Kenya Power now sends 24 senior managers packing in major shake-up

Electricity distributor Kenya Power has sent 24 senior staff packing in a management shake-up its chief executive Ben Chumo says is linked to a recent audit of the firm that recommended a reduction of positions at the top.

The majority of the exiting managers had been asked to apply afresh for the fewer top jobs that were left after the restructuring, but were not successful.

“The new positions were advertised internally and externally so we can promote staff with potential and also bring in new blood,” said Dr Chumo, adding that Kenya Power is moving to a leaner organisational structure that involves the merger of some management functions.

The number of executives reporting to the managing director has, for instance, been reduced to 10 from the previous 18.

Kenya Power is offering the affected staff send-off packages that Dr Chumo says are meant to smoothen their exit, including payment of three months’ salary in lieu of notice, advance payment of eight months basic salary and a fully paid for pre-retirement training. The packages will cost the company about Sh430 million.

The shake-up is the result of an audit of Kenya Power’s structural and financial fitness to perform its mandate. The audit was done by consultancy firm PricewaterhouseCoopers (PwC).

“We contracted PwC to find the best package in line with the affordability and market trends culminating to the drawing of a five-year strategic plan whose implementation has begun,” said Dr Chumo.

Under the new structure, Kenya Power’s departments will be headed by general managers who have replaced chief managers.

The general managers will head the ICT, human resources, business strategy, regional coordinator, supply chain, corporate affairs, customer service, infrastructure development and finance departments.

Some of the departments that were merged in the structural changes include energy and transmission, operations and distribution that now make up the network management division.

All the retiring employees are above 50 years of age and at most eight years away from the official retirement age of 60.

All senior managers who have agreed to go on voluntary retirement have been asked to reach the general manager in charge of human resources and administration not later than Wednesday.

Revenues vs staff costs

Kenya Power reported a pre-tax profit of Sh4.2 billion in the half-year ending December 2014, an increase of 53 per cent compared to Sh3 billion for the same period in 2013.

READ: Higher tariffs lift Kenya Power profit 38pc

The increased profit has been attributed to tariff review and increased sales. Kenya Power’s cost base has, however, been running high, driven by staff costs that have increased at the rate of Sh1 billion annually in recent years.

The firm’s payroll expanded to Sh11.7 billion in the 2013/2014 financial year from Sh10.7 billion the previous year and Sh9.7 billion in the 2011/2012.

But staff numbers have only increased marginally between 2012/2013 and 2013/2014 from 10,465 to 10,590 compared to the 20 per cent increase between 2010/2011 and 2011/2012. The company is not hiring new employees in a bid to stabilise its wage bill.

“Our revenues must grow faster than the staff costs,” said Dr Chumo, adding that the company’s workforce grew by less than five per cent even as its customer base grew to 3.2 million.

Kenya Power reduced its contractors for construction down to 800 from 1,400 to hedge itself from staff redundancies. Dr Chumo said there are no more lay-offs on the cards.

Kenya Power’s retirement of the 24 puts it in step with other companies that have recently trimmed their payrolls. Last year, Co-operative Bank sent home 160 employees on the recommendation of global consultancy McKinsey. Co-op Bank has an annual wage bill of about Sh8 billion.

READ: Co-op Bank spends Sh1.2bn to lay off 160 staff

McKinsey, which opened a Kenya office earlier this year, has in the past recommended job cuts at KCB, Barclays and National Bank.

National Bank laid off 200 employees through a voluntary early retirement scheme last year while Eveready East Africa spent Sh110 million to pay nearly 100 employees that were laid off following the closure of its Nakuru plant.

New revenue streams

Kenya Power has announced plans to open new revenue streams to grow its top line and minimise the impact of rising operating costs.

Dr Chumo said the power firm plans to extend its fibre optic cable connections to cover all counties as it seeks to quadruple its earnings from the new revenue stream to Sh1 billion by the end of next year.

Last week, the power firm partnered with mobile telecommunications firm Safaricom to offer soft loans to its customers for power tokens.

Electricity consumers will get credit advances to settle power bills of between Sh100 and Sh2,000, to be repaid at an upfront flat rate of 10 per cent of the borrowed amount.

READ: Mobile soft loans for power consumers

With funding from the Africa Development Bank and the World Bank, the electricity distributor has taken up the last mile project aimed at taking power closer to homesteads so as to decrease the connection costs to less than Sh35,000.

As part of the plan to grow its customer base, Kenya Power has invested Sh10.45 billion for construction of 36 new substations. Additional 29 substations will be commissioned in June while 33 are set for June in the next financial year, bringing the total to 98.

Some multinationals have also found the going too tough, with several closing shop or shifting their manufacturing to Egypt in pursuit of cheaper electricity and economies of scale.

Cadbury Kenya, for instance, last year shifted its production of confectionery goods to Egypt in a decision that left 300 workers jobless.

Soda ash producer Tata Chemicals ceased operations last year citing high costs amid weak demand for the commodity, retrenching 200 employees.