Payments to diesel power generators surge to Sh10.6bn

Kenya Power’s payments to diesel-fired electricity plant operators surged by a fifth to Sh10.6 billion in the year to June, the company’s annual accounts have showed.

The payments, which contributed to the sharp increase in power bills that hit consumers hard last year, were mainly attributed to poor weather that affected hydro power generation as well as increases in international oil prices.

The State-controlled electricity distributor paid the Sh10.6 billion to emergency power firm Aggreko and four other independent power producers (IPPs) – Tsavo Power, Iberafrica Power, Rabai Power and Thika Power.

Kenya Power’s demand for the costly diesel energy saw consumers pay a two-year high fuel cost charge of Sh7.22 per kilowatt hour (kWh) in May, saddling households and manufacturers with hefty electricity bills.

Power purchases from the privately-held diesel power plants totalled 1,883 gigawatt hours (GWh), equivalent to 21 per cent of total units bought, revealing a generation mix that is tilted towards the costly and environment unfriendly thermal electricity.

The sharp growth in the IPPs’ earnings outshone revenue increase by power generator KenGen, despite the fact that private power firms account for only a quarter of total electricity consumed in Kenya.

KenGen earned Sh17.6 billion in electricity sales to Kenya Power. Its installed generation capacity of 1,335 MW accounts for 71 per cent of total power produced in Kenya.

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Glasgow-based emergency power firm Aggreko raked in Sh705.5 million from electricity supplies to Kenya Power in the year, annual accounts released on Thursday show.

However, the company saw its earnings drop by a third compared to the previous year following the government’s plan to minimise use of costly temporary power.

Aggreko owns a 30 MW thermal plant in Muhoroni and supplied 94 GWh to Kenya’s electricity grid in the year ended June.

Iberafrica Power, majority-owned by Union Fenosa of Spain, earned Sh3.1 billion in electricity sales to Kenya Power. The firm has a 108.5 MW diesel plant located in Nairobi South, making it Kenya’s biggest thermal-based IPP.

Rabai Power made Sh3 billion in electricity sales from Kenya Power, a growth of 16 per cent compared to the Sh2.5 billion earned in 2013. The firm has a 90 MW thermal plant located in Rabai, Kilifi County.

Rabai Power is a joint venture between London-based energy firm Aldwych International Ltd and Burmeister & Wain Scandinavian Contractor of Denmark.

Thika Power – which was connected to the grid in March – netted Sh1.9 billion in its first year of operation, reflecting the lucrative nature of Kenya’s electricity sector.

Thika Power has an 87 MW diesel-fired plant and is a subsidiary of Melec PowerGen Inc, affiliated to the Matelec Group of Companies from Lebanon.

Tsavo Power’s earnings from Kenya Power remained flat at Sh1.8 billion last year, after selling 152 GWh to the grid. The IPP operates a 74 MW medium-speed diesel plant in Mombasa and is owned by London-based and Africa-focused PE firm Actis.

The heavy spending in thermal power puts to test President Uhuru Kenyatta’s promise to turn to cheaper and cleaner sources such as geothermal, wind and co-generation to lower the cost of electricity to Sh9.40 (¢10.45) per kilowatt hour from the current average of Sh17.80 (¢19.78) per unit for domestic households.

The planned shift is meant to help cut overreliance on hydro and thermal power.

Other IPPs in Kenya include OrPower 4 with an installed capacity of 110 MW of steam power, Mumias Sugar’s 26 MW from baggase, Imenti Tea Factory’s 0.3 MW hydro plant and Gikira’s 0.514 MW hdro plant in Nyeri County.