Kenya Power to review deal with Mumias on electricity
Kenya Power managing director Ben Chumo. PHOTO | FILE
What you need to know:
Mumias has been pushing for the review of the contract, saying its terms are not friendly as Kenya Power has retained low rates for a long time.
Kenya Power managing director Ben Chumo says the two entities need to balance the agreements for mutual benefit.
Kenya Power has agreed to renegotiate terms of an electricity buying contract signed with Mumias Sugar Company in a move expected to ease the burden of the miller which has been making losses on co-generation.
Kenya Power managing director Ben Chumo said the two entities need to balance the agreements for mutual benefit.
Mumias has been pushing for the review of the contract, saying its terms are not friendly as Kenya Power has retained low rates for a long time.
The losses are mainly attributed to low feed-in tariffs and penalties that Kenya Power levies the sugar miller for interrupted supplies.
The power utility firm has been slapping the miller with a penalty in the event that it does not supply power to the national grid as a result of stoppages occasioned by operation challenges.
“The agreement should be balanced to make both parties work together amicably. My team has already assured them (Mumias) of my support and commitment to have the past be lessons and move forward powered by mutual positive interest,” Mr Chumo said on phone.
Agriculture Cabinet Secretary Willy Bett, speaking to the Business Daily, noted that the current terms are not friendly to the miller.
“In developing the power agreement between the two organisations, one power was cleverer than the other. There is need to review the contract,” said Mr Bett.
The firm is grappling with shortage of sugarcane, which has in turn affected production of power for its own consumption and feeding the national grid.
The firm uses bagasse to make electricity and the shortage of raw material implies that it cannot generate power.
In the six months to December 2015, the energy generation unit at Mumias recorded zero revenue as the miller did not sell any electricity to Kenya Power.
The shortage of cane has seen the Nairobi Exchange listed company crush cane for only two days in a week. The miller blames competitors for the shortage, claiming that they are poaching sugarcane from its contracted farmers.
Diversification into other revenue streams is one of the conditions put in place by the Common Market for Eastern and Southern Africa (Comesa) before the sugar market is liberalised to allow imports to come in the country without restrictions.
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