Kenya Power’s local products drive benefits Chinese firms

What you need to know:

China-based Hexing Group used its Kenyan subsidiary to sell prepaid meters worth Sh4.7 billion in the financial year ended June.
Another Chinese company, Yocean Group, last month opened Kenya’s first transformer manufacturing plant in Nairobi as it eyes big-ticket supply contracts from the electricity distributor.
Chinese firms are increasingly benefiting from the government’s policy requiring public institutions to prioritise local goods.

Chinese firms are emerging as the biggest beneficiaries of Kenya Power’s campaign to buy locally manufactured prepaid meters and transformers.

China-based Hexing Group used its Kenyan subsidiary to sell prepaid meters worth Sh4.7 billion in the financial year ended June, benefiting from the government’s policy requiring public institutions to prioritise local goods.

Another Chinese company, Yocean Group, last month opened Kenya’s first transformer manufacturing plant in Nairobi as it eyes big-ticket supply contracts from the electricity distributor.

“Kenya Power purchased pre-paid meters worth Sh4.7 billion in the year to June 30 from the local market,” the company said in a statement.

“For the first time, Kenya Power has also budgeted to spend Sh424 million on locally assembled transformers during the current financial year.”

The utility firm is keen to grow usage of prepaid meters, which require customers pay for power in advance, to reduce electricity defaults and cut operational costs.

The company reckons that the prepaid billing system is key to boosting its cash flow and slashing postage costs in issuance of monthly invoices to post-paid customers.

Chinese firms have continued to firm their grip on the Kenyan market in areas such as civil works, real estate, renewable energy and lately industrial electrical equipment.

READ: More Chinese firms get mega construction deals

Kenya Power, which is majority owned by the State, previously imported transformers and prepaid meters from China and India.

A lack of local suppliers of transformers and meters had restricted the Nairobi-bourse listed company to local purchase of concrete poles, cables and connectivity devices as part of the government’s buy-Kenyan-build Kenya campaign.

The policy action is meant to support local industries, drive industrialisation and spark growth.

Kenya Power views this arrangement as symbiotic because growth of industries creates a huge demand for power supply, making it book more revenues from electricity sales.

Industries account for more than 60 per cent of the utility firm’s power sales revenue.

Kenya Power managing director Ben Chumo said they have spent Sh6.2 billion on purchase of materials and equipment from local suppliers in the first quarter (July to September) of the current financial year.

“We have 54 Kenyan companies currently supplying us with both concrete and wooden poles, eliminating the need to import these materials,” said Dr Chumo adding that some 540 direct jobs had been created.

The firm reckons that it has spent Sh120 billion on locally manufactured equipment in the past four years, accounting for 65 per cent of its budgeted capital expenditure of Sh184 billion over the period.

In July, the company published new procurement guidelines stating that 80 per cent of all electricity distribution equipment would be sourced from Kenya, giving preference to local investors.

Demand for locally made equipment is set to further rise as more homes get connected to the power grid following reduction of connection fee to Sh15,000 from Sh35,000 for homes located within 600 meters to the nearest transformer.