Cash-rich energy parastatals seek new CEOs

Critical State -owned firms in the energy sector will need to find new CEOs following the exit or impending departure of top executives.

KenGen, Kenya Power and Kenya Pipeline Company (KPC) will soon have new faces in the corner office, offering Davis Chirchir, the Energy Cabinet secretary, a chance to appoint preferred managers to shepherd the cash-rich firms.

The top jobs in the three parastatals are the most coveted among State-owned firms given that they control multi-billion shilling contracts and last year generated combined sales of Sh77.5 billion with profits of Sh20.3 billion.

Eddy Njoroge, the boss at KenGen, the country’s largest power producer, is expected to step down at the end of this month.

Joseph Njoroge, CEO of Kenya Power which is Kenya’s sole electricity distributor, was on Friday nominated as the principal secretary in the Energy and Petroleum ministry while Selest Kilinda’s three-year reign as KPC managing director ended last month.

“This is an opportunity for the new administration to infuse new ideas into these parastatals, which are critical to the economy and have faced capacity challenges recently,” said Johnson Nderi, an analyst at Suntra Investment Bank.

While the State corporations have managed double-digit profit growth in recent years, they have failed to deliver adequate and affordable petroleum products and electricity in the country.

This has dimmed the country’s ranking as the preferred investment destination and made locally produced goods expensive in a regional market where pricing is an arsenal for market share growth. Fuel and electricity are among the top drivers of inflation in the country.

KPC has been struggling to replace the existing pipeline linking Mombasa to Nairobi, which has outlived its 30-year life span and is prone to ruptures. Many of the products from Kenya’s only refinery in Mombasa have to be transported by trucks in the region, which are slow and unreliable owing to breakdowns and bad roads.

Plans to build a new $300 million (Sh25.5 billion) fuel pipeline from the Mombasa port to Nairobi have been on the radar for the past five years.

Mr Kilinda was appointed acting managing director at KPC in January 2009, and confirmed to the position in August the same year, after the former boss, George Okungu, was sent on compulsory leave over inefficiencies in the company.

Mr Kilinda was dismissed last month following accusations of nepotism and abuse of office that were brought against him last year. He was found to have hired three siblings in a firm where successive managing directors have employed tribesmen.

Mr Njoroge, 55, joins the government at a time when the country faces frequent blackouts due to supply shortfalls and an aging grid.

Businesses often rely on diesel generators to make up for the gap between power demand and output and cite frequent localised power blackouts as one of the key barriers to economic growth.

Kenya Power, which currently has more than two million electricity customers, has been adding more than 200,000 customers annually since 2008, which has been a success story under the tenure of Mr Njoroge. He joined Kenya Power in 1980 and rose through the ranks to become managing director in June 2007.

The new boss at the electricity distributor will need to find Sh20 billion annually for the next five years to strengthen its distribution capacity and seek fresh funding after the government froze plans to increase tariffs.

Mr Chirchir has revived the recruitment process of KenGen chief executive, which had been stopped in April to allow for the appointment of a new Cabinet secretary on May 15.
Mr Njoroge chose to exit midstream in a five-year term that was to end in March 2015 and his replacement will be known this month.

The power generator has struggled to meet growing electricity demand amid robust economic activity.

But it has recently embarked on capital intensive alternative power generation projects in a bid to reduce dependency on unreliable rain-fed hydro-electric dams and thermal power prone to erratic rainfall. It appointed Barclays last year to help it secure financing worth $5 billion (Sh420 billion).

The executive changes will give Mr Chirchir an opportunity to participate in the selection of the CEOs of the three State-owned firms as the balance of power shifts in Kenya’s energy sector.

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