An Aggreko employee checks installations. The firm will end operations next month. PHOTO | FILE
What you need to know:
KenGen has been managing Aggreko’s diesel-powered electricity generators in Muhoroni at an annual fee.
The firm was tasked to manage the costly emergency power plants because Aggreko did not have a valid electricity generation licence.
Electricity generator KenGen has earned Sh889 million for managing Aggreko’s expensive emergency power projects over the past decade, official data shows.
The Nairobi Securities Exchange (NSE)-listed firm has been managing Aggreko’s diesel-powered electricity generators at an annual fee.
KenGen was tasked to manage the costly emergency power plants because Aggreko did not have a valid electricity generation licence hence the need to be executed under the State-owned company.
“We are the ones who do the readings and billing to Kenya Power,” said KenGen chief executive Albert Mugo in an interview.
Aggreko, which first entered Kenya in 2006 when the country was suffering an acute power shortage, is set to exit the Kenyan market in line with the government’s policy of reducing the cost of energy.
The Glasgow-based power producer owns a 30-megawatt (MW) thermal plant in Muhoroni and a 3.4 MW temporary generator in Garissa, both managed by KenGen.
The earnings, disclosed in KenGen’s annual reports, shows the mixed fortunes of emergency power: saddling homes and manufacturers with high power bills, but generating income for the listed power producer.
Emergency power is priced as high as ¢50 per kilowatt-hour, which is more than double the cost of diesel-fired electricity set at ¢20 per kWh. Aggreko has earned Sh10.9 billion in electricity sales over the last decade, underlining the lucrative nature of the deal.
The Energy Regulatory Commission has set next month as the deadline to unplug Aggreko’s Muhoroni plant pricey electricity from the national grid, replacing it with a KenGen gas turbine of a similar capacity.
KenGen raked in Sh24.8 million in management fees for the Aggreko project in the year ended June 2015, a drop from the Sh33.6 million earned a year earlier and Sh76.7 million in 2013.
The highest earnings recorded by KenGen from the Aggreko project in the last decade was Sh211.3 million in 2010.
Similarly, purchases of emergency power peaked in the year to June 2010 when Kenya Power bought 1,096 gigawatt-hours (GWh) from Aggreko, which earned the Scottish company Sh2.2 billion.
Aggreko took home Sh326.2 million in sales after supplying 62.7 GWh in emergency electricity supplies to Kenya Power in the period to June 2015.
The Ministry of Energy in March 2006 signed a contract with Aggreko for supply of up to 180MW of emergency power to avert load shedding following a prolonged drought which reduced generation from hydro dams.
The contract handed Aggreko a compulsory basic capacity charge of $8.6 (Sh860 million) per month – payable whether power is generated or not, with fuel expenses being footed by taxpayers as pass-through costs.
Kenya has lately been turning to geothermal power to cut reliance on hydropower which even though cheap is affected by vagaries of weather.
Hydropower is priced at ¢3 per kWh followed by Mumias co-generation (¢6 per unit), geothermal (¢7 per kWh), Biojoule’s biogas (¢10 per unit), and Strathmore University’s solar power priced at ¢12 per unit.
In January 2013 the government terminated Aggreko’s contract for the supply of 90MW of emergency power ahead of the first batch of 280MW Olkaria project being fed to the grid.
Kenya’s dalliance with emergency power dates back to 2001 when the government contracted Aggreko, Cummins and Deutz to supply 105MW after aprolonged drought that exposed the economy’s overreliance on hydro power.
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