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Kenya Power now eyes insurance policies in cost-cutting measures

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Electricity House which is the Kenya Power head offices in a Picture taken on May 30, 2018. PHOTO | EVANS HABIL | NMG

Kenya Power #ticker:KPLC has started the review of insurance policies for its assets including transformers and other critical infrastructure in its latest cost-cutting initiative.

The utility has invited technical advisors to bid for the implementation of the cost-cutting plans on the company’s insurance for staff and assets.

The review of the insurance cover will target Kenya Power’s 36 insurance policies for its staff, their dependants and its assets.

The restructuring marks Kenya Power’s latest attempt to cut costs and boost its cash-flows as it seeks to cement its recovery from years of perennial losses.

“The Company wishes to undertake a comprehensive review of existing insurance arrangements and the staff medical scheme with a view to establishing a robust and responsive portfolio and to adopt a cost-effective framework for procurement of Insurance Service Providers and managing the medical scheme going forward,” Kenya Power said in the notice.

The review looks set to boost Kenya Power’s recovery at a time the firm ended years of losses with a profit of Sh1.5 billion in the period ended June last year, attributed the profit to reduced costs and increased sales of electricity.

Kenya Power currently has no insurance cover for its 122 substations distributed across the country, exposing the strategic national assets, employees and the general public to major risks in case of accidents.

Gordon Kihalangwa, the Energy principal secretary told a Parliamentary committee in November that Kenya Power could not afford the cover after bidders quoted above available budget and could not be awarded pending availability of funds.

Under the restructuring of its insurance policy, a review of the limits for legal liabilities and indemnity limits ranks top on the list of items targeted by Kenya Power.

The review will also be pegged on the amounts spent on medical cover for Kenya Power and their dependants in the last five years. The firm will compare expenditure per staff against a similar cadre of workers in the State parastatals.

Kenya Power says the review of its insurance policies will bring it to par with other parastatals in a cost-cutting drive as government agencies reduce costs amid near stagnant revenue generation over the years.

The firm has for years been accused of financial losses with an audit report last year showing it held about Sh9.8 billion in deadstock of cables, meters, and transformers that have been idle in the warehouses for more than five years.

Firms have until February 7 to submit their bids and spearhead yet another attempt by Kenya Power to reduce costs.

Review of the insurance costs is also part of the cost-cutting drive recommended by a presidential task force in a bid to save the State utility.

The tender comes nearly half a year after Kenya Power dropped a restructuring plan including reduction of debts, electricity theft and employee costs.

Kenya Power had said the restructuring plan was informed by the current financial challenges which have hurt its ability to run sustainably and deliver on its obligations to shareholders and the public.

The company had sought a technical adviser to implement the restructuring plan that also included a strategy for renegotiating bulk power purchases from firms like KenGen.

But threats of a strike prompted the State-backed utility to drop the plans pointing to the hurdles bedevilling its turn-around efforts.

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