Companies

Kenya Power spends Sh140m on legal fees in tariff negotiations

kplc

Kenya Power workers carry out repair works along Haile Selassie Road, Mombasa on December 5, 2020. PHOTO | KEVIN ODIT | NMG

brianngugi_img

Summary

  • Electricity distributor Kenya Power will pay Sh140.75 million in legal fees connected to the renegotiation of power purchase agreements (PPAs) signed with electricity-generating companies.
  • The State-owned firm revealed the award of the legal tender to two firms in regulatory disclosures seen by the Business Daily.
  • The fear of a legal tussle with powerful foreign investors forced the State to retreat and opt for a negotiated deal with the IPPs.

Electricity distributor Kenya Power #ticker:KPLC will pay Sh140.75 million in legal fees connected to the renegotiation of power purchase agreements (PPAs) signed with electricity-generating companies.

The State-owned firm revealed the award of the legal tender to two firms in regulatory disclosures seen by the Business Daily.

A joint venture comprising British lawyer and energy dispute-focused practitioner Michael Sullivan will earn Sh123.97 million.

Nairobi law firm NBMA Advocates will get Sh16.77 million.

Mr Sullivan specialises in energy, banking, and other commercial disputes.

The directors of NBMA Advocates are listed as Nigel Shaw, Binti Shah, Mahesh Acharya, Amar Grewal Thethy.

NBMA was formed in 2019 by the former partners of top law Kenyan firm Kaplan and Stratton.

Kenya Power’s decision to seek the services of the legal experts followed the decision by President Uhuru Kenyatta in March last year to appoint a task force to review PPAs signed between Kenya Power and all electricity generators with a goal of renegotiating the energy prices and other terms downwards.

The IPPs, which are owned by powerful institutions like the World Bank, opposed a unilateral push to lower the cost at which they sell electricity to Kenya Power, setting the stage for a legal battle.

The Ministry of Energy in February revealed it had opted for talks over forcing the independent power producers (IPPs) to lower tariffs in the wake of opposition from the foreign firms in the planned review.

The fear of a legal tussle with powerful foreign investors forced the State to retreat and opt for a negotiated deal with the IPPs.

The goal is to lower Kenya Power costs and offer the utility headroom to cut retail tariffs by an additional 15 percent without sinking into losses.

Kenya Power in January already cut retail tariffs by 15 percent based on a plan to lower system losses.

System losses refer to the electricity bought from generators such as KenGen #ticker:KEGN that does not reach homes and businesses due to power theft and leakages from an aging network.

The task force found that there was a huge disparity between the tariffs charged by the main power producer KenGen and IPPs.

Efforts to reduce power costs are meant to lower the cost of living and boost the country’s attractiveness to manufacturers and other businesses.

[email protected]