Kenya Power supplies 120 tonnes of scrap copper to NMC in anti-vandalism deal

Kenya Power CEO & MD Joseph Siror speaks during the launch of the media campaign dubbed ‘Update Token Meter Yako’, on June 12, 2024.

Photo credit: File | Nation Media Group

Kenya Power has supplied 120 tonnes of scrap copper to the Numerical Machining Complex (NMC) for recycling into various products, some of which will be returned to the electricity firm on a net-off arrangement, in a bid to combat vandals and cut procurement costs by up to 30 percent.

The haul of scrap metal supplies includes a further 228 tonnes of transmission (Tx) shells, which are used for making meter seals, under a two-year deal that the two State-owned firms entered into in August last year. NMC is expected to make its first supplies from the recycled scrap metal by June this year.

“We will make considerable savings from the engagement with NMC. The scrap we are selling to NMC could have gone to waste or disposal at low prices. We have a 30 percent higher price by disposing of them to NMC and buying back manufactured items,” Kenya Power chief executive officer, Joseph Siror said.

Under the agreement, Kenya Power sells scrap steel, aluminium and copper products to NMC for Sh37, Sh115 and Sh650 per kilo respectively. NMC then recycles the scrap metal into equipment like meter seals, earth rods and transformer channels.

Some of the recycled products are then sold to Kenya Power under a net-off arrangement, whereby the electricity distributor only pays the difference after deducting the money it expects to receive from NMC for selling the scrap metal.

In a netting arrangement between two parties, the amounts owed under different contracts are aggregated so that the party owing the greater aggregate amount under the agreements being netted makes a payment to the party owing the lesser aggregate amount.

The net payment is the difference between the amount owed by the party with the lower total and the amount owed by the party with the higher total.

Kenya Power is betting on reducing operating costs, in addition to increasing electricity sales in order to remain on the profit trajectory. The firm made a net profit of Sh30.08 billion in the year to June 2024, reversing the net loss of Sh3.19 billion made the previous year.

NMC, on the other hand, is banking on the deal to provide it with cheap raw materials to manufacture a wide range of products, with Kenya Power already saying that vandalism cases have reduced, and in turn the frequency of blackouts associated with the destruction of the key assets.

“Our technical staff have reported significant drops in vandalism cases. We believe this is mainly because the market is aware that Kenya Power is not releasing any scrap and thus no demand,” said John Ngeno, Kenya Power’s General Manager for Supply and Logistics.

Prior to the deal, Kenya Power had lamented the rampant vandalism of key assets such as transformers, pylons and cables, adding that it had lost 519 transformers valued at Sh574 million between May 2022 and December 2023.

The vandalism has in the past been attributed to a high frequency of blackouts as vandals sought copper and aluminium accessories and transformer oil for sale in the thriving scrap metal business locally and across the region.

Trade and Investments Secretary Lee Kinyanjui recently said that Kenya should end all exports of scrap metal and instead ensure that it is used in the local manufacturing sector, widely seen as a major backing of the NMC-Kenya Power deal.

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