Kenya Power reforms under threat

Many observers of the corporate scene may have missed the significance of a commonplace gazette notice by Cabinet Secretary Monica Juma on April 14, announcing the appointments of Abdulrazaq Ali and Elizabeth Rogo as board members of the National Oil Corporation and the Geothermal Development Corporation, respectively.

Was the duo being rewarded with these appointments by the Cabinet Secretary? Far from it. This was a cleverly planned and executed scheme to achieve something else, somewhere else within the energy sector namely, to cunningly force them out of the board of public-listed Kenya Power stealthily without raising eyebrows and causing too much public attention.

The Trojan horse employed was a mundane provision of the Mwongozo Code that stipulates that one individual cannot sit on two boards in the same sector.

The Cabinet Secretary just pretended that it was a normal thing to transfer a director of a publicly listed company appointed at a shareholders annual general meeting to another parastatal under her docket. Corporate governance in the parastatals sector is in a big mess.

The Cabinet Secretary’s move set the stage for the duo’s exit from the Kenya Power board. Two weeks later, a notice appeared in the newspapers announcing that Mr Ali and Ms Rogo had resigned from the board of the company. It was a big setback to the dream team that has been implementing a turnaround plan at the company.

Indeed, this team has been on a campaign to free Kenya Power’s supply chain system from the grip of politically powerful cartels. Another team member, Caroline Kittony-Waiyaki, immediately read the signs of the times and promptly threw in the towel in solidarity with Mr Ali and Ms Rogo.

In just under three weeks, three of the reform champions on a board that is loathed by corrupt cartels and who have been nick-named the three musketeers had been outmanoeuvred.

The leader of the team — the chair of the board and CEO of the East Africa Development Bank, Vivian Yeda — was left feeling exposed, wondering whether the political will and support for the project they have been executing at Kenya Power has suddenly dissipated.

Personally, I see the invisible hand of interests fighting to control the company’s Sh50 billion annual procurement budget. That team had to be slowed down because it was beginning to disrupt corrupt old-boy networks that have captured the utility by turning its supply chain into a veritable source of inexhaustible largesse.

Citing frequent failures of locally assembled transformers and meters, the team has been pushing for a regime where equipment critical to the safety of customers like meters and transformers are bought from original equipment suppliers. The dispute has reached the Court of Appeal.

That dream team was also becoming more and more unpopular when it started pushing for a comprehensive forensic audit and review of the supply chain. It has been pushing for forensic audits in several areas, including the cost of fuel used by independent power producers and the company’s ERP systems.

These audits are being supervised by the Office of the Auditor-General. As Mr Ali, Ms Rogo, and Ms Kittony-Waiyaki were being ejected from the board, the forensic audits were yet to be completed.

Even the harshest critics will accept that this dream team has left a legacy of solid achievement. They found a company that was making heavy losses. Finance costs had ballooned, working capital was in the negative and debt to equity ratios were trending towards the unsustainable. By overhauling the operations of the company, Kenya Power started making profits.

The big question that remains is the following: Has the political will to overhaul the electricity sector dissipated? This is a pertinent issue because the signs right now are that the resolve to renegotiate power purchase agreements appears to have waned.

Kittony and Rogo also resigned from the steering committee on implementation of the recommendations of the task force on re negotiation of IPPs. It does not seem to me that the push to implement the second part of the plan to bring consumer prices by 30 per cent still has much political support. Lets wait and see.