The Ministry of Energy has kick started formal engagement with the Independent Power Producers within the framework of the ongoing wide-ranging reforms in the energy sector.
This process, recommended by the Presidential Task Force Report on the Renegotiation of Power Purchase Agreements (2021), seeks to contribute to the delivery of the constitutional mandate of the Ministry of Energy, to provide clean, reliable, sustainable low-cost power.
The negotiation process has been foregrounded by extensive preparatory work across all of government.
In addition, the Ministry of Energy has engaged in listening sessions with 77 IPPs that have outlined issues of concern to both sides.
There have also been extensive consultations with energy sector experts, regulators, legal and financial advisors, as well as other stakeholders, in-country and beyond. All together, these conversations have established good faith, forged comfort and clarified a pathway to successful negotiations in the shortest time possible.
We are persuaded, more than ever, that reform in the energy sector is an imperative and urgent. More importantly, it has begun to deliver concrete results. Among them a 15% (first tranche) reduction in power tariffs, effected in January 2022. This step has had significant impact.
While all tariff categories benefited from the reduced tariff, low-tier customers had decreases in power costs of up to 23%. A recent KAM report on the impact of this reduction indicate an average 10% saving in manufacturing costs. We continue to work progressively towards the next tranche reduction. There is no doubt that the negotiation process that we are embarking on will contribute to this.
We are also witness to improving performance across the sector. Most recently, the KPLC announced KSh3.82 billion profit after tax for the half-year to December 31, 2021, as did KenGen’s 7% increase in the profit before tax in the same period.
In addition, the Energy and Petroleum Statistics Report 2021, EPRA showed that the country continued to lead in electricity connections across East Africa. Further to this, Kenya remains a world leader in green clean energy with over 92% of our electricity generated from a growing mix of renewable sources.
The ongoing reforms will ensure sustainable performance and optimization, launch us into green growth, which will translate in improved global competitiveness, dignified jobs and enable Kenya to contribute to the reduction in carbon emissions.
Furthermore, it will enable the development of a robust framework that distributes risks evenly and secures better, balanced and more sustainable commercial arrangements.
The Ministry of Energy remains steady as we drive these reforms and calls upon all stakeholders, particularly the IPPs to reciprocate the Government’s demonstrated good faith as we commence and engage in the negotiation process. We also look forward to the conclusion of the negotiations as soon as possible.
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