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Kenya Power Creates ‘Profit Centres’ In Counties

Cash-flow woes have pushed Kenya’s monopoly electricity retailer back to the drawing board, emerging with a strategy it hopes to boost its dimming fortunes.

Kenya Power is moving to decentralise decision-making in conducting business – an approach that has seen creation of the position of county business managers, according to the CEO Bernard Ngugi.

Each of the 47 counties in Kenya will be under a business manager fully empowered to make independent decisions around power sales and related services, cost management and profits. Flexibility in decision-making seeks to position counties as the new profit centres for the utility firm, with the county managers expected to be responsible for the numbers generated in their respective markets.

“We are restructuring in the sense that we have devolved our functions and created positions called county business managers. A county business manager is now fully empowered to run a county like his own business – which we call profit centres,” Mr Ngugi said in a broadcast interview.

“That means he has to know his customers, ensure all customers are metered to grow his sales and manage his costs. At the end of the day, we want profits out of those counties,” he added.

Kenya Power has been pushed into a negative working capital territory, buffeted by rising operating costs amid a commercial debt overhang.

“Our liquidity position is not good,” said Mr Ngugi.

“We pay 67-70 percent of what we collect to power generators. We are then left with about 30 percent to run operation and maintenance (O&M) and other things, like maintaining our lines. And that leaves us almost with a negative every month. This needs to be curtailed.”

Kenya Power buys electricity in bulk at wholesale prices from power generators, including State-owned KenGen and independent power producers (IPPs) for onward retail to homes and businesses after including markup.

The retailer has issued a profit warning this year — the third one in a row.

Read also: Where Kenya power missed cash opportunities