8 November 2017

Kenya Power to Review Supplier List

Kenya Power's decision to procure transformers from local suppliers has left the utility firm with substandard products that have been linked to the rising cases of power outages and maintenance costs, and have compromised efforts to connect more Kenyans to the national grid.

In a policy action that was praised as crucial in promoting local industries, driving industrialisation and sparking growth, Kenya Power wanted local firms to tap into its more than $530 million annual procurement budget.

Before opening the procurement for transformers and prepaid meters to Kenyan firms, the company's local input consisted mainly of concrete and wooden poles, cables and connectivity devices.

Now the utility firm is feeling the pressure from a 16 per cent rise in power transmission and distribution costs to $316.7 million in the 2016/17 financial year from $272.1 million in the previous financial year, while network management costs rose to $106.2 million from $90 million.

The high costs have impacted on the company's after-tax profits, which showed a near flat growth to $68.9 million from $68.1 million.

"We have looked at the transformer suppliers and identified a number whose products have proven sub-standard," said Kenya Power's managing director Ken Tarus.

Dr Tarus said that the company will review its suppliers and engage only those that offer quality products, meaning Kenya Power may be forced to resort to Chinese, Indian and Japanese manufacturers.

New specifications

Ironically, last year Kenya Power developed new specifications for equipment with the aim of increasing its durability and making it less attractive to vandals.

The rules state that transformers should contain aluminium windings as opposed to copper, which is attractive to vandals. Suppliers are also required to provide a list of critical raw materials and their sources in order to ease traceability of parts and control the quality of the equipment.

In addition, suppliers are required to provide a warranty of six years and five years from the date of delivery and commissioning respectively. This is designed to help reduce transformer failure rates and compel manufacturers to take responsibility for any manufacturing defects.

"We have challenges of quality transformers and have set up standards that we have now agreed we must follow," said Dr Tarus.

In the 2016/17 financial year, Kenya Power managed to reduce the average number of outages per month by 28 per cent to 19,588 from 27,274. It also managed to increase system efficiency marginally to 81.1 per cent from 80.6 per cent.

Crackdown on transformer vandalism

More critically, the company managed to crackdown on transformer vandalism, reducing the number of incidents to 133 compared with 228 in the 2015/16 financial year.

Over the next one year, Kenya Power plans to spend $380 million in network expansion in order to attain its target of increasing the number of customers to 7.5 million from 6.1 million currently.

At the end of last year, the utility firm had some 60,000 transformers in its distribution network. The figure has been increasing significantly with the implementation of the Last Mile Connectivity project that is designed to ensure universal access to electricity by 2020.


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