Project Part 4

Kenya Electricity Generating Company Expansion Strategy

The Kenya Electricity Generating Company (KenGen) is a state owned power producing company in Kenya. It is the largest power producing company in Kenya producing more than 80% of the total Electricity consumed in the country. The company was formed in 1998 from its predecessor the Kenya Power, formerly Kenya Power and Lightening Company. KenGen had its shares listed in Nairobi Stock Exchange in 2006. The company produces power form thermal, hydroelectric, geothermal and wind. In the financial year ended June 2013, the company the company had an asset base of Ksh.189 billion and electricity revenue of 16.5 billion Kenya shilling. The company made a profit of Ksh. 4.09 billion before tax and the earnings per share is Ksh. 2.39. The company has a total of 24 power stations distributed country wide and the total installed capacity is 1239 MW with over 2000 qualified and self-motivated employees (www.kengen.co.ke).

The Strengths of the Company – the company boasts of the largest geothermal power project under development in the world in Olkaria and it is the leading generator of power in Kenya with up to 72% market share. It is the largest geothermal power producer in Africa and the 7th in the world. It is also the sole wind power producer in East Africa. The company won an award for commissioning the quickest thermal power plant in a record of 14 months and it is the pioneer in geothermal wellhead technology in the world. The company has a large capital base and boasts of over 50 years of experience in the energy sector.

The company’s strategic implementation process is keenly revolving on improvement of existing plants, expansion of production, efficiency enhancement, and risk assessment and management. KenGen is working hard to lower the operation costs and enhance reliability and at the same time keeping on with the spirit of continuous improvement. The company’s strategy is capacity expansion, operational excellence, talent management and regulatory strategic focus (www.kengen.co.ke/documents, 2013).

KenGen produces power in bulk and sells to Kenya Power which distributes the power to the consumers. The company’s vision is to become the market leader in provision of reliable safe quality and competitively priced electric energy in the Eastern Africa region. The company is guided by professionalism, integrity, safety culture and team spirit as its core values. KenGen’s philosophy is to move from Good to great company in order to create value to the stakeholders.

However with all the face and strengths of the company, it is faced by inadequate financial base and a substantial debt that the company is financing. The aging power generation plants contribute to too high operation costs. There is low production during the period of adverse hydrology and regulated energy tariffs that affects the pricing. The company has a list of ongoing projects ranging from thermal, geothermal, wind, hydro to nuclear power.

As part of its expansion strategy, the company is seeking to expand its operation in Eastern and Central Africa. This transformation is necessitated by growing performance pressure, significant growth in demand of electricity, changes in regulatory environment and regionalization of the sector. The good to great focuses on the overall strategic direction, capital strategy execution, operational performance and organizational health. KenGen has qualified geologists who have been doing research in different parts of East and central Africa to identify areas that may be viable for construction of power stations. The company is seeking to invest in geothermal power in Ethiopia after a feasibility study from the research that was undertaken in the fields of central Ethiopia in the rift valley region turned positive. The area is rich in steam that has proved to be commercially viable and could support a geothermal power plant of up to 300mega watts. As the company seeks to expand its operations in Ethiopia, land acquisition and entry into a foreign market is always consequential. According to developments that involves acquisition of mostly private lands from foreign countries, the affected persons must always be considered, and the company has already paid all the fees and agreed on compensation of Project Affected Persons. The environmental and social impact assessment has been done and as a way of giving back to the community the company has agreed that 20% of the vacancies will be given to the local resident.

He project which is estimated to take up to 36 months to complete will cost an estimate of 5 billion Kenya shillings to complete. It is expected to pump in additional 300 megawatts to Ethiopia’s national power capacity. The company will be controlled and managed by the Kenya Electricity Generating Company in line with the constitutional requirement of the republic or Ethiopia.