KP in fresh bid to sp*ed up changes
Kenya Power has started reviewing existing insurance arrangements for its assets including staff medical scheme and infrastructure in the latest bid towards a cost-effective framework. In a gazette notice, the power distributor has invited consultants to bid for the implementation of its cost-cutting programmes, amidst its loss-making streak that forced the government to oversee urgent reforms.
“The company wishes to undertake a comprehensive review of existing insurance arrangements and the staff medical scheme with a view to establishing a robust and responsive portfolio and to adopt a cost-effective framework for procurement of insurance service providers and managing the medical scheme going forward,” read part of the notice.
It said the consultants will review, identify gaps, and recommend appropriate action for the utility’s existing 36 insurance policies targeting essential infrastructures, assets, and staff and their dependents medical covers.
Financial abyss
The structuring marks parts of efforts to lift the company out of its financial abyss after the government declared it a “special government project” in October 2021, implementing various internal reforms aiming profitability and power cost reduction.
In August 2021, Energy Principal Secretary, Gordon Kihalangwa told the National Assembly Energy Committee that the utility’s Sh700 million insurance budget was insufficient.
This left 122 substations distributed across the country uncovered for consequential loss, substations, and public/product liability, exposing the assets, staff, and general public to major risks in case of accidents.
Modifying the limit for legal liability and/or indemnity tops the list of the areas where Kenya Power will utilise to build cash reserves. Also, the cost of staff medical schemes will be reviewed and models compared with other state institutions of similar capacity. The scope of the insurance benefit will cover pandemics like Covid-19 and only cover dependents up to their 24th birthday.
The restructuring plans came just after the utility posted a profit growth of 8.4per cent in the last financial results, ending years of successive losses that dimmed its sustainability hopes. In the financial year ending June 2021, Kenya Power recorded Sh8.198 million pre-tax profit compared to Sh7.04 billion loss in the previous year.
The company is now accelerating reforms to ride on this positive growth by streamlining its operations, operate within set budgets, and impose strict internal controls to cut its losses.
Asset disposal
“We will also review the procurement and asset disposal processes to anchor them on the principles of value for money, international standards, high quality, professionalism and accountability,” Kenya Power said in its last annual report.
The firm has, however, been accused of financial losses emanating from stalled projects and unused assets despite investing heavily in such infrastructures with last year’s audit report showing that its impairment loss on capital Work-In-Progress totaled to about Sh205 million. The impairment losses were in respect of projects partly paid for no work done with about Sh159 million linked to fraudulent payments.
