Kenya Power and Lighting Company Management Contract

concluded

In May 2006 the government of Kenya awarded a two year management contract for public utility Kenya Power and Lighting Company (KPLC) to Canadian operator Manitoba Hydro International. In 2006 KPLC was the monopoly electricity distributor in Kenya. Most of the power sold by KPLC was purchased from Kenya Electricity Generating Company, the partly privatized generation utility (id 4041). Manitoba Hydro’s contract started in July 2006 and contained a provision for a possible extension into a third year. By May 2006 KPLC was 49% owned by the Kenyan government. The remaining shares were divided among a large number of minority private shareholders. KPLC had such ownership structure for some time, but its private shareholders were fragmented, and the government continued to operate KPLC. By 2006, the company was still classified as a state owned enterprise when the management contract was awarded. According to the management contract, Manitoba Hydro’s main obligations were: • Reduce transmission losses from illegal connections and ageing wires by 4%; • Raise the rate of new connections from 70,000 in 2005 to 120,000; • Reduce the rate of monthly outages from and average of 11,000 to 3,000. The management contract was awarded through a competitive tender in which Manitoba Hydro beat out Irish company ESBI and Spanish firm Union Fenosa. Manitoba Hydro was a major Canadian utility headquartered in Winnipeg, Manitoba. Its core activity was electricity generation, and it was active in four wholesale energy markets in Canada and the mid-western United States. The management contract with a private operator was a part of an agreement with a consortium of development agencies which pledged to finance a loan of $225 million to improve KPLC’s technical, operational and financial performance. The program, led by the World Bank, was initiated in 2004 and named the Energy Sector Recovery Project. The World Bank agreed to lend $80 million with supporting funds coming from the European Development Bank ($17 million), the French development agency (AFD) ($25 million) and the Nordic Development Fund ($12 million.) Local resources were provided by the government ($200,000), the Kenya Electricity Generating Company ($7.5 million) and KPLC ($25.8 million). The management contract concluded in July 2008.