Kenya Energy Sector

MINISTRY OF ENERGY AND PETROLEUM
PROJECTED 5000+MW BY 2016 POWER TO TRANSFORM KENYA
INVESTMENT PROSPECTUS 2013-2016

Energy Sector Institutional Structure

The reforms in the energy sector have seen a complete reorganization of functions hitherto concentrated in the Ministry of Energy and KPLC. This was driven by the need to place responsibilities to specific institutions that would specialize in the mandates vested in them under the Energy Act to enhance efficiency. Accordingly, the functions were unbundled into generation, transmission, distribution, oversight and policy functions. 

The institutional structures in the Ministry of Energy and Petroleum (MOE) are; -

• Energy Regulatory Commission (ERC), 

• Kenya Electricity Generating Company (KenGen), 

• The Kenya Power and Lighting Company (KPLC), 

• The Rural Electrification Authority (REA), 

• Kenya Electricity Transmission Company (KETRACO), 

• Geothermal Development Company (GDC), 

• Energy Tribunal, 

• Kenya Nuclear Electricity Board (KNEB), 

• Independent Power Producers (IPPs). 

Other institutions of the Ministry include, 

• Kenya Pipeline Company (KPC), 

• National Oil Corporation of Kenya (NOCK)

• Kenya Petroleum Oil Refineries (KPRL).

a) The Ministry of Energy and Petroleum (MOE&P) 

Is in charge of making and articulating energy policies to create an enabling environment for efficient operation and growth of the sector. It sets the strategic direction for the growth of the sector and provides a long-term vision for all sector players.

b) The Energy Regulatory Commission (ERC) 

Is responsible for regulation of the energy sector. Functions include tariff setting and oversight, coordination of the development of Indicative Energy Plans, monitoring and enforcement of sector regulations. 

c) The Energy Tribunal

Is an independent legal entity, which was set up to arbitrate disputes in the sector.

d) Rural Electrification Authority (REA)

Was established in 2007 with a mandate of implementing the Rural Electrification Programme. Since the establishment of the Authority, there has been accelerated connectivity of rural customers who have increased from 133,047 in 2007 to 382,631 in 2012.

e) The Kenya Electricity Generating Company (KenGen)

Is the main player in electricity generation, with a current installed capacity of 1,232MW. It is listed at the Nairobi Stock Exchange with the shareholding being 70% by the Government of Kenya and 30% by private shareholders. 

The Company accounts for about 77% of the installed capacity from various power generation sources that include hydropower, thermal, geothermal and wind.

f) The Kenya Power and Lighting Company (KPLC)

Is the off-taker in the power market buying power from all power generators on the basis of negotiated Power Purchase Agreements (PPAs) for onward transmission, distribution and supply to consumers.  It is governed by the State Corporations Act and is responsible for existing transmission and distribution systems in Kenya. The transmission system comprises 220kV, 132kV and 66kV transmission lines. KPLC is a listed company on the 

Nairobi Stock Exchange with the ownership structure being 50.1% by the National Social Security Fund (NSSF) and Government of Kenya while private shareholders own 49.9%. 

g) Geothermal Development Company (GDC)

Is a fully Government owned Special Purpose Vehicle (SPV) intended to undertake surface exploration of geothermal fields, undertake exploratory, appraisal and production drilling and manage proven steam fields as well as enter into steam sales agreements with investors in the power sector.

h) Kenya Electricity Transmission Company (KETRACO)

Was incorporated in December 2008 as a State Corporation 100% owned by the Government of Kenya. The Mandate of KETRACO is to plan, design, construct, own, operate and maintain new high voltage (132kV and above) electricity transmission infrastructure that will form the backbone of the National Transmission Grid and regional inter-connections. This will facilitate evolution of an open- access- system in the country.

i) Kenya Nuclear Electricity Board (KNEB)

Is tasked with defining, coordinating and implementing Kenya’s nuclear power programme which includes the development of a comprehensive legal and regulatory framework for nuclear energy use, evaluation of technical requirements for the programme and advocacy for nuclear use in Kenya.

f) Independent Power Producers (IPPs)

Are private investors in the power sector involved in generation either on a large scale or for the development of renewable energy under the Feed-in-Tariff Policy. Current players comprise IberAfrica, Tsavo, Or-power, Rabai, Imenti, and Mumias. Collectively, they account for about 22% of the country’s installed capacity from thermal, geothermal and bagasse, as follows:

• IberAfrica Power (108 MW -Thermal power plant)

• Rabai Power (90MW- Thermal power plant)

• Tsavo Power (74 MW- Thermal power plant)

• Or Power -4 Inc. (86 MW - Geothermal power plant)

• Mumias Sugar Company (26MW – Co-generation)

• Imenti (0.3MW -Mini-hydro)

j) Private Distribution Companies

Are proposed under the Energy Act and are expected to improve the distribution function whose sole mandate currently rests with KPLC. It is envisaged that future power distributors will purchase bulk power from the generators and with KETRACO facilitating the transmission; the power generators will be able to sell power directly to consumers through a wheeling arrangement. This is expected to enhance distribution competition and hence improve efficiency.

k) Kenya Petroleum Oil Refineries Limited (KPRL)

Is the only refinery in East Africa. It is 50 per cent GoK owned and 50 per cent owned by Essar of India. It refines 40% of all petroleum products requirements in the country. The first refinery complex was commissioned in 1963 while the second was commissioned in 1974. The first installed capacity of KPRL is four (4) million MT per annum. However, its operating capacity is 1.6 Million MT. 

l) Kenya Pipeline Company (KPC)

This is 100% state owner corporation, which was established in September 1973 under the Companies Act Cap 486, and its mandate is to provide effective, reliable, safe and cost effective means of transporting petroleum products from Mombasa the hinterland.

The Company commenced operations in 1978 and has constructed a 1200 kilometre Pipeline network and over 600 million-litre storage and loading facilities for transport, storage and distribution of oil products.

m) National Oil Corporation of Kenya (NOCK)

Is 100% state-owned corporation established in 1981 and became operational in 1984. Its mandate is oil exploration, importation and sale of petroleum products including crude oil, white fuels, lubricants and Liquefied Petroleum Gas (LPG) in order to provide stability in the market.