This document discusses supplier relationship management (SRM) practices at Kenya Power and their effect on corporate performance in Kenya's energy sector. It provides background on Kenya Power and describes its main electricity suppliers as well as challenges like inadequate supply and high costs. SRM practices at Kenya Power are examined through an analysis of power purchase agreements and perceptions within Kenya Power divisions. Corporate performance is measured using consumer satisfaction surveys. The results suggest Kenya Power needs strong partnerships with suppliers to overcome challenges and build long-term collaborative relationships to help stabilize supply and costs. However, perceptions of relationships differ within the company's divisions, impacting its business performance.

1. Gabriel Lubale
JKUAT PhD Student
www.gabriellubale.com
April 2014
To Effect of SRM Practices on
Corporate Performance in the
Kenyan Energy Sector
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2. Who is Kenya Power?
 Limited liability company which purchases,
transmits, distributes and retails electricity to
customers throughout Kenya.
 Kenya Power is a public company listed at
the NSE.
 Kenya Power is a State Corporation. GoK
has controlling shareholding of over 50%
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3. Seminar Paper
Objective & Methodology
 Objective: To analyze extent of Supplier Relationship
Management (SRM) practices on Corporate Performance in the
Kenyan Energy Sector.
 Research Design: Exploratory Research implies that the
proposed research focuses on the understanding of the
research dilemma in detail by gathering background information
(Cooper & Schnidler, 2001:762). To perform a holistic SRM
practices review in Kenya Power, detailed research was done
using Secondary data sources from: Annual Reports, Ministry
of Energy and Petroleum publications, KNBS publications,
KIPPRA publications, KenGen Report, ERC publications.
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4. Kenya Energy Sector
 Sector is guided by Energy Act No. 12 of
2006 legislated from Sessional Paper No. 4
of 2004 known as the Energy Policy Paper.
 Plays a critical role in the socio-economic
development of a Country contributing 9.49%
to the GDP .
 Main drivers of the Kenyan economy as
sources of energy are petroleum and
electricity .Other sources of energy are
biomass, Wind, Solar, firewood.4

5. Kenya Energy Sector … contd
 The Kenyan energy sector relies wholly on
imported petroleum for its requirements.
However, with the discovery of oil in Turkana
County this trend is likely to change. Also
search for Coal deposits in Kitui County.
 Electricity generation is predominately hydro,
supplemented by geothermal, thermal, Wind
and co-generation sources.
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Kenya Energy Sector … contd
Figure shows consumption of selected petroleum products (000s tons) some
used in Electricity Generation. Source: KNBS data

7. Suppliers of Electricity in Kenya
Kenya enters into Power Purchase Agreement
(PPA) with each Producer. These are:
1. Kenya Electricity Generating Company
Limited (KenGen).
2. Independent Power Producers (IPPs) .
3. Imports from Uganda, Tanzania and
Ethiopia.
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8. 8
Suppliers of Electricity in Kenya ..
contd
Kenyan ERC licensed capacity by electric Power Suppliers. Source:
Ministry of Energy, 2013

9. Key Stakeholders in the Electricity
sub-sector
 Ministry of Energy &
Petroleum
 Electricity Regulatory
Commission (ERC).
 Rural Electrification
Authority (REA) .
 Geothermal Development
Company (GDC).
 Kenya Electricity
Transmission Company
(KETRACO).
 Lake Turkana Power
Company.
 Iberafrica Power
 Tsavo Power Company
Limited
 Rabai Power Company
Limited
 Orpower 4 Inc
 Mumias Sugar Company
Limited
 Imenti Tea Factory
Company Limited
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10. Theory of SRM Practices
 Cox, Sanderson & Watson (2000)
demonstrates that buyer and supplier
relationships center on power,
interdependence and independence and they
agree that relationship can be of an arms’
length, adversarial and collaborative nature
depending on the power and style of
management.
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11. Challenges facing Kenya Power
1. Periodic inadequate bulk supply to fully meet electricity market
demand due adverse hydrological conditions.
2. insufficient transmission and distribution network redundancy.
3. lack of capacity to absorb all the loan capital financing
available.
4. high internal construction costs.
5. limited affordability by customers.
6. vandalism of transformers, electricity line cables &
accessories,
7. a diminished reserve margin at 1.2% & Benchmark is 15%,
8. supply and quality constraints coupled with ever- rising
primary energy costs
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12. SRM Practices on performance of
KPLC
 It is therefore evident that as a national asset
Kenya Power cannot overcome the current
challenges successfully without strong
partnerships with key suppliers.
 . Significant energy pressures are impacting
on traditional systems; as supply tightens it is
important for Kenya Power to intensify their
efforts to build and sustain long- term
collaborative relationships with key Players.
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13. SRM Practices on performance of
KPLC … contd
Power Purchase Agreements revealed some
very interesting observations. More
significantly, oil prices were a key driver
behind Kenya Power’s significant electricity
price increases and therefore it arguably
makes sense to assess the PPAs in Kenya
Power and the implication for SRM.
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14. SRM Practices on performance of
KPLC … contd
The results of the analysis uncovered the
differing perceptions of buyer - supplier
relationship in the KPLC divisions and the
implication on its dismal business
performance. Kenya Power Corporate
Performance was measured by using
Consumer Satisfaction Survey was done by
KIPPRA for petroleum products, electricity
and renewable energy providers.
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15. 15
SRM Practices on performance of
KPLC … contd
Figure shows Consumer Satisfaction Index: Summary of Latent Key
Variables. Source: Kenya Institute of Public Policy Research & Analysis
(KIPPRA), 2010.

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