Can Safaricom help Kenya Power to improve its performance?

Can Safaricom help Kenya Power to improve its performance?

In an interesting reminder of the growing relevance of smart grids and the Internet of Things (IoT) to developing markets, it has been reported that Kenyan operator Safaricom is offering to supply a $288 million smart metre system to the country’s main power utility.

Reuters says that Kenya Power suffers from annual power system losses of 23.46 percent on its transmission network. These losses are costing it 3 billion shillings (about $27.25 million) every year.

Among strategies to cut such losses Kenya Power is apparently considering investing in a reliable metering system.

If the proposed system were to be implemented, Reuters says, both firms have estimated that losses would fall to 15.46 percent in two years; that’s close to the 15 percent level seen as the global benchmark.

Safaricom wants to build, operate and then transfer the smart grid to Kenya Power after an eight-year period. Safaricom will make the initial investment required. It proposes to split the additional revenue, projected at 71.7 billion shillings (about $651.3 million) on a 75 percent to 25 percent basis in favour of Safaricom. However, it is not clear whether this figure is also based on an eight-year period, nor how it has been calculated.

System losses and alleged mismanagement have driven Kenya Power into the red in recent years, with shares under 1 shilling each – close to the lowest they have ever reached – so improvement is clearly needed. However, if this strategy proves successful, it may even gain the attention of a number of other African power utilities in similar predicaments.

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