How Kenya Power dug itself into a hole

Kenya Power on Wednesday provided incomplete and contradicting information in defence of its transformer purchase programme.

In response to queries by the Nation on Tuesday, managing director Ken Tarus, in a short text message, said that 206 transformers supplied by Muwa Trading were received, tested and the bulk are already in use and working well.

“We have deployed 190 in the field and they are working well,” said Dr Tarus. “Sixteen of the remaining are at our yard, which was visited by the Direc-tor of Criminal Investigations.”

On Wednesday, the company bought space in the newspapers to display a different set of figures. It said that 154 transformers in the consignment were sent out for use and 52 are in storage.

The statement did not say when the balance of the transformers, 206 in all, were supplied and why a quarter of them are allegedly still in the stores.

FULL FACTS

Kenya Power did not provide the full facts about the procurement of the transformers, declining to comment about equipment supplied by Nucon Switchgear because of an ongoing court case.

Neither did the company give the number and type of transformers it bought from Muwa and the full, true reasons for cancellation of the supply contract on May 6, 2015.

However, the Daily Nation has seen records which show that the Kenya Power management reported to the board of directors in July of 2015 that it was suffering loss as a result of supply delays and the “supply of defective transformers by some suppliers”.

According to the minutes of that board meeting, “the trend of supply of defective and failed transformers was found to be unacceptable by management and posed serious danger to the public and loss of sales”.

DEFECTIVE PRODUCTS

The minutes named Muwa Trading Company Limited and Nucon Switchgear as among those affected by the delays and supply of defective products.

Indeed, in the out-of-court settlement between Muwa and Kenya Power, it is clearly recorded that part of the reason the contract was terminated was “failure of transformers in the field supplied by Muwa”.

After a meeting of negotiating teams between Kenya Power and Muwa on Wednesday, November 15, 2017, it was captured in the minutes that “there were Schillar transformers supplied by Muwa that indeed failed”.

However, Kenya Power had not prepared the paperwork on the failed equipment, according to the minutes, and agreed not to press the issue in the in-terest of having a quick settlement.

TRANSFORMER FAILURE

In his statement, Dr Tarus did not address the issue of transformer failure, and it is likely that just like the Kenya Power negotiating team, he does not know how many of those transformers were junks.

During the negotiations, Kenya Power had wanted Muwa to take back and repair all faulty transformers already supplied. The issue disappeared during the talks and was not part of the final agreement.

So, what happened to the faulty ones?

Muwa’s contract was for the supply of 528 transformers with a rating of 100KVA and 180 with a rating of 1,000KVA.

Some 352 of the smaller ones were delivered earlier, as were 180 of the bigger ones, leaving a balance of the 206 that Dr Tarus has been quoting.

The question is, out of a total of 708, how many were junks and are rotting in the yard?

JUNKS

The agreement Dr Tarus signed on December 20, 2017 was to pay in full for all these transformers, including the junks over which they took the grave step of cancelling a huge contract, with the consequent court cases.

As far as Nucon is concerned, a matter Kenya Power said is in court, the Daily Nation is aware that an agreement was struck on Tuesday, January 30 and Kenya Power agreed to receive some 212 transformers already at the port of Mombasa.

The Daily Nation counted and photographed 664 Nucon transformers clearly labelled “rejected”. The Nation also observed and photographed rust on presumably new transformers.

On Wednesday, Muwa claimed that Kenya Power “has never” written to them to complain about defective transformers.

“All our transformers have been passed. Since 2016, we have always asked Kenya Power to give us the serial numbers of the transformers which were not working and they have never given us,” said Mr Edwin Muchori, the general manager.

PASSED TEST

“We are surprised that you wrote that the transformers at the yard belong to Muwa. I think they belong to Nucon.”

Muwa also claimed that Kenya Power has not paid for the transformers. Interestingly, even as the MD was claiming that all transformers had passed the test, the company was issuing a statement saying “transformers which were rejected were not paid for (and) the same will be collected by suppliers as per procedure”.

The transformer saga and the cause of high bills over which the country has complained is the subject of an ongoing police investigation, the Nation has learnt.

A senior police source told the Nation that the defective equipment has been “preserved” and was now being treated as evidence.

There has been a storm of protest across the country over what consumers say are exceptionally high power bills.

ONE-YEAR WARRANTY

Many of the poor families connected to the grid with pomp and ceremony before the election cannot afford electricity.

Another puzzling question was why Kenya power accepted a one-year warranty on transformers, which are sensitive and expensive machines.

In 2016, the then Kenya Power Managing Director Ben Chumo had announced that the transformer suppliers would have to provide a warranty of six years and five years from the date of delivery and commissioning, respectively, in order to improve the quality of power supply.

According to insiders, the first batch of transformers from Nucon had been approved – despite some defects – but the consignment failed at the field, leading to major black-outs wherever they were installed. This was blamed on poor workmanship.

Initially, Kenya Power’s Supply Chain manager Annie Gatukui had rejected 150 transformers in March 2015 and asked Nucon to “remedy the defects and notify us upon rectification”.

POWER LOSSES

“Let us know of any tests carried out after the correction and the results,” she wrote.

They took Kenya Power to court and an out-of-court negotiation began.

Company sources told the Nation that Kenya Power realised that Nucon transformers were losing a lot of power – which means the company was buying power it could not sell because it vanished within the transmission network.

For instance, the 50KVA transformers were losing an average of 1,534W against the standard 840W specified in the tender documents.

The 100KVA single-phase transformers were also losing 2,704W against the average of 1,650. They were also found to have low oil levels and poor finishing.

But Nucon had claimed that they were never notified that 664 of their transformers were not working, and they were not aware of the defective products.

POWER UTILITY FIRM

In January 2018, Kenya Power and Nucon agreed that the power utility firm would pay for 212 transformers from Nucon, and that it would not pay “interest on goods in Kenya earlier rejected at inspection”.

But it agreed to pay 15 per cent interest on goods at the port and to buy 100 per cent of the goods in India. In all, Kenya Power agreed to pay Sh45 mil-lion in interest alone to Nucon.

We also learnt that repairing of transformers is a multi-million-shilling business. Kenya Power records indicate that Ms Yocean (Group) Limited billed the power firm Sh65 for repair works on the transformers for the month of March alone.