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President Uhuru Kenyatta, through a special Gazette Notice No. 3076 published on 29 March 2021 (the Gazette Notice), appointed a taskforce primarily assigned with undertaking a comprehensive review and analysis of all power purchase agreements (PPA) entered into between various independent power producers (IPPs) and the Kenya Power and Lighting Company Limited (KPLC) (the Taskforce).
The constitution of the Taskforce by the President follows the revocation of a standing committee appointed by the Cabinet Secretary for the Ministry of Energy to undertake a similar exercise, through special Gazette Notice No. 2219, published on 15 March 2021(the Revoked Notice). Notably, the mandate of the standing committee in the Revoked Notice was centred on the re-negotiation of PPAs, whereas the mandate of the Taskforce in the Gazette Notice has been extended to include termination of PPAs and any other appropriate actions the Taskforce deems fit as recommendation options.
Key Issues to Note
The term of the Taskforce shall be six months with effect from 29 March 2021 although the term may be extended as specified through a gazette notice. In addition, the Taskforce shall report to the President through the Cabinet sub-committee on KPLC.
The Taskforce comprises of:
The scope of the Taskforce includes the following:
The Gazette Notice provides that pending the completion of the review exercise by the Taskforce, a moratorium has been placed on:
This means that any ongoing negotiations between IPPs and KPLC for PPAs that have not been concluded as at the date of the Gazette Notice would have to be suspended for a period of 6 months or longer if the Taskforce’s tenure is extended. The Gazette Notice is not clear on whether the moratorium extends to any new expressions of interest applications and other related approvals. It is likely that the review process may stagnate the issuance of any new expression of interest approvals and other related approvals due to the uncertainty with respect to the conclusion of the pending PPAs. In addition, the Gazette Notice is not clear on the criteria of PPAs that are exempt from the moratorium and are legible for renewal following approval by the KPLC’s Board of Directors and ratification by the Cabinet Sub-committee on KPLC.
We expect that the outcome of the Taskforce will have a great impact on the existing framework relating to PPAs as the review by the Taskforce includes a review of key issues such as the tariff structure, procurement methods and risk allocation.
Should you have any questions regarding the information in this legal alert, please do not hesitate to contact Amyn Mussa.