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KenGen gets Sh1.74bn insurance payment for power plant damage
The Kenya Electricity Generating Company (KenGen) head offices in Nairobi.
What you need to know:
- The firm’s insurance revenue also includes other compensation for fire and equipment damage.
- Insurance for power plants is critical for power producers, especially independent power producers.
KenGen has received a compensation of Sh1.74 billion from an unnamed insurer after one of its power plants was damaged which stopped power generation.
The power producer has revealed that it made a compensation claim to its insurer after the Olkaria V Unit 1 got damaged on October 7, 2021. It said the damage led to loss of revenue and damaged key equipment in the plant.
The firm’s insurance revenue also includes other compensation for fire and equipment damage.
“Insurance compensation in 2023 mainly relates to insurance proceeds received concerning business interruptions and property damage claims mainly arising from the damage to Olkaria V unit 1 on 7 October 2021. The insurance claim process was finalised in June 2023,” said KenGen.
Equipment damage
This pushed up the company’s other income by 170.8 per cent from Sh769 million in 2022 to Sh2.084 billion.
Insurance for power plants is critical for power producers, especially independent power producers (IPPs) to secure funding for their projects.
This gives funders assurance that any revenue loss and equipment damage to the power plant will be covered.
It is unclear how much KenGen spends to insure the dozens of power plants, including hydro, geothermal, wind, thermal, and solar plants that it owns, every year.
The firm, which is listed at the Nairobi Securities Exchange (NSE), currently has an installed generation capacity of 1,904MW, out of which hydro is 826MW, followed by geothermal (799MW), thermal (253MW), and wind (25.5MW).
Highest net profit
The company however spent Sh2.44 billion on insurance cover including for its workers in the year to June 2022, an increase of 119.8 percent from Sh1.11 billion.
KenGen commenced construction of the 172MW Olkaria V power plant in 2017.
The company tapped H-Young Company (HY), Mitsubishi Corporation with its compatriot Mitsubishi Hitachi Power Systems to provide some of the parts needed to equip the steam plant.
KenGen synchronised the first unit to the national grid in July last year, which means the plant developed damage barely three months after it was commissioned.
The company posted a profit after tax of Sh5.01 billion in the year to June 2023, up from Sh3.38 billion in the previous year.
It was the highest net profit the company has booked in three years since it earned Sh18.37 in the year to June 2020.