Africa's energy: 'If we don’t think long-term, we could play catch up,' says KenGen's MD

How we made it in Africa talks energy with KenGen's outgoing managing director Eddy Njoroge.

Kenya Electricity Generating Company Limited (KenGen) is the leading electric power generation company in Kenya producing about 80% of the country’s electricity consumption. Last year, the firm began development of the 280MW Olkaria IV Project, the single largest geothermal project on the continent. How we made it in Africa’s Dinfin Mulupi caught up with KenGen's managing director Eddy Njoroge – who is set to retire in June – to talk about Africa’s energy challenges, China’s growing presence in the industry and lessons from his long career. Last year construction began at your 280MW Olkaria IV geothermal power project ,which has attracted a lot of international attention. What is the progress of the project?

The project is ongoing and we are sure that it will be online by the end of next year. The entire 280MW should be commissioned by the end of 2014. That is a record when you consider 280MW being built within five years. The project has been driven by demand. Geothermal is one of the cheapest options that Kenya has. We have sufficient geothermal resources in this country and all we need to do is exploit it. The 280MW is not a huge input into the grid considering the demand growth in this country, which is over 8% growth per annum cumulative. We need to be building more than 280MW every year. However, we are excited that this is the first big project, costing about US$1 billion. It is a unique project made possible by the collaboration of many partners. The icing on the cake is the fact that we will also deliver power at the price of about $0.7, one of the cheapest in the world.

Upon completion of Olkaria IV in 2014, KenGen will supply just over 1,500MW. With the growing demand for power in Kenya, how do you intend to fill the demand supply gap?

We are looking at geothermal energy. We have gone out to tender for expression of interest for joint venture partners or steam conversion partners. We could have another 650MW of geothermal energy between now and 2018. We are also looking at coal which could give us about 1,200MW. We have done feasibility studies on wind and we reckon that some places in Marsabit and Isiolo (northern Kenya) could generate 150MW of wind. Therefore it is possible to have an additional 1,500MW by 2018. By 2030 however the demand should be at 15,000MW. If we don’t think long-term, we could play catch up. Part of the problem we have had before is concentrating on one project at a time. We need to have a pipeline of projects in different stages to meet the growing demand.

Describe the challenges you face.

Financing is our main challenge. We have been traditional in terms of financing options. We have always looked to the DFIs; the World Bank and Japan International Cooperation Agency (JICA). We want to change that thinking and look at a wider scope of financing options. When you think about 15,000MW expansion you are talking of $40 billion between now and 2030. That financing will be a challenge.

In all these energy projects in Kenya and the rest of Africa, China’s participation either in financing or implementation is increasing. Your thoughts on this?

In our sphere China is not that active but they are obviously coming in. They have built one of our small hydro plants and are looking at wind energy. They are willing to venture out. They are not too concerned about the risks. Western countries have always looked at Africa as a place too risky to invest in. Sometimes when you look at the risks, they are so mitigated. There are hardly any risks.

Africa’s development is hinged on access and affordability of energy yet most countries including Kenya struggle with these. What is the remedy to the energy problems?

It is very possible to have access and affordability. Sub-Saharan Africa has over 780 million people and an installed capacity of 31,000MW (excluding South Africa), which is small compared to Norway which has a population of five million and 32,000MW. Sub-Saharan Africa is also rich with energy resources like hydro, geothermal, solar and wind. We need to tap [into] these resources because the demand is there. The headroom is so high in terms of energy demand. We also need to be cost effective in the delivery of our projects so as to ensure affordability on the end of the consumer. The way we do our projects is very expensive. It takes far too long to complete a project and with that comes extra costs. We need to deliver on time and on budget. It also needs to be sustainable and that is why at KenGen our thrust is towards renewable energy.

You have been active in the private and public sector for more than 35 years and are set to retire in June. What lessons have you learnt in your long career?

I have learnt that as you go to the top your management style needs to change. You need to be looking at strategic issues and not operational issues. What is more important is that you need to be very focused. You need to set the goals and stay focused on achieving them. For us that has been to get to 1,500MW then to 3,000MW and then to over 10,000 MW by 2030. There have been difficult times too in my career. One of the worst was when we were being accused of impropriety in our procurements some time last year. That was a difficult time for us. It was not a good time to have all sorts of accusations leveled at us considering how hard we have been working to deliver.

What is next for you after retirement?

I will play golf and travel. I will be involved in non-executive positions in the energy sector and will continue to sit on several boards. I may go back to school to study because I feel there are some challenges and gaps in the energy sector and I would like to help African governments bridge those gap. I would also like to teach later.

Africa’s private and public sectors need good leadership to grow local entities. What are the best management options?

We need to identify potential leaders in our organisation. In the past we used the laid down scheme of service such that one had to go through each and every step to get to the top. Every organisation needs to identify potential leaders and take them through a route that can get them to the top as early as possible. We need to get CEOs at much earlier ages, not in their 60s and that cannot come through schemes of service but rather through identification and nurturing of potential. Younger CEOs have the energy. Sure you need the experience, but these days they can get experience by their early 40s, not necessarily in their 60s.

As you leave KenGen after ten years as MD, what path do you want the company to tread and have you groomed any successors?

I want KenGen to still be the leading power generator not just in Kenya but also in the region. I want to see it grow to over 10,000MW in installed capacity. I want it to continue being focused and play a major role in the economic growth of Kenya. As for succession, I have done a lot in preparing the people who report to me. However, the position will be filled competitively and I have no preference on either internal or external [candidates].

At the age 60, you have seen Africa through different seasons. What is needed to take Africa to the next stage?

We have a huge potential in terms of human population. We need to create a very robust and sustainable middle class across the whole continent. I believe the middle class is the buffer of society. It really is the one that anchors society. We need to have more people moving from the bottom of the pyramid, which is where a lot of people are, to the middle. We need to start reshaping our social structure which is very pyramidal. That will resolve a lot of issues.