State to get lion’s share in new Kenya Power board

Kenya Power has informed its shareholders of the plan to restructure its board in order to safeguard the interests of minority owners.  

In a meeting held Tuesday, the board told investors of its intention to reconstitute board to an almost 50-50 shareholding between the government and private investors.

Currently, the government owns a 50.1 per cent stake in the Nairobi Securities Exchange (NSE) listed power distributor, a majority shareholding that allows it to make decisions at will, hurting small investors. 

Kenya Power board chairperson Joy Brenda Masinde told investors that the proposed changes are aligned with the government's commitment to transform the company into a commercially viable entity.

"This will see the company operate on commercial principles and provide a return to all shareholders,'' Masinde said. 

In the proposed restructuring, the state will appoint five directors while the remaining shareholders will elect four directors.

This means directors on the board will represent shareholders' interests unlike in the current scenario where the board has a minimum of seven and a maximum of 10 directors, with an appropriate mix of skills, experience, age, gender, geographic spread and team roles.

The company has convened an Extraordinary General Meeting on November 10 to seek shareholders' approval of the changes.

"During the EGM, the company will be seeking shareholders' approval to amend its Memorandum and Articles of Association, specifically on the restructuring of the Board of Directors,'' she said. 

Although the power distributor says the change will be safeguarding minority shareholders,  legal minds have laughed off the purported change as meaningless. 

In an expert piece published by Business Daily, a business executive and corporate lawyer Carol Musyoka questions how the government that has a slim majority will protect minority investors by appointing more directors.

"The government, with a majority thinner than a mosquito’s proboscis, is looking to protect minority shareholders by appointing five directors to the minority’s four?'' she questions. 

She also wonders why the government is saying it will appoint five directors, yet the company CEO and managing director sit on the board, making its total representatives six to four.

Her sentiments are echoed by Jeremy Kiamba, a long-term corporate lawyer who insists that the planned overhaul will not benefit minority shareholders who have been victims of rushed government decisions. 

''This is putting the status quo on paper. The government still has an upper hand on so many things. A company cannot run full-scale commercial when the government's hand is clearly visible,'' Kiamba said. 

He adds that minority shareholders are still burning fingers from past decisions made solely by the government, including a power subsidy plan by the past regime which reduced electricity bills by 15 per cent. 

The firm's shareholders have not received dividends for the past five consecutive years and are headed to the sixth if the profit warning issued in May is anything to go by. 

The firm issued a profit warning for the financial year ending June 2023, preparing investors for a drop of at least 25 per cent of net profit in the period.

The utility firm posted a net loss of Sh1.1 billion for the half-year ended December 2022 and is attributing the looming drop to the widening foreign exchange losses.

During the past 13 years, the highest Dividend Payout Ratio of Kenya Power is 0.30 and the medium of 0.13.