Kenya Power now exclusively channels its scrap metal to the State-owned Numerical Machining Complex (NMC) for recycling into various products, some of which are handed back to the electricity firm on a net-off arrangement, dealing a blow to illegal traders.
The State-owned power distributor now sells scrap steel, aluminum, and copper products to NMC for Sh37, Sh115, and Sh650 per kilo, respectively.
NMC then recycles the scrap metal into equipment like meter seals, earth rods, and transformer channels.
The firm sells part of these kits to Kenya Power in a net-off arrangement where the electricity distributor only pays the difference after deducting the expected money from NMC for selling the scrap metal.
Under a netting arrangement between two parties, amounts owed under different agreements are aggregated so that the party owing the greater aggregate amount under the agreements to be netted makes a payment to the party owing the lesser aggregate amount.
The net payment is equal to the difference obtained when subtracting the amount owed by the party owing the lesser aggregate amount from the amount owed by the party owing the greater aggregate amount.
John Ngeno, General Manager, Supply Chain and Logistics at Kenya Power said the deal with NMC will help cut off rogue copper dealers, who have targeted critical electricity infrastructure like transformers, throwing Kenya Power into massive losses.
Kenya Power says it lost 519 transformers valued at Sh574 million to vandals between May 2022 and December 2023, highlighting the massive cost of vandalism to the utility and inconveniences to its customers due to power outages.
“We picked NMC in a deal that has the model of barter trade, we sell our scrap metal to them, and they use it to make kits such as meter seals, earth rods, and transformer channels,” he said in an interview.
“Vandalism was getting out of hand and this deal is key to ending this illegal trade,” he added.
In some cases, Kenya Power takes more than a week to replace vandalised transformers, especially in rural parts of the country, highlighting the massive hit on businesses and homes as a result of vandalism.
NMC is State-owned with Kenya Shipyard Limited holding 51 percent ownership and Kenya Railways- the remaining 49 percent.
NMC manufactures industrial spare parts and the deal with Kenya Power is set to offer it a lifeline after years of struggles and under-funding.
Dr Ngeno added that the deal will also cut the costs that Kenya Power bears in acquiring meter seals, earth rods and transformer channels, due to the net-off payment arrangement.
High demand for copper in the local black market due to its multiple uses and ready export market in China and India, has also been blamed for fueling vandalism.
There have also been concerns that milling firms have fueled vandalism by buying scrap metal from criminals before refabricating it into new products.
Increased vandalism prompted Kenya Power to start welding transformer bases on channels, installing transformer units above high-voltage lines, installing alarms on transformers, and using aluminum transformers as part of battling the vice.
The government between January and May 2022, banned the scrap metal trade in a bid to curb the crime, a period that Kenya Power says it recorded zero cases of vandalism.
There have been growing calls for the government to ban the copper export business, as well as compel scrap metal dealers to disclose the sources of their copper and aluminum.
Vandalism of transformers and other critical infrastructure has continued unabated despite the heavy penalties of not less than Sh5 million or up to ten years in jail or both for those found guilty of the crime or illegally trading in scrap metal.
