KPLC is a public company incorporated under the Companies Act and listed on the Nairobi Stock Exchange. The state owns 50.1 percent of its shares, while 49.9 percent are in private hands. The company operates with policy guidance from the MoEP, as well as the National Treasury (Ministry of Finance), under the State Corporations Act. Regulatory affairs are dealt with by the ERC under the 2006 Energy Act and by the Capital Markets Authority under the Capital Markets Act.

On our index of governance, KPLC scores well (90 percent) compared to the comparator group (63 percent)<sup>17</sup> (table 8).<sup>18</sup> Its one black mark is the sway of government in board appointments. At each annual general meeting, at least one-third of the board’s members retire by rotation but are eligible for reelection.<sup>19</sup> Any shareholder is free to nominate someone to fill a vacancy on the board and to participate in the ensuing voting. The vote is normally conducted by a reputable auditing firm and the results published in the press. In practice, however, the government’s 50.1 percent share means that it can decide who serves on the board.

**Table 8. Corporate governance of utilities in Kenya and comparators, 2015**

||Kenya<br>Kenya Po|Senegal<br>wSENELEC|Tanzania <br>TANESCO|Uganda<br> UMEME|International<br>benchmark|
|---|---|---|---|---|---|
|**Overall Utility Governance**|**90%**|**65%**|**61%**|**80%**|63%|
|**Corporate Governance**|100%|74%|57%|85%|62%|
|_Accountability_|_100%_|_58%_|_58%_|_92%_|60%|
|_Autonomy (SOEs)_|_100%_|_89%_|_56%_|_78%_|63%|

Note: Scores based on index developed for the Rethinking Power Sector Reform Project. For more details go to project website at http://www.esmap.org/rethinking_power_sector_reform KPLC operates under an annual performance contract with the MoEP, with targets set for key performance indictors based on the concept of the “balanced scorecard.” The company reports its performance to the government at least quarterly. Though KPLC performs well on most items and is known to have a long history of strong corporate culture, the discretionary influence of government should be kept in mind when interpreting the score. The cause for doubt is confirmed when one considers that (i) the board’s decisions have largely been in line with government positions, (ii) the government has removed board members before their term is up, and (iii) the board has failed to perform on all ten areas defined in the legal and regulatory framework as “explicit responsibilities.” When it comes to financial management, KPLC stands head-and-shoulders above other countries in the region and compares favorably with the broader global benchmark group (table 9). As KPLC’s shares are traded on the Nairobi Stock Exchange, its financial reporting is done in compliance with the International Financial Reporting Standards. The company is ISO-certified and has set procedures for budgeting operating and capital expenditures, as well as for other processes. KPLC has set internal auditing procedures with adequate reporting and supervision mechanisms. Because it is a

> 17 Data for utility governance indicators were collected in 2015. Given the dynamic nature of governance frameworks, specific conditions may have changed since then.

> 18 For a more detailed look at the indices used in this section, see the Annex.

> 19 The requirements of the sector, diversity of skills, academic qualifications, gender, age, and experience are among the factors to be taken into consideration when constituting the board.

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