Mediating effect of Contract Management on Financial Risk Management Instruments and Performance of Hydroelectric Energy Projects in Kenya
- July 10, 2021
- Posted by: rsispostadmin
- Categories: IJRSI, Management
International Journal of Research and Scientific Innovation (IJRSI) | Volume VIII, Issue VI, June 2021 | ISSN 2321–2705
Amolo Elvis Juma Amolo, PhD1, Charles Mallans Rambo, PhD2*, Charles Misiko Wafula, PhD3*
1University of Nairobi, Kenya
2Associate Professor PhD, University of Nairobi, School of Open and Distance Learning, Kenya
3Senior Lecturer PhD, University of Nairobi, School of Open and Distance Learning, Kenya
Corresponding author*
Abstract: The under exploitation of Renewable energy projects in Kenya has been alluded to financial constraints arising from investor’s negative perception of the regions high investment risk. The purpose of the study was to assess the mediating influence of Contract management on the relationship between financial risk management instruments and performance of hydroelectric energy projects in Kenya. The study adopted pragmatism paradigm and descriptive survey design while questionnaires and interview guide were used to collect quantitative and qualitative data from a census of 94 participants. Validity coefficient of 0.775 and reliability coefficient of 0.781 were obtained. Analysis involved descriptive statistic and inferential statistic of Correlation and Regression at a significance level of 0.05. The hypothesis: 2. H0: Contract Management does not significantly mediate the relationship between financial risk management instruments and performance of hydroelectric energy projects in Kenya was rejected since P=0.000<0.05. Therefore the study concluded that there is significant mediating effect of contract management on the relationship between financial risk management instruments and performance of hydroelectric energy projects in Kenya. It is recommended that Project management and policy makers should integrate appropriate contract management standards regarding financial risk management instruments to improve performance of hydroelectric energy projects to boost investors and lenders confidence. Further research should be carried out on other factors that can influence performance of power projects other than Contract management.
Introduction
Though Kenya is endowed with an estimated hydropower potential of about 6,000MW for large hydros (above 10MW) and over 3,000MW for small hydros, only 823.8 MW of large hydros and less than 25MW of small hydros has been exploited (Ministry of Energy, 2020). For this massive infrastructural investment to be realized the financial markets must play critical role in stimulating private investments into the renewable energy development to bridge the scarce resources at disposal of the public sector (Rezec and Scholtens, 2017). But due to investors negative perception of Kenya’s high investment risk and low creditworthiness, the degree of private capital penetration has generally remained low (OECD, 2013). Thus, appropriate contract management and utilization of financial risk management instruments to de-risk renewable energy infrastructure projects is essential for reducing private investment cost. Financial risk management instruments are approaches to risk mitigation for renewable energy projects and they include alternative risk transfer, contingent capital, hedging derivatives, credit enhancement, and insurance. Renewable energy development thus demands attention on risk mitigation to ensure adequate funds can be solicited from both the local and international financial markets so as to reap from their benefits and improve performance of such project by ensuring their successful completion on schedule, within cost and quality.
