Financial Risk Management Instruments, Communication Strategy, Contract Management and Performance of Hydroelectric Energy Projects in Kenya
Abstract
Renewable energy investment has been under exploited in Africa in spite its ability to increase the
estimated average regional Growth Domestic Product from the current 4% to more than 10%and
Kenya in specific due to investor‘s negative perception of the regions high investment risk and low
creditworthiness which retards the degree of private capital penetration. The purpose of the study was
to establish the influence of financial risk management instruments, communication strategy, and
contract management on performance of hydroelectric energy projects in Kenya. The objectives of the
study were: to establish how Alternative Risk Transfer influence performance of hydroelectric energy
projects in Kenya; to examine how Contingent capital influence performance of hydroelectric energy
projects in Kenya; to assess how Credit enhancement influence performance of hydroelectric energy
projects in Kenya; to determine how Hedging derivatives influence performance of hydroelectric
energy projects in Kenya; to examine how Insurance influence performance of hydroelectric energy
projects in Kenya; to assess how the combined financial risk management instruments influence
performance of hydroelectric energy projects in Kenya; to assess the moderating influence of
Communication strategy on the relationship between financial risk management instruments and
performance of hydroelectric energy projects in Kenya; to assess the mediating influence of Contract
management on the relationship between combined financial risk management instruments and
performance of hydroelectric energy projects in Kenya. The study was grounded on Prospect theory,
Goal-Setting theory, Diffusion of innovation theory, and Agency theory. The study was underpinned
on pragmatism paradigm, mixed method approach, descriptive survey and correlational research
design. Structured questionnaires and interview guide were used to collect quantitative and qualitative
data from a census of 94 participants. Validity test was done on the instruments and a coefficient of
0.775 obtained while reliability coefficient was 0.781. Analysis involved both descriptive statistics of
mean and standard deviation and inferential statistics of Correlation and Regression at a significance
level of 0.05 with the aid of SPSS version 25 and thematic content analysis of qualitative data for
triangulation. Eight hypotheses were tested at α=0.05 and the results were: 1. H0: There is no
significant relationship between Alternative Risk Transfer and performance of hydroelectric energy
projects in Kenya was rejected since P=0.000<0.05; 2. H0: There is no significant relationship
between Contingent capital and performance of hydroelectric energy projects in Kenya was rejected
since P=0.000<0.05; 3. H0: There is no significant relationship between Credit enhancement and
performance of hydroelectric energy projects in Kenya was rejected since P=0.000<0.05; 4. H0: There
is no significant relationship between Hedging derivatives and performance of hydroelectric energy
projects in Kenya was rejected since P=0.000<0.05; 5. H0: There is no significant relationship
between Insurance and performance of hydroelectric energy projects in Kenya was rejected since
P=0.000<0.05; 6. H0: There is no significant relationship between the combined financial risk
management instruments and performance of hydroelectric energy projects in Kenya was rejected
since P=0.000<0.05; 7. H0: Communication strategy does not significantly moderate the relationship
between financial risk management instruments and performance of hydroelectric energy projects in
Kenya was rejected since P=0.000<0.05;and 8. 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 Alternative Risk Transfer, Contingent Capital, Credit Enhancement, Hedging
Derivatives and Insurance have a significant influence on performance of hydroelectric energy
projects. Equally, the moderating effect of Communication Strategy and mediating effect of Contract
Management have a significant influence on the relationship between financial risk management
instruments and performance of hydroelectric energy projects. It is recommended that Project
management and policy makers should integrate appropriate financial risk management instruments to
improve performance of hydroelectric energy projects besides developing targeted policies for
strengthening implementation of the financial risk management instruments to boost investors and
lenders confidence.
Publisher
University of Nairobi
Rights
Attribution-NonCommercial-NoDerivs 3.0 United StatesUsage Rights
http://creativecommons.org/licenses/by-nc-nd/3.0/us/Collections
The following license files are associated with this item: