Risk Factors, Contract Management and Performance of Public Private Partnerships Renewable Energy Projects: the Case of Geothermal Renewable Energy Projects in Kenya.

Abstract

Energy infrastructure has a direct effect on growth and development of an economy. When funded and maintained, infrastructure plays a critical role in ensuring a high standard of living. In spite of this the infrastructure deficit is very glaring among most governments, more so in developing nations. This is a result of tight budgetary allocations hence governments are increasingly looking to attract private-sector investment. PPP provide budgetary room without any compromise to sustainability of a government’s fiscal position. However, investment risks create a big obstacle to private sector investment. The aim of this study was therefore to establish the extent to which risk factors, contract management influence the performance of public private partnership renewable energy projects in Kenya. The objectives of the study were; to establish how political risks influence performance of public private partnership renewable energy projects in Kenya; to establish the extent to which policy risks influences performance of public private partnership renewable energy projects in Kenya; to assess the extent to which macro-economic risks influences performance of public private partnership renewable energy projects in Kenya; to assess how social acceptance risks influences performance of public private partnership renewable energy projects in Kenya; to assess the extent to which market risks influences performance of public private partnership renewable energy projects in Kenya; to determine how combined risk factors influences performance of public private partnership renewable energy projects in Kenya and to determine the moderating influence of contract management on the relationship between risk factors and performance of public private partnership renewable energy projects in Kenya. Mixed methods approach was employed and a pragmatism research paradigm was adopted to guide the study. The study used correlational and descriptive survey research design. Both quantitative and qualitative data was collected by use of a self-administered questionnaire and an interview guide after piloting and reliability established. A sample size of 263 respondents was drawn from a target population of 769 using the Yamane formula. Data was collected using questionnaires and an interview guide. For descriptive statistics the study used the mean and standard deviation. For inferential statistics the study used Pearson’s Product Moment Correlation (r) and Multiple Regression while the F-tests were used in hypothesis testing. The study established a significant influence of political risks r = 0.572, F (1,205) = 99.771, R2 = 0.327 at p<.05 H0 was consequently rejected. Policy risks, r=0.627 F (1,205) =132.851, R2 = 0.393 at p< 0.05 established a significant influence of policy risks on performance of public private partnership renewable energy projects in Kenya. Macroeconomic risks, r=0.603, F (1,205) = 117.416, R2=0.364. P< 0.001, the study found a significant influence of macroeconomic risks on performance of public private partnership renewable energy projects in Kenya. The study established a significant influence of Social acceptance risks on the performance of public private partnership renewable energy projects in Kenya, r=0.565, F (1,205) =96.135, R2= 0.319, p< 0.001, the H0 was rejected and alternate hypothesis adopted. With r=0.582, F (1,204) =104.689, R2= 0.339, P=0.000˂ 0.05, the study found that market risks has a significant influence on performance of public private partnership renewable energy projects in Kenya. With, r=0.757, F (5,200) = 53.777,R2= 0.573p =0.000< 0.05 the study determined that there was significant influence of combined risk factors on performance of public private partnership renewable energy projects in Kenya. The study also found no moderating influence of contract management in the relationship between risk factors and performance of public private partnerships, R2=0.847 ΔR2=0.001 F Change=1.702 df=1,203 P > 0.005.The study concluded that there is significant influence of risk factors on the performance of public private partnerships renewable energy projects. The study recommended the need for a comprehensive risk management strategy to enhance the performance public private partnerships. Further research could investigate effectiveness of PPPs in this way a comprehensive understanding of PPP performance in terms of effectiveness would be arrived at.