Kenya Power chief executive Bernard Ngugi. FILE PHOTO | NMG Kenya Power defaulted on payment for electricity worth Sh23.9 billion supplied by KenGen in the year ended June 2020, exposing the electricity producer to the risk of major losses.
The Office of the Auditor-General says in its report on the power generator’s financial statements that the debt had increased from Sh19.3 billion a year earlier.
Kenya Power, the distributor, swung into a pre-tax loss of Sh7.04 billion for its financial year to the end of last June on costly wholesale electricity purchase from the electricity producer and higher financing costs that offset modest sales.
This has made the firm struggle to meet its obligations, in a business setting that has seen it seek debt relief in the race to cut costs.
“In addition, the amounts due from Kenya Power were on average outstanding for periods of 195 days, which was way above the 90-day credit cycle provided for in the agreement between the two companies,” the Auditor-General said in the report.
The delayed payment has hurt KenGen’s cash flows, prompting it to reduce capital expenditure and increase its borrowings. The company ended the review period with a cash balance of Sh5.3 billion, down 42.3 percent from Sh9.3 billion the year before.
Its net profit, however, more than doubled to Sh18.3 billion, partly helped by a Sh4.5 billion tax credit.
Other power producers are also claiming a total of Sh20.5 billion from Kenya Power and it was not immediately clear how much of the amount is in default.
The audit found differences between what KenGen is claiming from Kenya Power and what the electricity distributor says it owes the power producer.
While KenGen says it is owed Sh23.9 billion, Kenya Power says the debt stands at Sh24 billion, a variance of Sh44.7 million.
KenGen is also claiming from Kenya a separate Sh224.3 million for its Aggreko project – an emergency power plant it manages on behalf of the Ministry of Energy.Kenya Power says it owes KenGen Sh197.6 million in relation to the Aggreko project, leaving Sh26.7 million in dispute.A total of Sh71.4 million is contested, with the power producer saying the amount represents penalties for default.“According to management, the unconfirmed amount of total trade receivables of Sh71.4 million relates to interest on delayed payments, which Kenya Power has disputed,” the audit report said.The interest KenGen charged Kenya Power for the outstanding amounts is much smaller compared to the penalties levied […]