Kenya Power workers repair a power supply line. FILE PHOTO | NMG The government has asked KenGen and other suppliers of Kenya Power not to enforce collection of billions of shillings they are owed by the electricity distributor, exposing them to cash flow problems and potential losses.
The move comes after the utility firm defaulted on the suppliers as its finances deteriorated further, culminating in a net loss of Sh939.4 million in the year ended June 2020.
KenGen, whose sole customer is Kenya Power, had not been paid Sh23.9 billion by the electricity distributor as of June 2020 and has one of the largest exposures in the debt restructure being championed by the government.
“The State and energy sector public organisations through the Ministry of Energy (MOE), have been requested to ease pressure on supplier dues payable by KPLC i.e. the amount to be settled on a payment plan including a moratorium on dues payable,” Kenya Power says in its latest annual report for the year ended June 2020.
The company also owed private power producers a total of Sh20.5 billion and it was not immediately clear how much of the amount is in default and whether they will also be subject to debt restructure.
The move to delay and stretch out payments to suppliers is the clearest indication of the depth of the company’s financial crisis which will get worse as the debt balloons with ongoing electricity generation and offtake.
KenGen’s interim results shows that its current assets –comprising receivables from Kenya Power— had increased by Sh7.5 billion to Sh41.5 billion in the six months to December.
Both KenGen and Kenya Power have the National Treasury as their majority shareholder at 70 percent and 50.1 percent ownership respectively, giving the government the influence to interfere in their commercial operations.
Besides KenGen, other State-owned suppliers that will now go slow in collecting their dues from Kenya Power include Kenya Electricity Transmission Company (Ketraco) in which the government owns 100 percent stake.
The State intervention may explain why KenGen has scaled down the interest or penalties it charges Kenya Power for default.
The power generator levied interest of only Sh44.7 million on the Sh23.9 billion payment that was overdue by 6.5 months as of June 2020.This is in contrast to the interest of Sh722.3 million in the previous year when the delayed payment was Sh19.3 billion.The move to protect the electricity distributor from its creditors raises issues of conflict of […]