Kenya Power owes KenGen Sh24b for electricity supplies

Kenya Power workers fix a 3 phase distribution transformer of 250KVA at Ndimaini Village in Karatina, Nyeri. On 28 December,2020. [Kibata Kihu, Standard]

Kenya Power owes KenGen Sh24 billion for electricity supplies as the power retailer continued to struggle in the course of last year.

The amount grew 24 per cent in the year to June 2020 from the Sh19.37 billion owed in 2019.

This is money that remained unpaid beyond the 90-day credit period set out in the power purchase agreements (PPAs) between the two firms.

While it is owed over Sh24 billion by the electricity retailer, KenGen listed the debt as Sh23.98 billion in its annual report, excluding the penalties levied on Kenya Power for delayed payments after the latter disputed the penalties.

An Auditor General’s report accompanying KenGen’s financial statements queried why the company had understated the debt by Sh77 million, despite Kenya Power confirming that it owed the energy producer Sh24 billion.

The report also expressed concerns about the lengthy periods that Kenya Power has been taking to pay its debts, at over six months as opposed to the three months allowed by the PPAs.

“In addition, the amounts due from KPLC 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,” said the Auditor General in the report.

While Kenya Power is yet to publish its financials for the year to June 2020, a recent report by the National Treasury showed that the company made a loss of Sh2.98 billion over the period compared to a net profit of Sh262 million in 2019.

Service debts

The Energy ministry recently said it is working on a plan – together with the National Treasury – to enable Kenya Power service its debts, not just to KenGen but also other power producers.

Speaking in November when KenGen held its annual general meeting, Energy Principal Secretary Joseph Njoroge said there was a push to get defaulting power consumers, especially government agencies, to pay Kenya Power to enable it meet its obligations.

The Auditor General also raised an issue with the lengthy time KenGen has been taking to pay some of its service providers, and holding dividends to some of its shareholders for years.

The firm, according to the report, appears to have failed to remit the money to the Unclaimed Financial Assets Authority (Ufaa) in instances where it could not trace the owners.

“The statement of financial position reflects trade and other payables amounting to Sh7.64 billion… included in this balance is Sh4.84 million, which relates to financial assets held by the company in form of long term outstanding cheques, which had remained unclaimed for a period of more than two years,” said the Auditor General.

The report said the management did not explain why it took a significantly long period to clear the outstanding payments despite acknowledging to have information about the prevailing circumstances and the whereabouts of the payees.

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