Kenya Power’s debt to KenGen hits Sh23.7bn

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Kenya Power #ticker:KPLC owes its key supplier the Kenya Electricity Generating Company #ticker:KNGN Sh23.7 billion, pointing to a growing debt distress to the monopoly energy distributor.

The debt covering the period to June 2020 excludes another Sh19.48 billion owed to Independent Power Producers supplying it with electricity and Sh4.67 billion owed to the Kenya Electricity Transmission Company.

The disclosures contained in confidential documents shared with the company’s board of directors and top management, the energy regulator and the parent ministry also show that different government departments (mainly parastatals) owe the electricity distributor close to Sh5 billion in pending payments for electricity supplied.

The documents also detail the firm’s push for a state-procured deal that will save it from penalties associated with the debt it owes the two state corporations and fresh negotiations of electricity supply deals with power generators.

“State corporations should agree on payment plans on how they will settle the outstanding debts owed to each other as at 30th June 2020 and waive penalties on late payments,” read the document detailing the state of affairs at Kenya Power.

Pending bills especially to its key supplier like KenGen has been a big blow for Kenya Power before with the supplier having penalised the distributor Sh1 billion in 2018 as interest on late payment when the pending payments had hit Sh21.8 billion.

Business Daily did not expressly determine what portion of the Sh23.7 billion owed to KenGen had crossed the 40-day window beyond which the debt begins earning interest.

KenGen did not confirm nor deny the piling debt load for Kenya Power but said the interest it will levy on Kenya Power will depend on the debt that will have remained unpaid beyond the credit period which is usually 60 days.

“We have an agreed credit period, after which the amounts outstanding accrue at agreed interest rates, mainly prevailing Central Bank rates. Interest levied is therefore dependent on what Kenya Power is owing after the agreed credit window lapses,” the firm wrote in response to queries adding that it was confident with Kenya Power’s debt repayment plan.

Kenya Power did not respond to the queries about the ballooning debt despite follow-ups on the subject.

In the period to June 2018 when the Sh1 billion penalty was levied, Kenya Power had owed KenGen Sh13.71 billion for more than 60 days while a further Sh694.63 million had remained unpaid for over a year.

Kenya Power buys a mix of hydro, thermal, wind and geothermal-generated electricity from KenGen and independent producers for onward sale to homes and businesses.

KenGen then bills it every month for the power delivered.

KenGen which contributes to over 70 percent of electric energy supply to the single off-taker, Kenya Power, recognises this as a business risk.

The firm even began a push to start distributing part of its generated electricity but has been discouraged by the government for posing market imbalance for the state electricity distributor.

KenGen’s scheme had envisioned an initial supply of power to the upcoming industrial park in Olkaria before scaling the plan in unnamed parts of the country in a strategy the power generator kept under tight lid, only grouping it under ‘non-generation revenue plans.’

The power generator in its annual report for 2018 disclosed plans to generate money from its Olkaria industrial park through among other ways; ‘direct sale of electricity.’

The Kenya Power pending bills now stand at Sh65 billon against its Sh29.55 billion it expects from electricity consumers and compensation from the government for managing the Rural Electrification Scheme that has been expanding connectivity to the rural areas.

Source: Business Daily

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