Kenya Power on the verge of collapse; audit report
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Kenya Power has been operating at a loss and is on the verge of collapse according to Auditor General Nancy Gathungu in the latest report
Kenya Power has been operating at a loss and is on the verge of collapse according to Auditor General Nancy Gathungu in the latest report.
In the audit summary for the year ending June 30, 2023, Kenya Power recorded a staggering Sh4.43 billion loss before tax.
The company’s current liabilities of Sh132.3 billion far exceed its current Sh81 billion assets by a whopping Sh51 billion as at June 30, 2023.
“The Company has remained in a negative working capital position for the seventh consecutive year.
Gathungu said past initiatives by the Board of Directors and management to improve the financial results of the company have not yielded fruits.
“These initiatives appear not to have yielded the intended results as of 30 June 2023. This condition along with many other matters indicates the existence of material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern,” the report says.
In the report tabled at the National Assembly, Gathungu also reveals that the foreign exchange rate fluctuation impact for the company in the financial year 2022/2023 is Sh23 billion.
The audit revealed that the company has been heavily affected by forex fluctuations owing to its payments of Power Purchase and Forex denominated loans due to a combined outstanding foreign currency obligation of USD 1 billion consisting of 70 percent forex-denominated debt and 30 percent Power Purchase obligations.
She says the company should review its approach to power purchase contracting to mitigate against the significant foreign exchange exposure given that its entire revenue is in local currency.
This, she said, should include engaging existing power generators for sustainable currency-related solutions that will resolve the accumulation of overdue obligations.
“The Company currently bears the difference between the actual forex rate used for payments and the Central Bank of Kenya (CBK) mean rate used by the regulator for pass-through costs. There is no forex compensation mechanism to ensure that the market rate applied at the time of making payments is mitigated against the impact of the forex rate fluctuation.”
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While comparing the cost of Power Purchase between Kenya Electricity Generating Company (Kengen) and Independent Power Producers (IPPS), Gathungu revealed that Kengen supplied a total of 8,027 gigawatt-hours 60 percent of the total power purchased while the IPPS supplied the remaining 5,263 GWH being 40 percent.
She, however, noted that the total cost of power purchased from Kengen was Sh54.2 billion equivalent to 35 percent compared to the power purchase cost of Sh98.4 billion from IPPS equivalent to 65 percent.
Reads the report: “Over the years, there has been a disparity in the cost of power procured from Kenya Electricity Generating Company PLC (Kengen) and the Independent Power Producers (IPPs).”
Gathungu also raises concerns over long outstanding receivables from other government entities amounting to Sh27.8 billion.
Of the money, receivables amounting to Sh26.9 billion relate to a debt due from the Rural Electrification Scheme (RES) which the company administers on behalf of the government.
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