Firm seeks new audit system in readiness for big spending

One of the Kenya Electricity Generating Company (KenGen) stations. Kenyans will enjoy cheaper electricity from next month, the Energy Regulatory Commission (ERC) has confirmed. PHOTO | FILE |  XINHUA

In Summary

• Sources privy to the undertaking say the move is intended to mitigate possible fraud as KenGen undertakes capital intensive projects to meet Jubilee’s 5,000MW target in 40 months.
• The audit management system is also expected to assist KenGen to reduce spending on audits.

By IMMACULATE KARAMBU
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The Kenya Electricity Generating Company (KenGen) has begun the search for a consultant to supply and implement an audit management system as the company scales up measures to curb fraud.

The information technology (IT)-based system is expected to increase the scope of KenGen’s internal audit department which, according to an insider, is currently “more oriented towards financial audit”.

The new system is, therefore, expected to include IT audit, capital projects audit, operations audit and fraud investigations in the company’s audit and risk management department.

“The department envisages a continuously evolving audit scope as the company grows and extends its boundaries. It is imperative that the audit and risk team responds by extending the coverage and the depth of audits while shortening the audit cycles. The company requires an optimised audit process, hence the need for an audit management system,” read a tender notice.

Sources within the company privy to the undertaking, who cannot be quoted as they are not authorised to speak on behalf of the firm, told Sunday Nation that the move has been taken to “mitigate possible fraud” as KenGen undertakes capital intensive projects to meet the government’s target for power generation.

GRAND PROJECT

KenGen, 70 per cent owned by the government, is expected to play a key role in accelerating electricity generation under the grand project launched last September that is expected to increase generation capacity by 5,000 megawatts in 40 months.

Much of this power is expected to come from renewable sources such as wind and geothermal, in addition to coal and natural gas.

The audit management system is also expected to assist KenGen to reduce spending on audits as it is envisaged that the system would be interconnected thereby reducing the need for travel by auditors and associated expenses such as per diems.

KenGen will be seeking to raise Sh30 billion from its maiden rights issue that has been delayed for two months pending a government decision on its contribution to the exercise.

The government is the majority shareholder, and its contribution to the rights issue is expected to be to a tune of Sh15 billion.

The rights issue was scheduled for June, but discussions between the ministries of energy and petroleum and the National Treasury over whether the government would take up its rights have taken longer than anticipated.

(READ: Investors in utility firm yet to know their stake in IPO)

With the cash, the firm intends to restructure its balance sheet to maintain its favourable debt versus equity position.

Together with an anticipated debt of Sh70 billion from external lenders, the electricity generator hopes to raise Sh100 billion to finance a number of projects it has lined up for completion in 2016.

OWE GOVERNMENT

At an investor meeting in March, KenGen said it owed the government Sh22 billion as at that time. Swapping the debt for government rights is among the options being explored before the company can go ahead with the issue.

KenGen’s full-year profit after tax went up by 86 per cent from Sh2.8 billion in June 2012 to Sh5.25 billion in June 2013.

The increase in net earnings was attributed to an investment allowance the company got during the period for its capital expenditure to put up the Sangoro and Kindaruma hydro stations and purchase of geothermal drilling rigs.