KenGen slaps Kenya Power with Sh1bn fine for payment delays

A Kenya Power power technician at work. FILE PHOTO | NMG 

In Summary

• Kenya Power owed KenGen Sh21.88 billion as at the end of June 2018.
• By the time KenGen was closing its books for the financial year ended June, Sh13.71 billion due from Kenya Power had been outstanding 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.

By PATRICK ALUSHULA
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Kenya Electricity Generating Company (KenGen) has slapped Kenya Power with a Sh1 billion penalty for flouting a 40-day window limit for paying debts owed to it in the financial year ended June 2018.

“Interest income from Kenya Power relates to interest penalties charged due to late payments invoices. Interest on late payments accrues after 40 days,” says KenGen in its annual report released this week.

Kenya Power owed KenGen Sh21.88 billion as at the end of June 2018.

By the time KenGen was closing its books for the financial year ended June, Sh13.71 billion due from Kenya Power had been outstanding for more than 60 days while a further Sh694.63 million had remained unpaid for over a year.

Of the Sh21.88 billion due to KenGen from Kenya Power, only Sh7.44 billion or 34 per cent had not breached the payment window as per the agreement signed by the two State-owned corporations.

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 currently sells its generated electric energy to a single off-taker, Kenya Power, and recognises this as a business risk.

“This comes with the attendant risk of late or delayed payment for electricity sales which could have adverse effects on KenGen’s flow of revenue,” says KenGen.

The penalty raised the power generator’s finance income 2.5 times to Sh3.34 billion.

KenGen says that it deploys a robust debt management programme for increased collection of overdue amounts.

The firm reports in its post-balance sheet items that it received Sh18.57 billion from Kenya Power after closure of its books, reducing the trade receivables to 3.31 billion.

It adds that mitigating against revenue flow glitches calls for it to deploy a robust debt management programme for increased collection of overdue amounts even as it calls for the enactment of the Energy Bill into law to give it an option of customers to sell to.

“This will allow entry of more players in the wholesale and retail of electricity (business), thus giving KenGen an option to sell bulk energy to multiple customers,” says KenGen.