Mumias Sugar factory. The firm has not supplied electricity to Kenya Power since last November. PHOTO | FILE
What you need to know:
Mumias Sugar has been unable to supply electricity to Kenya Power due to a shortage of a key raw material—bagasse—which remains from crushed cane that turn electricity generation turbines after heating.
Troubled Mumias Sugar Company has failed to supply electricity to Kenya Power since November, denying the miller revenues as it struggles to recover from losses.
Kenya Power says the miller has been unable to supply it with power due to a shortage of a key raw material—bagasse—which remains from crushed cane that turn electricity generation turbines after heating.
This is linked to a shortage of cane in western Kenya that cut its overall sales 62 per cent to Sh2.67 billion and prompted the Nairobi bourse listed miller to temporarily shut down its plant for 45 days.
“Mumias has no bagasse. When they closed down the factory that meant they could not produce energy,” Ben Chumo, Kenya Power chief executive told Business Daily in a phone interview last week.
The miller closed for 45 days from November and is yet to inject power into the national grid since it resumed operations in December.
Data from the Energy Regulatory Commission (ERC) indicate that Mumias power generation volumes were on the decline in the months before it shut down.
In July, it sold 5.14 million kilowatts hours (KwH) to Kenya Power compared to 2.9 million units in October.
Last year, revenues from Mumias co-generation plant slumped 24.6 per cent to Sh230 million which the company blamed on inadequate bagasse in its annual report.
The miller also buys electricity from the power firm to jump-start its machines and bridge periodical deficits. But Mumias has since November last year been relying on diesel power generators after it was disconnected by Kenya Power over an outstanding debt amid a protracted dispute over the sugar firm’s bills.
Mr Chumo said the disputed cash amounts to Sh1.17 billion and includes Sh225.9 million that Mumias has not paid for electricity consumed.
The remaining Sh953 million is tied to disputes arising from power purchase agreements in which the two firms are locked in a tussle over tariffs chargeable and the amounts owed to each other.
Mumias has complained that Kenya Power bills it under the domestic tariff, which is often higher than the industrial rate, an allegation that the power firm denies.
The company invested in power generation to cushion itself from competition arising from cheap sugar imports from the Common Market for Eastern and Southern Africa region. It also manufactures water and ethanol in a bid to diversify its revenue.
Mumias Sugar reported a bigger first-half loss from a year ago, which it blamed on lower prices of the sweetener as well as a prolonged shutdown but forecast an improved second half.
The cash-strapped company, which received a cash bailout from the government at the end of January, said its loss deepened to Sh2.08 billion from a restated loss of Sh407.4 million loss a year earlier.
Mumias said as part of its medium term to long terms plan, it was re-negotiating its payment schedules with creditors and plans a Sh4 billion rights issue.
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