Kenya Power slaps Mumias with Sh1bn electricity bill

Kenya Power has moved to court seeking to freeze Mumias Sugar Company’s assets until the struggling miller settles a Sh1.1 billion electricity bill — a demand that could worsen the miller’s dwindling fortunes.

The bill arose from Kenya Power supplementing Mumias’ power production plant between 2009 and 2014.

While the miller has only paid Sh70 million, the electricity distributor wants the court to compel Mumias to pay the total bill, a move that may disrupt a government rescue bid that involves a Sh1 billion cash injection and a Sh4 billion rights issue.

The case arose from a deal signed in 2009 that was to see Mumias sell excess power from its plant to Kenya Power. The miller was in turn to buy electricity from Kenya Power whenever its generators were on standby.

But the miller has challenged claims it owes the company money relating to “back-feed” energy consumption that had not been billed. Back-feeding occurs when electric power is introduced into a local power grid.

In its prayer, Kenya Power asks the court to grant “an order of injunction restraining Mumias from disposing, selling or in any way parting with custody of all moveable and immoveable properties in a way to defeat any judgment that may be entered against it.”

READ: Failure to supply power deepens Mumias cash woes

As an alternative to freezing the miller’s assets, Kenya Power wants it to deposit Sh1.1 billion with the court to secure its interests in the event the miller offloads its assets before the case is concluded.

Kenya Power’s case is the second court pursuit of Mumias by creditors barely two months after President Uhuru Kenyatta brokered the bailout deal.

The amount demanded by the electricity supplier may unsettle Mumias’ planned bailout as it may encourage other creditors to go after it for money owed.

In January, Security firm G4S filed a suit seeking Sh45 million in unpaid bills over three years, which the miller has conceded to owing in emails attached as evidence. G4S holds that Mumias had agreed to pay the amount urgently but is yet to offset the debt.

The security firm is demanding Sh40.7 million for guarding services in offices around the country and its factory, Sh4.6 million for response services it offered in times of emergency and Sh173,000 for courier services.

G4S has also asked the court to compel Mumias to settle the costs it will incur in the legal battle for its dues.

The President Kenyatta-brokered bailout will also see shareholders fork out Sh4 billion in a cash call aimed at resurrecting the miller’s profit-making days.

But the rescue plan also appears to have signalled creditors to come calling despite a request from the president to go easy on Mumias until it gets back on its feet.

READ: Mumias Sugar to seek Sh4bn in rights issue

Kenya Power says the miller accumulated a bill of Sh296 million between February and October last year, and after part payment still owes Sh225 million for the period.

“Mumias has so far paid Sh70 million. Despite several demand letters sent to them, Mumias has failed to pay the outstanding sum. Kenya Power prays for judgment against Mumias for Sh1.1 billion with interest at commercial bank rates from the date of filing this suit,” Kenya Power says.

Mumias has been on the spot since the release of a KPMG audit that showed massive mismanagement by past and present managers, who have been accused of using their positions to starve the firm of cash.

The company that was just nine years ago one of the biggest players in the Nairobi bourse is now in Sh10.7 billion debt

“Mumias Sugar is being massively plundered and is on the verge of disposing off its assets. By the time Kenya Power gets judgment, Mumias shall have no assets remaining for Kenya Power to execute against,” added Aggrey Machasio, Kenya Power’s acting energy manager.

Mr Machasio says his firm will be left with no remedy if Mumias is allowed to sell its assets to third parties, as the property will be outside the court’s local limits.

READ: Mumias directors, 300 staff to lose jobs in revival plan

Kenya Power is also seeking to have Mumias settle the money it has spent to institute the legal fees, and has asked the court for a summary judgment.

Last November, Mumias survived a winding-up petition filed by Dubai Bank, one of the seven financial institutions seeking Sh5 billion in defaulted loans.

The bank is seeking to sell off Mumias assets to recover a Sh91 million debt arising from a guarantee it gave for the release of a shipment bought from South Sudan’s Kenana Sugar Company.

But Mumias challenged the validity of Dubai Bank’s guarantee as it holds that the lender has refused to furnish it with the original documents defining the terms of the deal the two originally struck.

Since the bailout talks, the miller has embarked on cleaning up its house, sacking top officials it accused of being behind the illegal sugar imports that have cost it billions of shillings.

Last month, it fired and instituted court cases against former CEO Peter Kebati, former finance director Chris Chepkoit, former secretary Emily Otieno and former director Paul Murgor.

The four have been accused of being behind a Sh1.1 billion loss incurred by the firm after they allegedly imported cheap sugar illegally which was rebranded and sold as Mumias Sugar’s product.