KenGen slaps Kenya Power with Sh364m fine


Kenya Power Offices along Aga Khan Walk as pictured on April 23, 2023. PHOTO | LUCY WANJIRU | NMG

Kenya Electricity Generating Company (KenGen) hit Kenya Power with a Sh364.6 million penalty in the year ended June for late payment of electricity supplied, marking the latest of such charges.

The power producer had charged the electricity distributor Sh847.9 million a year earlier. The late payments and attendant penalties have served to raise Kenya Power’s costs.

“Interest income from the Kenya Power and Lighting Company Plc relates to interest penalties charged to Kenya Power due to late payments of invoices,” says KenGen in its latest annual report.

“Interest on late payments accrues after 40 days after billing and Kenya Power acknowledging invoice or lapse of credit period.”

Kenya Power and KenGen are both majority-owned by the government, with the companies seen as strategic national assets in the energy sector.

KenGen’s transactions with Kenya Power, including electricity sales, stood at Sh55.5 billion in the review period. This was up from Sh47.7 billion a year earlier.

As of June 2023, Kenya Power was yet to pay KenGen about 40 percent of the value of the electricity it had purchased.

“Despite the increase in electricity revenue, trade receivables remained almost at the same level as in the prior year, increasing marginally by Sh855 million from Sh20.59 billion in 2022 to Sh21.44 billion,” said KenGen.

This indicates that Kenya Power has accelerated its payments to the power supplier compared to the prior year.

The persistent delays have, however, prompted KenGen to provide for part of the amounts claimed. It made an allowance for impairment of Sh866 million in the review period, down from Sh1.2 billion the year before.

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.

“The company has one main customer — Kenya Power — however, limits are set to minimise the concentration of risk around Kenya Power and therefore mitigate financial loss through potential counterparty failure,” says KenGen in the section discussing its credit risk.

The power producer reported a 48.3 percent growth in net profit to Sh5 billion in the review period compared to a restated Sh3.3 billion a year earlier.

The performance was driven by growth in net sales, which increased to Sh45.8 billion from Sh37.7 billion.

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