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Kenya Power holds Sh10 billion dead stock

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Kenya Power workers repair a power supply line. FILE PHOTO | NMG

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Summary

  • Kenya Power holds about Sh9.8 billion in dead stock, the Energy Ministry has said, underlining the electricity supplier’s messy procurement programmes.
  • Energy Principal Secretary Gordon Kihalangwa said an audit has revealed piles of idle stocks at the utility firm, including power transformers.

Kenya Power #ticker:KPLC  holds about Sh9.8 billion in dead stock, the Energy Ministry has said, underlining the electricity supplier’s messy procurement programmes.

Energy Principal Secretary Gordon Kihalangwa said an audit has revealed piles of idle stocks at the utility firm, including power transformers.

“We have realised that Kenya Power has a dead stock of Sh9.8 billion currently,” he told the National Assembly’s Public Accounts Committee (PAC) yesterday without providing a breakdown of the idle equipment.

Insiders at Kenya Power, however, said the dead stock include items such as cables, meters, and transformers that have been sitting in the warehouses for more than five years.

Last year, the Kenya Power board insisted that the company recognise the diminution in value of non-moving inventory by charging that loss of value to the income statement. This partly contributed to the company posting a historic Sh7 billion loss in 2020.

Meanwhile, Mr Kihalangwa told MPs that two out of the 22 independent power producers(IPPs) had offered to renegotiate their purchase agreements with Kenya Power even as the State pushed on with its plans to lower electricity charges by December.

“Two of the IPPs have come forward to say they want to negotiate. We want to fix the problems at Kenya Power,” he said without naming the firms.

Some 22 IPPs are operating in the power sector in Kenya.

President Uhuru Kenyatta in April appointed a task force to review all power purchase deals with independent producers. Renegotiating the energy prices and other terms downwards by the end of December is one of the recommendations in a report presented to the President.

The team recommended a 33 percent cut in electricity prices, which would bring the average cost of a kilowatt-hour (kWh) to Sh16 from the current Sh24 unit.

The electricity distributor has also been barred from finalising any un-concluded power purchase deal or renewing expiring contracts with the producers in the wake of a rise in power bills that hit a 38-month high in August.

Mr Kenyatta appointed the task force after it emerged that Kenya Power had signed contracts committing it to take more electricity than it can sell.

The flawed contracts have exposed Kenya Power to paying onerous capacity charges to energy producers even when their plants are idle.

An inter-ministerial committee has since been formed to run a fresh audit on Kenya Power’s supply and demand needs, and pricing policies. Its membership draws from, among others, the Directorate of Criminal Investigations, the Central Bank’s Financial Reporting Centre, and the Assets Recovery Agency.

Interior Cabinet Secretary Fred Matiang’i earlier this month said the electricity supplier had been declared a ‘Special Project’ and that the team would also oversight reforms at the utility firm.

“We are going to do a forensic audit of some of our systems and procedures at Kenya Power. We are working jointly at an inter-ministerial level to reduce the system losses, including the theft of power. We will address all challenges that result in passing unnecessary costs to the consumers,” Dr Matiang’i said.

Kenya Power returned a net loss of Sh2.98 billion in the financial year ended June 2020 — its first in 17 years.