Kenya Power #ticker:KPLC defaulted paying Sh6.4 billion it owes KenGen #ticker:KEGN for electricity delivered in the year ending June, prompting the intervention of top Energy ministry officials.
The electricity distributor failed to pay the bill within the required 40-day credit window in line with their contract, exposing KenGen to credit risk, according to financial statements for the year ending June 2017.
Kenya Power buys electricity from the State-owned KenGen and independent producers for onward sale to homes and businesses.
The distributor is then billed every month for the power delivered and is expected to pay up within 40 days. Ministry officials said during KenGen’s annual general meeting last week that they had held talks in efforts to speed up the payments,arguing further delays could hamstring the power producer.
The Sh6.4 billion defaulted bill came after the Nairobi bourse-listed utility firm failed to pay Sh6 billion for over 60 days and a further Sh473.5 million for over a year.
In the period to June, the company owed KenGen Sh9.1 billion that was within the 40-day repayment window and classified ‘neither past due nor impaired.’
This took Kenya Power’s debt to KenGen to Sh15.7 billion in the year to June, which accounted for 94 per cent of the Sh16.6 billion sitting on KenGen’s balance sheet as trade receivables.
The unpaid debt stood at Sh10 billion in the year to June 2016, reflecting a growth of 39 per cent. The delayed debt of Sh6.4 billion is equivalent to 18.5 per cent of KenGen’s Sh34.5 billion sales and 71 per cent of its net profit of Sh9 billion.
“It’s normal in this sector to delay to pay up based on the prevailing factors such as foreign debt obligations, pressing cash needs in light of ongoing works like infrastructure upgrade and defaults by customers,” KenGen executives said.
Kenya Power is also struggling with defaulting homes and businesses.
It recorded a Sh16.7 billion in unsettled customer bills in the year ended June 2017, out of which Sh4 billion was declared impaired having not been paid for a period of over 90 days. Despite the 34 per cent profit growth, KenGen for the second year in row failed to pay dividends.
Executives said the funds are being ploughed back into the construction of new power plants to strengthen the company’s future business case.
It plans to add 721 megawatts of renewable power to the grid by 2020 at a cost of $2 billion (Sh206 billion).