Kenya Power, the country's major electricity provider, faces a critical juncture as Auditor General Nancy Gathungu reveals in her latest report that the company has been operating at a loss for seven consecutive years, with a staggering loss of Sh4.43 billion before tax for the year ending June 30, 2023.
The report underscores the company's precarious financial situation, indicating that its current liabilities of Sh132.3 billion far exceed its assets of Sh81 billion by a significant Sh51 billion as of June 30, 2023.
Gathungu warns, "The Company has remained in a negative working capital position for the seventh consecutive year," signalling a looming threat to its sustainability.
Despite past initiatives by the Board of Directors and management to improve financial results, Gathungu states, "These initiatives appear not to have yielded the intended results as of 30 June 2023. This condition along with many other matters indicates the existence of material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern."
One of the key factors contributing to Kenya Power's financial woes is the impact of foreign exchange rate fluctuations, amounting to Sh23 billion for the financial year 2022/2023.
Gathungu attributes this vulnerability to payments of Power Purchase and Forex denominated loans, constituting a combined outstanding foreign currency obligation of USD 1 billion.
To address the foreign exchange exposure, Gathungu recommends a review of the company's power purchase contracting approach.
She advocates engaging existing power generators for sustainable currency-related solutions and resolving the accumulation of overdue obligations.
The report highlights a significant cost disparity in power procurement between Kenya Electricity Generating Company PLC (KenGen) and Independent Power Producers (IPPs).
KenGen supplied 60 per cent of the total power purchased, costing Sh54.2 billion, while IPPs supplied 40 per cent at a higher cost of Sh98.4 billion.
Gathungu expresses concern over long outstanding receivables, particularly Sh26.9 billion due from the Rural Electrification Scheme (RES).
Additionally, the report reveals Sh1.1 billion in interest on late payments and questions the un-procedural purchase of a Sh75 million land in Machakos County for a substation construction.
The Auditor General also flags irregularities in an outgoing Managing Director receiving Sh26.8 million and 90 employees working in acting capacities for extended periods, drawing allowances beyond the stipulated six-month period.
he cumulative issues paint a dire picture for Kenya Power, raising serious doubts about its financial viability and operational sustainability in the near future.