- State-run electricity producer KenGen penalised Kenya Power Sh710.17 million for late payment of electricity it supplied for the year ended June 2024, the latest disclosures show.
- The two companies’ contract stipulates a 40-day credit period, meaning Kenya Power must pay for electricity supplied within that period to avoid a penalty.
State-run electricity producer KenGen penalised Kenya Power Sh710.17 million for late payment of electricity it supplied for the year ended June 2024, the latest disclosures show. KenGen says earnings from interest penalties charged on Kenya Power nearly doubled from Sh364.70 million the year before, a jump of 94.73 per cent.
This emerged in the year ending June when Kenya Power posted a net profit of Sh30.08 billion, allowing it to resume paying dividends, ending a six-year drought. The fines paid by Kenya Power marked the first growth in three years, helping boost KenGen’s cash flow.
“[This] relates to interest penalties charged to Kenya Power due to late invoice payments. Interest on late payments accrues 40 days after billing, and Kenya Power is acknowledging invoices or lapses in the credit period,” KenGen wrote in the latest annual report for the period that ended in June.
The two companies’ contract stipulates a 40-day credit period, meaning Kenya Power must pay for electricity supplied within that period to avoid a penalty. KenGen applies a credit period of 30 days for other entities.
The contract is governed under power purchase agreements (PPAs). The PPAs compel Kenya Power to buy the signed capacity of electricity regardless of whether the near-monopoly utility needs the energy.
KenGen’s total income from transactions with Kenya Power in the year ended June 2024 amounted to Sh60.68 billion; the report shows a growth of 9.31 per cent over Sh55.51 billion in the prior year.
Sale of electricity accounted for S1.25 billion of the transactions, with the remainder of the billings largely coming from fuel and water charges, steam revenue, realised foreign exchange losses and interest income. Kenya Power owed KenGen Sh16.63 billion as of June 2023, a drop of 22.47 per cent compared with nearly Sh21.45 billion the year before.
The two firms are strategic national assets in the energy sector and are, therefore, majority-owned by the government. “In assessing Kenya Power’s credit quality, management has used the Government of Kenya’s sovereign rating probability of default as a proxy to Kenya Power’s and other government entities’ credit rating,” KenGen wrote in the report.
The Standard and Poors (SandP) cumulative average default curves have been used to obtain the probability of default and have been applied to all debts whose counterparty is a government agency.
The drop in outstanding debt to KenGen came in a period when Kenya Power posted a net profit of Sh30.08 billion, a historical turnaround from net loss of Sh3.19 billion in the year ended June 2023. Kenya Power added 427,251 new connections in the just ended financial year, bringing total customers to 9.
Large consumers used 5,415 GWh in the recently ended financial year, marking a rise of 5. 41 per cent from 5,137 GWh a year ago, while homes consumed 2,768 GWh, which was a growth of 5.37 per cent.