Kenya Power has cut the period it takes to pay the Kenya Electricity Generating Company (KenGen) for electricity supply by 46 days, even as it continues to breach the credit period of 40 days.
The utility firm is now taking an average of 101 days to pay for electricity supply down from 147 days three years ago, notes a new report by the Auditor-General.
While the period Kenya Power takes currently is still in breach of the 40-day credit period allowed by KenGen, the reduction is expected to bring down penalties for late payment, which hit Sh710 million in the year to June 2024.
The auditor’s report tracking Kenya Power’s progress in settling a Sh17 billion debt owed to KenGen says the company has made significant improvements after entering into a monthly payment plan with KenGen.
“Both KenGen and Kenya Power Managing Director & CEOs have instituted a monthly payment plan which has led to reduction of KPLC debt significantly, with average credit days decreasing from 147 days in financial year 2022/2023 to 101 days in the current year due to ongoing monthly payment plans and reconciliations,” KenGen says in a new report by the Auditor-General.
By end of June 2024, Kenya Power owed KenGen Sh17.09 billion for electricity supplied to it, which was a Sh5.2 billion reduction from the Sh22.3 billion debt in June 2023.
KenGen slapped Kenya Power with Sh710.2 million in penalties due to late payments during the year, up from Sh364.7 million the previous year, the electricity producer acknowledged in its annual report.
“The Company has a credit period of 40 days with Kenya Power and 30 days for other customers, after which they are considered as credit impaired,” KenGen said.
In the Auditor-General’s report following-up on the progress of the debt owed by Kenya Power to KenGen, the latter acknowledged that after entering into the monthly debt repayment framework, credit days have reduced from 147 in 2022 to 101 days this year.
The reduction in credit period from 4.9 to 3.3 months implies an improvement in Kenya Power’s cash flows, allowing the utility firm to pay for electricity supplies more quickly than before.
Of the debt owed by Kenya Power, KenGen said Sh14.57 billion was in local currency and $19.49 million in US Dollars. In December 2023, the electricity generator disclosed it had allowed Kenya Power to pay the dollar-denominated debt in local currency due to dollar shortages at the time.
“We know that Kenya Power owes us quite a substantial amount and we have worked so hard with them to ensure that the amount is reduced, and it is reducing. Part of the debt is supposed to be paid in foreign currency and considering that we have a problem with foreign currency, we are actually in negotiations so that they can also make the payments in Kenyan Shillings equivalent,” KenGen Chief Executive Peter Njenga said.
At the time, Mr Njenga said Kenya Power had already cleared old debts owed to KenGen and it was only servicing current debts.
The new report by Auditor-General Nancy Gathungu, monitoring progress in clearance of the debt, concludes that the two firms have partially implemented the action to address the issue.
“The two companies have since agreed and reconciled the balance owing as Sh17,096,299,000 which has since been updated in Kenya Power's financial statements. Further, KenGen and Kenya Power have entered into a monthly payment plan to settle the outstanding balance. The amount due has not been fully settled,” Ms Gathungu says.
