Kenya Power was hit with the most recent of these penalties in the year that ended in June when Kenya Electricity Generating Company (KenGen) assessed a Sh364.6 million fine for the late payment of electricity supplied.
A year prior, the power producer had assessed Sh847.9 million to the electricity distributor. Kenya Power’s expenses have increased due to the penalties and late payments.
The latest annual report from KenGen states that interest income from the Kenya Power and Lighting Company Plc is related to interest penalties that were assessed against Kenya Power for late invoice payments.
Both Kenya Power and KenGen are strategically important national assets in the energy sector, with the government owning a majority stake in each company.
During the review period, KenGen’s transactions with Kenya Power, which included the sale of electricity, totaled Sh55.5 billion. From Sh47.7 billion a year earlier, this was an increase.
As of June 2023, KenGen had not received payment from Kenya Power for approximately 40% of the electricity that it had purchased.
“Despite the increase in electricity revenue, trade receivables remained almost at the same level as in the prior year, increasing marginally by Sh855 million from Sh20.59 billion in 2022 to Sh21.44 billion,” said KenGen.
This indicates that Kenya Power has accelerated its payments to the power supplier compared to the prior year.
The persistent delays have, however, prompted KenGen to provide for part of the amounts claimed. It made an allowance for impairment of Sh866 million in the review period, down from Sh1.2 billion the year before.
Kenya Power buys a mix of hydro, thermal, wind and geothermal-generated electricity from KenGen and independent producers for onward sale to homes and businesses. KenGen then bills it every month for the power delivered.
KenGen currently sells its generated electric energy to a single off-taker, Kenya Power, and recognises this as a business risk.
“The company has one main customer — Kenya Power — however, limits are set to minimise the concentration of risk around Kenya Power and therefore mitigate financial loss through potential counterparty failure,” says KenGen in the section discussing its credit risk.
The power producer reported a 48.3 percent growth in net profit to Sh5 billion in the review period compared to a restated Sh3.3 billion a year earlier.
The performance was driven by growth in net sales, which increased to Sh45.8 billion from Sh37.7 billion.