According to the Energy Ministry, Kenya Power has over Sh9.8 billion in deadstock, highlighting the electrical supplier’s clumsy procurement programs. According to Energy Principal Secretary Gordon Kihalangwa, an audit uncovered mounds of idle stocks at the utility firm, including power transformers. “We have realized that Kenya Power now has a dead stock of Sh9.8 billion,” he told the National Assembly’s Public Accounts Committee (PAC) yesterday, without going into detail about the idle equipment.
On the other hand, Kenya Power insiders claim that the dead stock includes components such as cables, meters, and transformers that have been languishing in warehouses for more than five years. Last year, Kenya Power’s board of directors requested that the business recognize the depreciation of non-moving inventory by charging that loss of value to the income statement.
Similarly, Mr Kihalangwa said that two of the 22 independent power producers (IPPs) have volunteered to renegotiate their purchase agreements with Kenya Power, even as the State pressed ahead with plans to reduce electricity costs by December. “Two of the IPPs have indicated a willingness to negotiate.” “We want to fix the problems at Kenya Power,” he said, declining to name the companies. Kenya has 22 independent power producers (IPPs) working in the power sector.
In April, President Uhuru Kenyatta formed a task team to examine all power purchase agreements with independent producers. One of the proposals in a report provided to the President is to renegotiate energy prices and other parameters by December. The team proposed a 33% reduction in electricity costs, lowering the average kilowatt-hour (kWh) cost from Sh24 to Sh16.
In the aftermath of a 38-month high in power bills in August, the electricity distributor has also been forbidden from concluding any unfinished power purchase deals or renewing expired contracts with the producers. Mr Kenyatta formed the task group after it was revealed that Kenya Power had signed contracts binding to purchase more electricity than it could sell. Due to the flaws in the contracts, Kenya Power is now obligated to pay onerous capacity costs to energy providers even when their plants are idle.
Since then, an inter-ministerial group has been formed to conduct a new audit of Kenya Power’s supply and demand demands and pricing strategies. Its members include the Directorate of Criminal Investigations, the Central Bank’s Financial Reporting Centre, and the Assets Recovery Agency. Interior Cabinet Secretary Fred Matiang’i announced earlier this month that the electricity supplier had been designated as a ‘Special Project,’ adding that the team will oversee utility improvements.
“At Kenya Power, we plan to conduct a forensic audit of certain of our systems and practices.” We are collaborating on an inter-ministerial level to mitigate system losses, including power theft. “We will address all difficulties that result in unwarranted costs being passed on to consumers,” Dr Matiang’i stated. Kenya Power reported a net loss of Sh2.98 billion for the fiscal year ending June 2020, the company’s first in 17 years.
Ken is a Quantitative Trader with experience in investments, quantitative finance, financial modelling and algorithmic trading in Global Investable Markets (GIM). He enjoys using Bayesian Statistics, Time Series and Machine Learning in developing Robust consistent Alphas in Equities Market, FX, ETPs and Derivatives instruments. He enjoys deep dives in understanding High Frequency Trading infrastructures and improving how the African financial markets work. He holds a Bachelor's in Actuarial Science from Strathmore Institute of Mathematical Sciences : An Executive Program in Algorithmic Trading (EPAT) certificate in Algo Trading from QuantInsti : A current MSc student in Financial Engineering at World Quant University.