The Auditor General, Nancy Gathungu, now says that Kenya Power is broke.
According to her report, Kenya Power’s liabilities stood at Ksh116.11 billion against the Ksh49.63 billion assets. The Ksh66.47 billion difference, Gathungu said, represents high fluidity levels as the state corporation is not in a position to undertake its financial obligations.
She noted that the government will need to step in and bail out Kenya Power, noting that the utility firm was too reliant on its operating cash flows.
The report further indicated that Kenya Power's working capital improved from Ksh74.84 billion in 2020 on an upward revision of its current assets and repayment of some of its debts during the same period.
She also cautioned that Kenya Power was too reliant on its operating cash flows to finance its debt repayments and capital spending.
“The Board of Directors and management in the past and in the year under review indicated strategic initiatives that were being undertaken to improve the financial results as of June 30, 2021," the Auditor stated.
"As further stated, this condition, along with other matters as set forth, indicates the existence of material uncertainty that may cast significant doubt on the company’s ability to continue as a going concern.”
The Auditor advised that Kenya Power will need additional funding for capital expenditure to expand, improve and maintain its network, which could decline into more debt.
Gathungu also recommended that Kenya Power’s technical insolvency will make it tougher for the government or shareholders to provide it with funds or approvals for mobilization of loans from other sources.
This comes in the backdrop of a move by the government to overhaul the Kenya Power and Lighting Company (KPLC) in a bid to reduce the cost of power and tame the ever-growing losses at the parastatal.
According to Interior and Coordination of National Government Cabinet Secretary, Fred Matiang'i, his Ministry and that of Energy will fully implement President Uhuru Kenyatta's directives to cushion Kenyans and other industrialists from the high power bills.
The Interior CS added that the high cost of power was affecting the country's competitiveness in attracting local and foreign investments and also frustrating businesses' profitability.