Tag: KenGen

  • KENYA: The Irony Of Surplus Power Yet Electricity Is Expensive

    KENYA: The Irony Of Surplus Power Yet Electricity Is Expensive

    In November 2021, Kenya’s electricity demand hit an all time high of 2036 MW, the highest ever recorded in history from a record low 1,661MW in April 2020 at the height of the Covid 19 pandemic.

    After 7 months, a new high of 2051 MW was recorded.

    As per the laws of demand and supply, the price of electricity would then be high, however, there’s a slight catch.

    In June, international headlines beamed that KenGen has surplus energy that it would love to give to cryptocurrency Miners.

    That is something to pause and ponder..

    In a country with exorbitant electricity costs, companies closing because of this and households going for months without electricity because of non – payment, why would the government want to give electricity to outsiders instead of reducing costs.

    The oversupply can indeed shut down the switch off KPLC movement, but it hasn’t.

    This brings up and confirms the claim that KenGen indeed is controlled by Independent Power Producers (IPP) cartels.

    In March KenGen had to defend itself on the allegations of switching off parts of Olkaria Geothermal Power Station to enable IPP owners to supply electricity.

    This shot up the cost of electricity.

    KenGen denied the allegations but it was confirmed by a government report by Energy And Petroleum Regulatory Authority (EPRA). 

    The EPRA report showed that the contribution of geothermal power to the grid has reduced from 46% in January 2021 to 31% in January 2022. During the same period, the contribution of thermal (diesel) power to the grid has increased from 7% to 20%. 

    In 2021, a unit of geothermal power was sold to Kenya Power at an average of KShs 7.19, while a unit of thermal was sold at KShs 32.97.  

    It is clear to see the repurcussions or going the IPP way. 

    In January 2022, Olkaria Geothermal power station produced 425 units of power, but in February it produced just 6 units. 

    How does a power plant move from producing 60 million units in December 2021 to 6 units?

    KenGen is compromised.

    Indeed, it is a slap on the face of Kenyans for the power producer to engage in this economic deception.

    Whilst it seems cool to have surplus power to supply to outsiders for mining Bitcoin, it isn’t great at all to the suffering Kenyan populace to close shops, shut down factories due to high electricity costs which can easily be rectified.

    Reprimand KenGen, shut down IPPs, Switch Off KPLC

  • Why It Is Hard To Get Employed At KenGen

    Why It Is Hard To Get Employed At KenGen

    KenGen is a state parastatal that is full of nepotism and tribalism.

    Many a time, those that have submitted their request for employment narrate how they’ve reached in the final interview process but none got the job.

    This is because most of the hiring is done on ‘who you know’ basis.

    The interviews are usually a formality to pass the audit question in the Human resource department.

    Founded in the 1950s, KenGen has a lot of former employees whose numbers are enough to supply a new crop of staff to the parastatal.

    This means that 98 per cent of KenGen staff have a relative who has worked with the parastatal. It is therefore not easy to get an ‘outsider’ working there.

    There are some positions which are filled with people who have not even gone for an interview. They are handpicked by senior Govt officials to fill in vacancies.

    According to a job seeker, he was the best during the internship period and was sure to get a slot when the company seeks permanent employees. He was shocked to later hear that someone had already been appointed in the position he was eyeing.

    The person that filled that vacancy was not even in the list of those that were in the industrial attachment.

    Late last year, KenGen failed to explain how two directors whose contract time had expired got re-elected illegally. It also came at a time when KenGen failed to issue a profit warning as the company’s revenues plunged over 93 per cent for the year ended June 2021.

    This lack of fairness has made it possible to find staff stuck in the same position for years as children of former staff and top Govt officials fill in top positions.

    The corruption at KenGen HR department is a matter that is being handled by EACC.

  • No Alarm Over Idle Projects, KenGen Reacts To Auditor General’s Queries

    No Alarm Over Idle Projects, KenGen Reacts To Auditor General’s Queries

    Electricity generating company KenGen has defended its stock of idle assets which were highlighted in an audit of its books for the year ended June by the Office of the Auditor General (OAG).

    In response to the disclosures, KenGen says idle geothermal wells valued at Ksh.79.3 billion are to be incorporated into future power generation projects.

    “Energy projects, especially geothermal infrastructure, require significant lead time during which geothermal steam resources must be harnessed and availed to guide plant specifications and conclusion of financing agreements and terms,” the company said on Thursday.

    Examples include 83MW Olkaria I unit 6 to be commissioned by end of the year, 140MW Olkaria VI project, 50MW Olkaria I Rehabilitation among others. “These are a long-term investment that will go a long way in making Kenya green and also reduce the overall cost of power in the long run. On the case of the hydro plaza, the project has since been completed and officially handed over to the company and is now fully occupied.” KenGen says.

    On transmission lines, KenGen says that notably Sondu and Olkaria the respective loans are currently being paid by the transmission company and negotiations for transfer of both the underlying loans and lines are at advanced stages.

    KenGen says it has dug an estimated 319 geothermal wells which have been subsequently assigned to current and future projects.

    In her audit of Kengen books, Auditor General Nancy Gathungu noted the vacant geothermal wells offer no value for money even as KenGen services a loan taken from the Export-Import Bank of China (EXIM) for the investment.

    The idle geothermal wells were flagged alongside other projects whose value rounds off to Ksh.99.3 billion and which the audit fingers as likely incomplete projects.

    The projects include Ksh.4.5 billion deployed in the construction of Soundu and Olkaria transmission lines which are currently used by a third party for revenue generation.

    According to the audit report, KenGen did not provide explanations to auditors on why the projects had not been completed and capitalized.

    KenGen financial statements through 12 months to June 30, 2021, earned a qualified opinion after the company failed to revalue its power, plant and equipment for depreciation, a matter the electricity generating company blamed on COVID-19 related disruptions.

    The lack of inclusion for the depreciated assets which are factored in the calculation of net earnings means KenGen real earnings in the period are much lower than the reported net profit of Ksh.1.3 billion for the period.

  • Mischief Prompts Decision To Stop Private Firms From Auditing KenGen And Others

    Mischief Prompts Decision To Stop Private Firms From Auditing KenGen And Others

    The state appears to be uncomfortable with parastatals engaging international consultancy firms in matters auditing and realignments.

    Parliament has directed Auditor-General Nancy Gathungu to order all parastatals under the Ministry of Energy including Kenya Power and KenGen to stop hiring private auditing firms.

    The National Assembly raised the red flag that State corporations under the Energy docket continue to advertise for external audit services in breach of the Constitution, the Public Audit Act and the Public Finance Management Act.

    The Constitution and the PFM Act, 2012 require the Auditor-General to “audit and report on the accounts of any entity that is funded from public funds.”

    The law, however, allows the Auditor-General to outsource audit services after entering into contracts with private audit firms.

    But the committee reckons that the firms in the energy sector have been seeking the private auditors on their own.

    Abdulswamad Nassir, chairman of the Public Investment Committee (PIC), directed Ms Gathungu to stop the hiring of private audit firms without consultations and approval of the Auditor-General.

    PIC issued directive to disengage Private auditors as they were suspected of being pocketed and not capturing financial statements manipulated by management.

    The Public Investment Committee raised issues with the move by the State corporations under the Energy docket continue to advertise for external audit services, saying it was in breach of the Constitution, the Public Audit Act and the Public Finance Management Act.

    The law allows the Auditor-General to outsource audit services after entering into contracts with private audit firms.

    The parastatals however, have been sourcing for private audit firms on their own.

    The committee said that private auditors were returning clean accounts (unqualified audit) for State agencies despite outstanding audit queries and procurement irregularities.

    National Assembly Speaker Justin Muturi also questioned why private audit firms have always given the parastatals a clean bill of health at a time when the cost of electricity was skyrocketing.

    He said that private auditors were always returning ‘clean’ accounts for State agencies despite outstanding audit queries and procurement irregularities.

    He called upon the house in its oversight role to question why firms which the government has an interest in always run to private entities when it comes to audit alluding that they hide a lot of dirt in the manipulated report to read clean.

    Kengen that was recently on the spot over flawed recruitment process of staff is on the radar over the audit reports that in the recent past has given them a clean template. MPs now want KenGen, Kenya Power and other state agencies in the energy sector to be audited by the auditor general herself for a clear view instead of manipulated reports.

    For instance, Deloitte & Touche that handles KenGen was recently busted for allegedly manipulating data for a client. In a leaked document involving Deloitte, one of the largest accounting firms in the world, began circulating on the Chinese social media. The 55-page document (in Chinese), written by a person calling themselves YW who says they were a Deloitte employee at the company’s Beijing office, outlined “serious problems of auditing professional ethics and quality” going back to 2016.

    In the document, YW writes: “I have communicated with Deloitte management and Deloitte Reputation and Risk Group (RRG) more than 30 times for 2 years since 2018, requesting Deloitte to deal with audit quality reporting issues properly.”

    “However, it is a pity that up until now, all of the people involved in the reporting issues are still engaged” in other important auditing engagements “and have been promoted accordingly.” The employee seems to imply that managerial conflicts of interest may have resulted in inaction up until now.

    Among the main accusations which include 10 specific episodes, three of them by another employee who has since resigned is the failure to abide by proper auditing protocol. Auditors took major shortcuts, the report claims, telling their clients that their jobs were thoroughly completed when they were not.

    International business consultancy and accounting firms have reached an unchartered phase in the business life cycle. These behemoths of commerce, often tasked with keeping both public and private sector players in check, have now grown powerful enough to pose a threat to entire countries, if not the global economy. After decades of predatory and self-serving behavior, resistance is growing that may well ring in the end of the consulting firm’s era.

    India may have provided the initial impetus for pushing the consultancy system over the brink. The country is currently in the process of banning one of the so-called Big Four accountancy and consultancy firms, Deloitte, for aiding financial fraud. New Delhi says it has detected several violations of auditing standards by Deloitte while investigating IFIN, a unit of Infrastructure Leasing & Financial Services, whose debt defaults in 2018 triggered widespread fear of financial contagion.

    Fraud at IFIN was “nothing short of organized crime,” India’s Ministry of Corporate Affairs has charged, with the firm “actively aided and abetted by the statutory auditors.” While Deloitte is contesting a government call for a five-year ban on new business, it appears the ministry plans to invoke section 140 (5) of the Companies Act to debar the firm for alleged malpractice.

    In 2019, Deloitte was fined£415,000 ($518,000) by Malaysian regulators for audit failures linked to the scandal-ridden state fund 1MDB. Established more than a decade ago, the $583-million investment was meant to finance much-needed development projects across the country. Thanks to endemic corruption, 1MDB accumulated losses of $10 billion, emerging as one of the largest cases of gross corruption in the region. The Malaysian Securities Commission has since struggled to decide if Deloitte was “aiding and abetting” in the graft or was “merely negligent.” As far as the regulator is concerned, there is no third option.

    Harrowing stories from South Africa highlight the ruthlessness of these firms evidently operating in a morality-free void. Not shying away from helping corrupt politicians and their agendas, under former president Jacob Zuma major consulting players have all been shown to have dirtied their hands in aiding Zuma’s project to effectively “capture” the South African state.

    Kenya Power

    In the same light of international firms consultancy, the government shot down a proposal by Kenya Power to single-source three international legal and consultancy firms the utility company had picked to review expensive power purchase agreements (PPAs) blamed for high consumer bills.

    Documents presented in Parliament show that the National Treasury, the Attorney-General and the Procurement Agency slammed breaks on Kenya Power’s quest to directly hire the services of Michael Sullivan, the Queen’s Counsel (QC) Howard Barrie, and Mr Jude Kearney.

    The Treasury further shot down firm’s request to use Specially Permitted Procurement Procedure to hire the services of consultancy firms PriceWaterhouseCoopers (PWC), McKinsey & Company, and Boston Consulting Group.

    Kenya Power’s decision to seek the services of the experts followed the March 21 decision by President Uhuru Kenyatta to appoint a taskforce to review PPAs signed between Kenya Power and all electricity generators with a goal of renegotiating the energy prices and other terms downwards.

    The 15-member team, chaired by boardroom veteran John Ngumi has recommended a number of reforms including renegotiation of all PPA’s contracts that Kenya Power has signed with electricity producers that also dictate modes of engagement, including payment.

    The proposals that are expected to reduce the cost of power by 33 percent – from Sh24 per unit of electricity to Sh16 per unit by December this year.

    Kenya Power signed contracts committing it to take more electricity than it can sell, leaving it to pay onerous capacity charges to energy producers even when their plants are idle.

    Mr Howard Barrie and Mr Jude Kearney were to be hired to advise KPLC and the Presidential Taskforce on the review of the PPAs and the renegotiation strategy.

    PWC was to undertake financial analysis of PPAs, McKinley was to be hired as management consultant while Boston Consulting Group was to offer the taskforce “a wealth of cross-cultural experience.”

    Members of the Energy committee, who probed the PPAs, have now questioned why KPLC wanted to bring in the international experts at the time the taskforce was conducting a investigations into the PPAs.

    Consultancy and accountancy firms are the only ones big enough to audit states or multinational corporations (MNCs), and have thus developed into quasi-cartels capable of influencing the paths of entire countries through their intimate connections to the centers of power and decision-making.

    While their work as auditors is no doubt crucial to providing accurate reports to shareholders, they have a broader responsibility to simultaneously safeguard economies on a national and global scale. That is, after all, what they are paid to do. Or so the theory goes.

    In reality, they have aided those with financial interests to avoid taxes and cook the books since their first conception in the ancient economies of Mesopotamia and Babylonia.

  • KenGen Facing Hefty Fine For Not Cushioning Shareholders

    KenGen Facing Hefty Fine For Not Cushioning Shareholders

    Kenya Electricity Generating Company PLC (KenGen) posted a 7 percent growth in Profit Before Tax after recording a Ksh.14.76 billion profit up from Shs 13.79 billion profit in its full-year Financial Results for the financial year ended 30th June 2021.

    In a statement, the firm’s Managing Director Rebecca Miano said the profit growth was achieved on the back of continued revenue growth underpinned by the company’s diversification strategy.

    In effect, the firm recommended a dividend pay-out Shs.0.30 per share which amounts to Shs 1.98 billion to be paid to all its shareholders.

    Overall, there was a growth of 3% in unit sales from 8,237GWh in 2020 to 8,443GWh in 2021. The Company benefited from a full year operation of the 172MW Olkaria V geothermal power plant whose construction was completed in October 2019, resulting in a 12% displacement of thermal generation.

    However, despite the glittering results, the energy producer is headed for a shoulder brush with the market authority for failing to cushion consumers with a profit warning.

    KenGen whose net income dropped by at least 25% in the year ended June, is accused of going against compliance requirements among Nairobi Securities Exchange-listed firms by failing to issue the shareholders with a profit warning.

    The big profit drop came as a shock to investors, with the company’s share price declining 2.5 percent in yesterday’s trading to Sh4.57 as the market reacted to the news.

    The Capital Markets Authority (CMA) requires listed firms to issue a profit warning within 24 hours of becoming aware that their net earnings will drop by a quarter or more for their respective financial year results.

    Such announcements are meant to give existing and prospective shareholders a guide to a company’s performance well in advance of what would otherwise be shocking results.

    KenGen did not issue a profit warning prior to publication of its results.

    According to the company the profit drop was brought by circumstances out of its control, hence it did not see the need to publish an earnings alert.

    ”That explanation does not make sense. Kengen credibility is on the line.” Isaac Koech reacted.

    “As a public entity they are held to the highest scrutiny, must deliver the public expectation. They cannot hide under the cloak of generality, should have issued a profit warning regardless of compliance.” He added.

    ”Sounds very dodgy.” One Brian reacted on KenGen.

    Previously, the markets regulator has penalised investment firm Centum for failing to issue a profit warning before announcing a drop in its full-year net profit.

    Companies listed at the Nairobi Securities Exchange (NSE) are required to warn investors if their full-year profits will drop by more than 25 before actual announcements, with the law stating that offenders will pay a fine set at the discretion of the regulator.

    The earnings alert should be sent to the NSE, CMA, and the public at least 24 hours before announcement of the results, a rule Centum did not adhere to.

    “An issuer who fails to comply with any continuing obligation within the prescribed time shall be liable to pay a penalty at the rate prescribed by the authority,” says the CMA public disclosure requirement.

    CMA forwarded amendments to Treasury that will allow CMA to reprimand directors who fail in the duty to protect investors’ interest saying it was impunity that a board would have prior information on results but opt to ignore the law as is the case of KenGen now and Centum then.

    Last year the Acting Chief Executive of Capital Markets Authority Wycliffe Shamiah warned companies listed on the Nairobi Securities Exchange against issuing profit warnings late. 

    Shamiah urged the firms to comply with listing rules which require companies to issue a profit warning within 24 hours of the board becoming aware that returns will fall by more than 25 percent compared to the previous financial year.

    “Good corporate governance practices dictate that companies prepare prudent periodic management accounts and projections. The company’s management and board also ought to be aware of the declining levels of profits well before commencement of external audit,” he said.

    Shamiah said the Authority will continue to implement the penalties for late filing.

    In 2016, National Bank of Kenya was fined an undisclosed amount of money for failing to publicly issue a profit warning ahead of announcing a surprise loss.

  • DCI Launches Investigations Into Postpaid Billing Fraud At KPLC

    DCI Launches Investigations Into Postpaid Billing Fraud At KPLC

    DCI sleuths have officially started investigations into an alleged postpaid billing fraud at Kenya Power.

    On 27th of June, DCI had summoned 200 Kenya Power staff and customers summoned to record their statements at its headquarters.

    According to DCI director George Kinoti, millions of monies were lost through a collusion between the staff, brokers and over 5,000 customers.

    Those directors at KPLC and private companies implicated will report to the DCI headquarters on diverse dates in July for further questioning.

    A source at DCI headquarters told this site that Tens of the suspects have already recorded their statements with DCI detectives.

    Fraud cases have hit most of state-owned parastatal.

    This is not the first time senior managers at KPLC are being arrested and questioned.

    July last year, KPLC managing board was arrested over the procurement of defective transformers and the irregularities in pre-qualifying 525 companies.

    18 Kenya Power staffs were dismissed after an audit report revealed that 350 out 500 contractors did not meet the set criteria.

    Government auditors recommended investigation of 19 Kenya Power employees that had shortlisted companies registered by their cronies and relatives.

    Kenya Power has been at the center of corruption for ages, last year, KPLC spent 15 times more to buy power from Independent Power Producers (IPPs) compared to Kengen.

    Kenya Power’s electricity purchase costs summary for 2018 seen by this site records that KPLC spent a total of Sh64.8 billion to buy 10.7 billion kilowatts of power from 19 producers up from Sh60.4 billion in 2017.

    Kengen was the biggest beneficiary of which they sold 7.9 billion kilowatts at Sh37.02 billion.

    Our checks reveals that Kenya Power bought a kilowatt of power from Triumph Power Generating Company at a cost of Sh69.26 compared to Sh4.63 from Kengen.

    Other IPPs including Gulf Power Limited sold a kilowatt at sh26.34, Iberafrica Power at 16.96, Power Tecnology Solution at sh14.70 and Tsavo Power sold a kilowatt at Sh11.77.

    Also Orpower 4 Inc, a subsidiary of Israel owned, OrmatTechnology, a firm listed on New York Securities Exchange sold 1.18 billion kilowatts to Kenya Power which earned them Sh11.4 billion.

    This means Orpower 4 inc sold a kilowatt at Sh9.68, more than double that of Kengen.

    Ethiopia sold 18.3 million kilowatts to Kenya at Sh27 per unit and Uganda 1.26 billion kilowatts at Sh6.54 per unit.

    This is, amongst other irregularities that the DCI are investigating, is what saw KPLC Managing Director Ken Tarus suspended.

    Our investigators checks reveals a list of the most notorious companies on the DCI’s radar;

    Moi University Campus (North Rift), Safaricom Investments Co-op Society Ltd, Nairobi Womens Hospital, Uchumi Supermarkets (North Rift), Holy Cross Fathers (Nairobi North) and Dandora Catholic.

    Detectives will also question the involvement of Sasini Coffee House Limited, Turbo Highway Eldoret, Eldoret Polytechnic, Franscisca Sisters of Anna (Western Kenya) and Seventh Day Adventist Church, South Nyanza on the billing fraud.

    Here is the full list of those summoned by the DCI