How Kenya Power is being looted through purchase of dead stock

The debt ridden electricity power distributor, Kenya Power is losing billions of shillings through stockpile of unprioritised purchases some covering up to 8,050 years, The Informer can now reveal.

In what appears to be a well-orchestrated brazen looting spree choreographed as material stock up in an attempt to cover possible trace of theft of taxpayers’ money, the materials have overtime been purchased without financial prudence.

At the time, the current Managing Director Bernard Ngugi served as the Manager in charge of Supply Chain and has served at the company for over three decades now.

According to insiders, senior officials at the Ministry of Energy were privy to the dealings that saw colossal amount of money from the public coffers committed to unwanted stock.

The materials are lying unutilised and could soon be declared obsolete.

Additionally, the purchases were made without requisitions by the user departments to a tune of over Sh8billion.

Some of the materials itemised as; Clamp suspension (11kV ABC) bought at Sh14.6million has been quoted at stock cover of 8,050 years.

From the inventory records seen by The Informer, other items booked under material code 174827 were purchased at Sh690million were assigned stock cover of 127 years.

Others mostly cables and conductors were bought at a cost of Sh129million, Sh463million, Sh185million and Sh139million among others.

According to the highly guarded procurement record, ‘bracket steel pole top swer’ under material code 181202 was bought at Sh18, 569,600.00 and assigned a stock cover of 183 years while ‘joint 66KVXLPE 400mm2 AL S/C’ under code material 153416 was purchased for Sh26, 687, 604.79 to cover 35 years.

Concrete fitting U-bolt and nut (20*700M) under code material 186806 assigned stock cover period of 27 years was purchased for Sh18,370,473.70 while ‘Pvc Trunking Type II (Perforated) was bought at a cost of Sh17,552,709.44 for a period of 797 years.

“The money minting scheme is continued purchase of dead stock.” Our source who spoke on condition of anonymity intimated.

Currently, the struggling public entity has ballooned debt levels to a tune of Sh109.9 billion out of which Sh56.6 billion is owed to commercial banks at exorbitant interest rates while Sh53.2 billion is on-lent debt guaranteed by the Kenyan government.

The Standard Chartered Bank is owed Sh39.3 billion, Rand Merchant Bank (Sh9.2 billion), Equity Bank (Sh4.9 billion) and Agence Francaise De Development (Sh1.2 billion).

In September last year, another facility amounting Sh2 billion owed to Stanbic Bank was settled.

For the year that ended June 2020, the firm plunged into deeper losses to a tune of Sh939million attributed to managerial inefficiencies and revenue leakage.

In what points a grim financial performance of the utility firm, despite the high number of power connected clientele to a tune of 7.5million and revenue accrued, the Bernard Ngugi led company is seeking refinancing of its Sh54.6 commercial debt after the government granted it a one-year renewable moratorium on the repayment of its Sh53.2 billion on-lent debt.

The mounting debt likely to plunge the firm into a deathbed, the refinancing will be actualised through Expression of Interest (EOI) floated last week.

“The company expects to take advantage of the prevailing macro-economic situation to achieve lower interest rates compared to those under existing facilities consequently reducing its overall financing costs,” Kenya Power states in the EOI.

The company’s debt servicing has hit Sh20 billion annually, with 85 per cent of the debt unhedged on a long-term basis and denominated in US dollars and Euros yet its income is in Kenya shillings, exposing it to foreign exchange risks.

“The proceeds of some of the existing bank debt was utilized to finance specific long-term projects hence the need for a rationalisation at this time,” Kenya Power said in the EOI.

“Arising from the above, expressions of Interest are therefore being invited from eligible bidders to re-finance the existing term bank debt and convert the outstanding overdraft into a term loan, and to provide a facility to enable the reduction of trade payables,” the company said.

Interested banks and other financial institutions will score 30 marks if they readily have Sh58.8 billion, which is just over a third of the threshold required to take on Kenya Power’s debt, while financiers who have at least Sh32.1 billion will score 15 marks.