One of KenGen’s geothermal wells at Olkaria in Naivasha, Nakuru County. [Antony Gitonga, Standard]

Auditor General Nancy Gathungu has put the Kenya Electricity Generating Company (KenGen) on the spot for spending more than 94.8 billion shillings on stalled projects.

The Auditor General, in his latest audit report on the state-owned company, is concerned that the projects, which are mainly financed by loans, have cost the company service costs without generating revenue.

Gathungu says the projects were started several years ago but have stalled for two to ten years without any explanation from the management of the power generation company. They include transmission lines and geothermal power wells, which were financed with loans, which means KenGen still pays interest even though the projects are inactive.

“Management has not provided an explanation as to why the projects have not been completed and capitalized,” Gathungu said in the audit for the fiscal year ended June 2021.

The Auditor General issued a qualified opinion on KenGen’s results based on insufficient or no explanations on stalled projects and the failure of the valuation of tangible assets since 2015 contrary to his own policy of evaluation every three to five years.

A qualified opinion is the opinion of an auditor that the financial statements are presented fairly, except in areas specified due to inadequate disclosures.

Gathungu notes that KenGen committed 79.32 billion shillings to drill geothermal power wells between 2011 and 2015, but the wells were not connected to any power plant to start generating electricity.

The project was financed by a loan from the Export-Import Bank of China (Exim), which means that KenGen continues to pay principal and interest without any corresponding income coming in.

“Management has not specified when the wells will likely be used for power generation. As a result, there is no value for money obtained on the 79.32 billion shillings investment in well drilling, ”Gathungu said.

The audit report further reveals that KenGen spent 4.48 billion shillings on the construction of transmission lines in the 2008/2009 fiscal year, but the lines never benefited the company.

Instead, the Auditor General notes, the lines are used by “another business” to generate income. KenGen told the Auditor General that he is still in negotiations to transfer assets to the company in question.

“KenGen continues to manage a loan and earn interest on those assets, increasing the company’s operating costs and cash flow without the corresponding revenue being realized,” observes Gathungu. The company also has on its books 645.98 million shillings committed on feasibility studies for wind power projects.

Some Sh 592.92 million was spent on the Meru wind power project during fiscal year 2011/2012, while Sh 82 million was used for the Karura hydroelectric power plant project during the fiscal year 2011/2012. 2013/2014 financial year. Gathungu claims that KenGen has not provided any contractual documents showing that the amount has been spent on feasibility studies for the two projects.

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