Kenya Electricity Generating Company (KenGen) has set aside Sh1.37 billion to cover for expected defaults from customers led by Kenya Power, which owed the generator Sh16.65 billion in June.
Latest disclosures show the allowance for impairment hit Sh1.37 billion in the year ended June 2025 from Sh774.71 million in the preceding financial year, on the backdrop of rising debts from its key commercial customer—Kenya Power—and non-commercial clients.
KenGen’s latest financial statements show the power producer increased the impairment allowance by 78 percent to Sh830.99 million, on the Sh16.65 billion due from Kenya Power as at end of June this year.
The non-commercial clients category has been backed by a provision of Sh545 million, up 76.9 percent from Sh308 million a year earlier with the receivables closing June at Sh1.27 billion from Sh982.42 million.
A large share of the Sh1.27 billion overdue balance is from two firms, including a foreign entity, which collectively owe Sh890 million.
The Auditor-General Nancy Gathungu said in an audit report that most of KenGen’s receivables exceed the typical 30–90-day credit window, with delays mainly attributed to weak contractual terms that do not enforce timely settlement.
“The extended outstanding receivables are attributed to weak contractual terms with clients which do not sufficiently safeguard timely payment,” said Ms Gathungu.
“Delayed collection of receivables would negatively affect the company's cashflows and working capital position, while the prolonged outstanding balances increases the risk of bad debts, which may require additional provisions and results in financial losses. The situation could also impact on the company's ability to fund operations and meet its obligations when they fall due.”
KenGen has a credit period of 40 days with Kenya Power and 30 days for other customers, after which they are considered as credit impaired.
These are assessed for impairment on a continuing basis and an estimate of doubtful receivables is made based on a review of all outstanding amounts at the year end.
The Kenya Power debt jumped slightly from Sh16.62 billion, as difficulty by KenGen to receive money from its main customer within the agreed 40-day credit period persisted.
The audit report shows Kenya Power’s actual payment cycle averages 113 days.
The delays in payment have forced KenGen to increase its loss allowance as Ms Gathungu cautions that late collections and weak dispute-resolution mechanisms could strain its working capital and heighten the risk of write-offs.
“In the circumstances, failure to collect receivables in optimal time and lack of an effective regular resolution of reconciliation items leading to delays in settling of the outstanding amounts, negatively impacts the company's working capital which could lead to future disputes and eventual risk of impairment,” says Ms Gathungu.
Under the non-commercial category, the audit singles out an engagement with the government of Djibouti where there are contractual obligations to KenGen under the Galla-le-Koma Geothermal Project.
Ms Gathungu noted that even though the Djibouti government, through its embassy in Kenya, reaffirmed commitment to pay once donor funds are released, “the existence of an effective enforcement mechanism of payment and debt recovery strategies could not be confirmed.”
