The loss making electricity distributor Kenya Power risks a Sh1.765 billion penalty for failing to surrender unclaimed assets, dividends and stale cheques to the state.
The Auditor-General Nancy Gathungu revealed that by the end of June last year, Kenya Power was still holding Sh922 million in its books against the requirements of Unclaimed Financial Assets Act, 2011.
Gathungu said the unclaimed assets should have been surrendered to the UFAA.
“Although the management is confident that the outstanding balance will drop following the ongoing review and audit of assets, this aspect of non-compliance may cost the company up to Sh1.765 billion in interest and penalties as at June 30, 2019,” she warned.
The unsurrendered assets also include deposit refunds, unidentified receipts, unpaid customer electricity deposits and unpaid way leaves compensation.
The Auditor General also revealed that the value unclaimed assets is 3.5 times the Sh262 million net profit that Kenya Power made in the year under review.
Data from UFAA shows that unclaimed assets went up by 23% in 2019 or Sh3 billion to Sh16 billion, most in uncollected salaries, pension dues, matured policies, bank deposits and royalties.
UFAA is mandated to charge any state entity that fails to surrender unclaimed assets a penalty of 25% of the assets held.
It is also allowed under the law to charge penalties ranging between Sh7,000 and Sh50,000 for each day the assets stayed before submission.
Kenya Power in it's previous report noted that it was yet to submit qualifying unclaimed assets at end of the four financial years to June 2017. It has claimed to be engaging UFAA to no end.
Kenya Power has been making huge losses, experiencing a rising debt and squeezed working capital. Kenya Power has remained in the negative working capital position with current liabilities exceeding current assets since 2017 due to rising short-term debts.
Paying Sh1.765 billion to UFAA at once will squeeze Kenya Power's operations at the time when investors are preparing for a more than 16-year low earnings.
The bad news come after KenGen also hit Kenya Power with a Sh722.31 million penalty for flouting 40-day window of paying for the electricity supplied in the previous year.