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Tarda threatens to sue over Sh5bn debt

Tuesday May 12 2015

Students on a tour of Masinga Dam in Machakos. The facility was handed to KenGen in a deal between Tarda and the utility firm in 1980s. The dam is now the subject  of a dispute over unpaid commercial charges.  PHOTO | FILE

Students on a tour of Masinga Dam in Machakos. The facility was handed to KenGen in a deal between Tarda and the utility firm in 1980s. The dam is now the subject of a dispute over unpaid commercial charges. PHOTO | FILE 

MWANIKI WAHOME
By MWANIKI WAHOME
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A development agency has threatened to go back to court to compel Kenya Power to pay charges that have been pending for decades.

Tana and Athi River Development Authority has threatened to seek legal redress after it failed to reach an agreement with the utility firm on how the debt should be settled as directed by the Public Investments Committee.

Kenya Power offered to pay Sh30 million to Tarda and said the Treasury should find ways to settle the balance. However, Tarda declined the offer and demanded at least Sh470 million to start with, to cater for its workers’ pension scheme.

“This matter is likely to end up in court. We are not getting the way forward as directed by the House committee,” said Tarda managing director Steven Githaiga.

He said the amount the power firm was offering was too little.

GAVE UP DAMS

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Tarda is demanding Sh4.9 billion from Kenya Power and Sh4.09 billion from KenGen arising from breach of a deal reached in the 1980s.

The agreement stipulated that the authority would be paid charges for ceding Masinga and Kiambere dams to the utility firms.

“We’ve Sh470 million owed to workers’ pension scheme and an outstanding demand of about Sh700 million for the families that were relocated from Masinga dam,” said Mr Githaiga.

He said KenGen plans a meeting this month to discuss its debt.

Public Investments Committee in last year’s audited accounts of state corporations noted that Kenya Power and KenGen owe Tarda Sh9 billion.

The unpaid dues have been blamed for the authority’s poor financial health.

The two firms took over management of the dams at various times during restructuring of the energy sector under agreements that Tarda says have not been honoured.

Mr Githaiga said the authority set up Masinga and Kiambere reservoirs as part of its role “of establishing integrated management of water resources for the development of communities in the catchment areas”. The firm, he said, was financially sound before it ceded the dams.

A Cabinet directive spelling out how revenue generated by Kenya Power was to be wired to Tarda has been disregarded over the years. Implementation of the directive would have seen Tarda receive Sh4.26 billion from Kenya Power between 1988 and 2000.

KenGen took over Tarda’s assets in 2000 without properly compensating the agency. Only Sh293 million was paid to Tarda, leaving Sh3.97 billion unpaid.

“The committee recommends that the ministry of Energy, the Treasury, Kenya Power, KenGen, Inspectorate of State Corporations, the Attorney-General and Tarda’s parent ministry work together to reach an amicable solution,” the House team said.

ANNUAL DEPRECIATION

However, talks with Kenya Power ended without any resolution. The committee observed that non-remittance of the charges, which was occasioned by a government directive that all revenue from hydro-electric power generation be wired to the Treasury, needs to be addressed by the relevant parties.

“The committee noted that the state of Tarda’s insolvency as captured by auditors would not have occurred had Kenya Power paid this authority the claim, which has accumulated to Sh3.97 billion in line with the commercial agreements or Sh3.1 billion if the authority were to receive the funds in accordance with the 1988 agreement,” the committee said.

Failure to pay the charges had seen Tarda suffer Sh10 billion loss due to annual depreciation of Sh367,984,972 on Masinga and Kiambere hydro-electric plants. KenGen would have remitted Sh4.09 billion and Kenya Power Sh4.9 billion.

“The authority’s current liabilities of Sh395,034,899 exceeded the current assets of Sh264,825,043 as at June 2012 resulting in negative working capital of Sh130,209,856,” the team noted.

Suspended Cabinet secretary for Energy Davis Chirchir, in 2013 pleaded with the House team for time to sort out the matter by March 2014.

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