Kenya Power risks Sh1.7bn fine over unclaimed assets
Kenya Power live team on Waiyaki Way on September 24, 2020. The firm risks a Sh1.765 billion penalty for not surrendering to the State unclaimed assets.
What you need to know:
- The utility firm was at the end of June last year still holding Sh922 million in its books against the requirements of Unclaimed Financial Assets Act, 2011.
Also making up the unsurrendered assets are deposit refunds, unidentified receipts, unpaid customer electricity deposits and unpaid way leave compensation.
Kenya Power risks a Sh1.765 billion penalty for not surrendering to the State unclaimed assets that include dividends and stale cheques as required by the law.
Auditor-General Nancy Gathungu disclosed in the latest audit report that the utility firm was at the end of June last year still holding Sh922 million in its books against the requirements of Unclaimed Financial Assets Act, 2011.
Ms Gathungu said the unclaimed assets ought to have been surrendered to the Unclaimed Financial Assets Authority (Ufaa).
Pension dues
“Although the management is confident that the outstanding balance will drop following 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,” warned the auditor-general.
Also making up the unsurrendered assets are deposit refunds, unidentified receipts, unpaid customer electricity deposits and unpaid way leave compensation.
The value of unclaimed assets is 3.5 times the Sh262 million net profit that the electricity distributor made in the year under review.
Ufaa’s latest data shows unclaimed assets have risen by 23 per cent in 2019 or Sh3 billion to Sh16 billion, most in uncollected salaries, pension dues, matured policies, bank deposits and royalties.
The law allows Ufaa to charge any entity that fails to surrender unclaimed assets a penalty of 25 per cent of the assets held.
Falling profits
Ufaa also charges a penalty of between Sh7,000 and Sh50,000 for each day that the assets stayed before being submitted.
The firm has been facing a period of falling profits, rising debt and squeezed working capital.
Kenya Power has, for instance, remained in the negative working capital position—current liabilities exceeding current assets— for the third consecutive year, due to rising short-term debts.
Paying out such money to Ufaa at once is sure to squeeze its operations at a time it has issued a third consecutive profit warning, preparing investors for a more than 16-year low earnings.
