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The East African : Mar 11th 2017
34 BUSINESS The EastAfrican MARCH 11-17,2017 ENERGY & MINING Estimated bills reduce Kenya Power’s earnings The utility fi≥m may find it di∞cult to ≥epay sho≥t-te≥m debts By JAMES ANYANZWA The EastAfrican K enyan electricity transmission and distribution firm Kenya Power has recorded a negative working capital of Ksh7 billion ($70 million) during the six months to December 31, 2016, suggesting that the firm does not have cash to repay short-term debts and finance its dayto-day operations. The Nairobi Securities Exchange- listed company, which has connected 3.4 million households to electricity in the past three years, is facing a shortage of meter readers, so it has been estimating monthly power bills for its clients, which has landed it in trouble with customers and impacted its cash flow. The management attributed the negative working capital to underestimation of power bills and a change in the international financial reporting standards (IFRS) that saw Ksh5 billion ($50 million) converted from long-term debt to a short-term one. “A significant number, mostly commercial customers, are still on postpaid. Most of the time we underestimate these bills and we end up having smaller figures for our debtors than those for the creditors. As a result we slightly end up with a smaller figure for the current assets compared with the current liabilities,” Harun Karisa, the firm’s manager in-charge of financial accounting told The EastAfrican. Kenya currently has 5.7 million customers connected to the national grid to-date, from 2.26 million in March 2013. Of the 5.7 million, 3.6 million are on the prepaid billing system and 2.1 million on post- paid metering. According to Mr Karisa, Kenya Power does not have enough meter readers to cope with the increased number of accounts. “We need to get accurate meter readings for our customers but there is still a lag in terms of the number of employees who can service 100 per cent of the accounts we have created,” said Mr Karisa. Each of the postpaid customers has a maximum of 21 days to clear their bills depending on the date when the meter was read. Kenya Power is 50.08 per cent owned by the state and its monthly revenue from electricity sales is esti- PERFORMANCE Kenya Power’s profit before tax for the six months to December 31 2016 fell 1.7 per cent to Ksh5.64 billion ($56.4 million) from Ksh5.73 billion ($57.3 million) in the same period the previous year (2015). The volume of cash generated from operating activities declined five per cent to Ksh12.08 billion ($120.8 million) from Ksh12.72 billion ($127.2 million) in the same period in 20115. Kenya Power employees repair a transformer. Picture: File mated at Ksh 1 billion ($10 million) of which 99 per cent is collected, leaving one per cent in debts. Large power consumers who are mostly on post-paid metering, account for about 55 per cent of the firm’s revenues from electricity sales while domestic consumers account for 45 per cent. About 66 per cent of the revenues collected from domestic consumers go into the company’s operations while the balance goes to other levies such as fuel cost adjustment levy, forex adjustment levy, inflation, Water Resource Management Authority levy, Energy Regulatory Commission Levy, Rural Electrification Fund Levy and value added tax. Similarly, only 55 per cent of the revenues from industrial consumers go to Kenya power while 45 per cent is spent on levies. However, Kenya’s power consum- ers are weighed down by huge power bills following a steady increase in electricity connections that has left the Kenya Power short of meter readers, forcing it to rely on estimated bills. The few available meter readers are sent to premises after as long as three months to take actual readings. The result is that consumers who pay their bills on a monthly basis are hit by high accumulated bills because the monthly estimates are usually quite conservative. Apple stops cobalt pu≥chases to fight child labou≥ By TODD C. FRANKEL The Washington Post APPLE SAID IT has temporarily stopped buying cobalt mined by hand in Congo after a recent investigation by British broadcaster Sky News that found continuing problems with child labour and harsh working conditions. The move comes several months after Apple said it planned to keep buying so-called artisanal cobalt from Congo while it worked to address the problems. Cobalt is essential for the lithium-ion batteries found in laptops and smartphones, such as the iPhone. Sixty per cent of the world’s cobalt supply comes from Congo. A Washington Post investigation last year de- tailed abuses in Congo’s artisanal cobalt supply chain, showing how miners — including children — laboured in hazardous, even deadly, conditions. Amnesty International and other human rights groups also have alleged problems. The Post connected this troubling trade to Zhejiang Huayou Cobalt Company, a Chinese firm that is the largest buyer of artisanal cobalt in Congo and whose minerals are used in Apple products. Apple responded by pledging to clean up its cobalt supply chain, but the tech giant said it wanted to avoid hurting the Congolese miners by cutting them off. In a response to the revelations that the problems identified earlier were still prevalent, Apple said it has stopped buying cobalt from artisanal mines. “We have been work- ing with Huayou on a programme that will verify individual artisanal mines, according to our standards,” Apple said in a statement, Sky News reported that children continued to be employed in the cobalt mining that feeds into Apple’s supply chain “and these mines will re-enter our supply chain when we are confident that the appropriate protections are in place.” Apple has said it intends to begin scrutinis- ing its cobalt suppliers this year like it does its “conflict mineral” suppliers — the tin, tungsten, tantalum and gold from Congo that companies are required by securities law to attempt to certify does not come from militia-controlled mines. Apple said it plans to publish a list of the cobalt smelters, just as it does for its conflict mineral smelters. Sky News reported that children continued to be employed in the cobalt mining that feeds into Apple’s supply chain. The report was centred on the former Katanga province of Congo, where Huayou Cobalt operates, although the Sky News report does not specify the locations. A Huayou Cobalt spokesman told the Post that it was investigating the allegations made in the story and had asked the broadcaster for more details. Explo≥ation to ≥esume at Kenya Coast EXPLORATION for oil and natural gas on Kenya’s coastline will soon resume after a two-year lull. Zarara Oil and Gas Ltd will spend $30 million on drilling two wells in block L4 and L13 in Lamu County while Royal Dutch Shell Plc is focusing on offshore acreage L10A and L10B. Investment in the oil and gas sec- tor in East Africa is expected to rise in 2017 as Kenya and Uganda rush to build hinterland crude export pipelines to the Lamu and Tanga ports respectively. Tullow Oil Plc, with its joint ven- ture partners, will build flow pipelines and other production facilities in northwestern Kenya and the Albertine basin in western Uganda to feed crude to the pipelines to the Indian Ocean. ESF Consultants Ltd said Zarara, a subsidiary of Midway Resources International (MRI), plans to undertake exploration drilling in block L4 and L13 to explore and appraise gas discoveries made by Shell in the 1970s. “Zarara’s business plan is to com- mercialise prospects in a phased approach. Phase I is a programme covering drilling and testing of wells,” said ESF in the environmental social impact assessment report. MRI owns the 75 per cent working interest through Zarara in two production sharing contracts over blocks L4 and L13. Swiss Oil Holdings Ltd holds a 15 stake. Sola≥ lights fo≥ fishe≥men SIMUSOLAR, a social enterprise providing financing for affordable solar-powered products in Tanzania, has launched a $50,000 loan scheme through the Kiva crowdfunding platform to benefit small businesses in rural areas. The loan will finance solar fishing lights used by communities around Lake Victoria. Simusolar’s president Michael Kuntz said funding to be provideed through a partnership of Kiva with Energy 4 will allow the entity to sell solar fishing lights and double the income of fishers over the first year of use. “In total, $250,000 of incremental take-home income will be generated by our clients from a $50,000 investment with a five times multiple of impact. Funding will allow us to build a repayment track record to access future lenders,” he said. Simusolar’s Kiva campaign is sup- ported by the UK’s Department for International Development through Energy 4 Impact’s crowd power programme, which will match contributions from Kiva lenders. Energy 4 Impact will provide up to $25,000 in match funding.
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