Business

Mumias woes deepen amid Sh24b debt

Debtors and cartels on lookout for incoming cash and gobble it up before it can be used for bailout purposes

Mumias Sugar Company acting chief executive Patrick Chebosi shocked the National Assembly’s Committee on Implementation saying the company’s debt has hit Sh24 billion, as opposed to the often quoted Sh17 billion owed to farmers, banks and Kenya Revenue Authority.

The chief executive dazed the MPs further when he urged the National Treasury not to release any bailout to the struggling sugar miller until various administrative and financial issues are addressed, lest the money disappears without trace.

Without trace

Early, Treasury Cabinet Secretary Henry Rotich had told the committee chaired by Moitalel ole Kenta that the government, which owns 20 per cent of the company, is waiting for an updated turnaround plan from Mumias management team before there can be money to implement the plan.

But the acting chief executive who met the MPs on Tuesday said any bailout given will be throwing good money after bad because the cash will disappear before addressing intended purposes.

“I have been at Mumias Sugar Company in the last three months and served as the acting CEO in just three weeks but I have established that the company is currently infested by ghost farmers, ghost workers. The company is in deep trouble and even if the Treasury was to give us Sh3 billion, it will be a drop in the ocean. We cannot be able to pay for the cane, salaries and electricity which is currently disconnected,” Chebosi said.

He said the miller’s debt which is currently estimated at Sh24 billion keeps piling and some of it is attracting interest of Sh50 million daily and advised against advancing money to the ailing company at this point and urged the legislators to consider depositing the cash in a third party account.

“If you make any deposit at our accounts, the money will immediately be taken by our debtors including banks and other hungry people who have been fleecing the company for years. You would rather give the money to Kakamega county so that they can pay farmers who deliver the cane,” he said.

Chebosi said his current focus is to grow cane and crush the available resources to produce molasses and ethanol for sale. He will then use the proceeds to meet the workers’ monthly salary of Sh62 million and keep operations going as he awaits the turnaround plan.

The CEO further told the legislators that Kenya Power disconnected power to the company over unpaid bill amounting to Sh55 million and demanded the company undertake to pay Sh3 million every week before they restore power.

“I agreed and even proposed to pay Sh4 million every week so as to clear the arrears quickly. But, Kenya Power turned round and increased the accrued bill to Sh200 million and demanded I pay them Sh20 million immediately, besides the Sh4 million a week. I declined because we don’t have such money. We resorted to using generators to crush sugarcane, which is obviously expensive,” the acting CEO explained.

Suspect KPLC bill

He told the MPs that the bill is suspect and may have been increased by cartels who have been milking the miller dry over the years, in cahoots with Kenya Power staff, using illegal agreements.

“What I have gathered is that the cash accrued from the Power Purchase Agreement was entered by the company and Kenya Power around 2008. The agreement obligated Mumias to sell 26MW of power to the national grid, failure to which Mumias will pay a penalty. Much of this Kenya Power bill is from that penalty.”

“However, Kenya Power actually owes Mumias money for erecting a power station within the factory land which they have never paid for since 1974. If this issue is properly followed it would be established that it is KPC which owes Mumias money,” he added.

The committee chairman Moitalel ole Kenta said the penalty is an illegality and asked the acting chief executive to appear before them next week to shed more light on what is ailing the company and also discuss a KPMG audit report which the management has kept under wraps since 2015.

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