Deloitte to audit WENRECO
May 10, 2009
MARKET INTELLIGENCE<br><br>The Government has contracted Deloitte & Touche, an accounting firm, to audit West Nile Rural Electrification Company (WENRECO) before it can inject more money to restore power supply in the region.
MARKET INTELLIGENCE
By Ibrahim Kasita
The Government has contracted Deloitte & Touche, an accounting firm, to audit West Nile Rural Electrification Company (WENRECO) before it can inject more money to restore power supply in the region.
WENRECO is a special purpose company that was formed by the Government and the Industrial Promotion Services (IPS-Kenya) owned by the Aga Khan Foundation to put up a 1.5 megawatt (MW) heavy-fuel thermal plant to extend electricity to the West Nile region and to build another 3.5MW small hydropower project on River Nyagak.
The Deloitte audit will also determine whether the construction of the Nyagak dam in Nebbi district can be restarted.
The move is part of the efforts to review WENRECO’s financing structure and determine an appropriate level of the Government’s financial intervention in form of equity share participation in the projects.
The WENRECO project’s financial structure was premised on its equity worth $3m and debt worth $3.6m, while the Government provided $8.2m in subsidy.
But the Government is not satisfied with the way WENRECO spent $8.2m in subsidy under the Energy for Rural Electrification Project.
Simon D’Ujanga, the energy state minister, confirmed Deloitte’s appointment.
“We want to ascertain the net worth of WENRECO. We are not going to commit public money without auditing them.
“We need to know their debts. Work has already started to that effect.
“The assignment is expected to be completed in two weeks time,†the minister said.
“In the short-term, we are going to give money for fuel for thermal power operations. I appeal to the people of West Nile to be patient as we solve the situation.â€
WENRECO is implementing the West Nile Rural Electrification project under a 20-year concession.
The project involves the supply of 1.5MW electricity using heavy fuel oil generators and construction, commissioning and operations of the Nyagak plant.
This plant was supposed to replace the thermal plant within three years of the licence award in March 2006.
However, the two projects stalled due to lack of money, leaving the region in darkness.
This forced WENRECO to request the Government for additional money to resume operations and complete the construction of Nyagak.
Eng. Paul Mubiru, the energy director, has already written to the Auditor-General for urgent government financial intervention in form of equity share participation in WENRECO.
“The firm submitted its financial statement, which indicated that it spent above the $6m committed to the project and that there is still a balance of approximately $4.1m on subsidy,†D’Ujanga explained.
WENRECO estimates that the new cost projections require an additional $1.5m to complete the Nyagak project.
Mubiru had also requested the Auditor General “to engage an independent firm of professional auditors to value the net worth of WENRECO and advise the Government on the appropriate level of financial intervention in form of equity shareholding in the project.â€
Mubiru disclosed that the energy ministry had proposed that the Government provides the balance of the funds to complete the Nyagak hydro-power project.
“The ministry of energy and mineral development has proposed that the Government’s contribution to the project be converted into equity,†Mubiru stated. The funds include $5.6m for the completion of the Nyagak dam and $1m for procurement of fuel for 12 months for the thermal power until Nyagak project is ready.
However, The New Vision established that the under the new terms and conditions, the subsidy is available for only operations of the heavy fuel plant and will be in form of fuel on a monthly basis.
The Government through the Rural Electrification Agency (REA) will also have a monitory role on the monthly revenue of WENRECO that is collected from consumers.
“The monthly revenue is to be deposited to an Escrow Account that is to be jointly operated by REA and WENRECO as signatories.
“Monthly revenue will be used for operations and for purchasing fuel,†noted a legal framework document for the project. “If there is a shortfall of the fuel, REA/Government will cover the shortfall.
The Government through REA will continue subsidising shortfalls by purchasing fuel for the plant till the hydro-power plant at Nyagak comes online.â€
The document demanded that reflection of the Government subsidy in the electricity tariffs to consumers should be worked out.
By Ibrahim Kasita
The Government has contracted Deloitte & Touche, an accounting firm, to audit West Nile Rural Electrification Company (WENRECO) before it can inject more money to restore power supply in the region.
WENRECO is a special purpose company that was formed by the Government and the Industrial Promotion Services (IPS-Kenya) owned by the Aga Khan Foundation to put up a 1.5 megawatt (MW) heavy-fuel thermal plant to extend electricity to the West Nile region and to build another 3.5MW small hydropower project on River Nyagak.
The Deloitte audit will also determine whether the construction of the Nyagak dam in Nebbi district can be restarted.
The move is part of the efforts to review WENRECO’s financing structure and determine an appropriate level of the Government’s financial intervention in form of equity share participation in the projects.
The WENRECO project’s financial structure was premised on its equity worth $3m and debt worth $3.6m, while the Government provided $8.2m in subsidy.
But the Government is not satisfied with the way WENRECO spent $8.2m in subsidy under the Energy for Rural Electrification Project.
Simon D’Ujanga, the energy state minister, confirmed Deloitte’s appointment.
“We want to ascertain the net worth of WENRECO. We are not going to commit public money without auditing them.
“We need to know their debts. Work has already started to that effect.
“The assignment is expected to be completed in two weeks time,†the minister said.
“In the short-term, we are going to give money for fuel for thermal power operations. I appeal to the people of West Nile to be patient as we solve the situation.â€
WENRECO is implementing the West Nile Rural Electrification project under a 20-year concession.
The project involves the supply of 1.5MW electricity using heavy fuel oil generators and construction, commissioning and operations of the Nyagak plant.
This plant was supposed to replace the thermal plant within three years of the licence award in March 2006.
However, the two projects stalled due to lack of money, leaving the region in darkness.
This forced WENRECO to request the Government for additional money to resume operations and complete the construction of Nyagak.
Eng. Paul Mubiru, the energy director, has already written to the Auditor-General for urgent government financial intervention in form of equity share participation in WENRECO.
“The firm submitted its financial statement, which indicated that it spent above the $6m committed to the project and that there is still a balance of approximately $4.1m on subsidy,†D’Ujanga explained.
WENRECO estimates that the new cost projections require an additional $1.5m to complete the Nyagak project.
Mubiru had also requested the Auditor General “to engage an independent firm of professional auditors to value the net worth of WENRECO and advise the Government on the appropriate level of financial intervention in form of equity shareholding in the project.â€
Mubiru disclosed that the energy ministry had proposed that the Government provides the balance of the funds to complete the Nyagak hydro-power project.
“The ministry of energy and mineral development has proposed that the Government’s contribution to the project be converted into equity,†Mubiru stated. The funds include $5.6m for the completion of the Nyagak dam and $1m for procurement of fuel for 12 months for the thermal power until Nyagak project is ready.
However, The New Vision established that the under the new terms and conditions, the subsidy is available for only operations of the heavy fuel plant and will be in form of fuel on a monthly basis.
The Government through the Rural Electrification Agency (REA) will also have a monitory role on the monthly revenue of WENRECO that is collected from consumers.
“The monthly revenue is to be deposited to an Escrow Account that is to be jointly operated by REA and WENRECO as signatories.
“Monthly revenue will be used for operations and for purchasing fuel,†noted a legal framework document for the project. “If there is a shortfall of the fuel, REA/Government will cover the shortfall.
The Government through REA will continue subsidising shortfalls by purchasing fuel for the plant till the hydro-power plant at Nyagak comes online.â€
The document demanded that reflection of the Government subsidy in the electricity tariffs to consumers should be worked out.