Centum Investments Company Ltd has written off its Ksh2 billion ($16.39 million) investment in the controversial Lamu coal-fired power plant. The project failed to take-off over environmental concerns and lack of financing.
The carrying value of the investment has dropped to zero in the books in the 2019/2020 financial year, casting doubts on the possibility of recovery.
Chief executive James Mworia told The EastAfrican that the strategic decision was informed by the need to be “prudent’’ over the investment.
The writing off comes as the investment firm also suffered a Ksh900 million ($7.37 million) impairment loss on its investment in Akiira Geothermal power project, a 140MW plant under construction in Kenya’s Nakuru County.
Centum invested Ksh1.97 billion ($16.14 million) in Akiira power for a 37.5 percent stake in 2016, but the carrying value of the investment has declined to Ksh1.07 billion ($8.77 billion) as at September 30, 2022.
In the same year (2016) Centum invested Ksh2 billion ($16.39 million) in Amu Power — a joint venture between Gulf Power (developer and co-sponsor) and Centum (co-sponsor) — for a 50 percent shareholding.
However, the project encountered several setbacks, including revocation of an environmental licence, delays in raising funds from banks and an announcement by the technical partner General Electric that it was exiting the coal business.
Amu Power Company was created as a special purpose vehicle by Centum and Gulf Energy Ltd to assemble a consortium of lenders and technical partners to deliver the $2 billion project that has since stalled.
In 2020, the Industrial and Commercial Bank of China (ICBC), which had committed to meet an estimated 60 percent ($1.2 billion) of the project’s development cost developed cold feet towards the plant that was expected to add 1,050 megawatts (MW) of energy on the national grid upon completion.
Struggling with losses
The Group is struggling with losses after years of massive capital investments and mounting debt took a heavy toll on its finances.
The group made a loss of Ksh1.29 billion ($10.57 million) in the six months to September 30 from Ksh662 million ($5.42 million) in the same period last year. All of the group’s trading, investments and subsidiary operations save financial services made losses.
The regional company which is listed on the Nairobi Securities Exchange attributed its poor performance to the volatility in the forex market.
According to the unaudited financial statements the group’s consolidated net loss increased by 95 percent to Ksh1.29 billion ($10.57 million) from Ksh662 million ($5.42 million).