Mumias last cash source fizzles out
Monday, November 26, 2018 22:25
By GERALD ANDAE
A lack of electricity at Mumias Sugar Company #ticker:MSC has hampered the sale of ethanol, the single source of income following the closure of the factory about six months ago.
Kenya Power #ticker:KPLC disconnected electricity at the Kakamega-based factory in September, paralysing activities at the weighbridge as ethanol cannot leave the company without having weight verified by the Kenya Revenue Authority, which has an officer at the site.
The outstanding amount owed to the power utility firm is estimated at Sh1.2 billion having accrued over the years.
“We cannot sell ethanol at the moment as the exercise has been hampered by the lack of electricity in the company, hence the product cannot be weighed at the weighbridge as it is required,” said Mumias acting CEO Patrick Chebosi.
He said Mumias has been mulling using diesel for the exercise but the plans have been abandoned because of high cost of fuel.
The miller is in negotiations with Kenya Power to restore the electricity, making a commitment of paying Sh4 million a week towards the arrears. Kenya Power had not responded to Business Daily queries by time of going to press.
The company halted production of sugar in April due to a lack of raw material following a severe drought that affected cane development last year.
Suspension of milling has affected earnings from other revenue streams in what is likely to sink the listed miller into further losses at the end of the financial year.
The lack of production has seen the firm accumulate huge debt to farmers with the total amount owed currently standing at Sh870 million.
The once vibrant miller has been relying on government bailout as it struggles to meet financial obligations due to huge debts resulting from underperformance and mismanagement.
Mumias resumed selling electricity to Kenya Power last year and it was exporting about 55 per cent of its daily output to the national grid before running out of raw material.
It has an ethanol plant with the capacity for 120,000 litres and requires about 300 tonnes of molasses daily to operate optimally. The miller has been struggling financially in recent years, its miseries worsened by an acute shortage of raw material.
Dumping of the commodity has also made marketing sugar difficult.
Mumias is Kenya’s largest miller in terms of production capacity which is 8,000 tonnes of cane per day. However, the firm has been milling way below its capacity as farmers shy away from sugar cane growing due to delayed payment.
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