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Auditor queries Kenya Power prime land lease deal with firm

Auditor queries Kenya Power prime land lease deal with firm

An undisclosed firm is renting a prime 2.9654-acre piece of land in Nairobi owned by Kenya Power for Sh3.7 million annually per acre, which is less than half the market value of the land.

Auditor-General Nancy Gathungu has questioned how the undisclosed firm came to lease the land for 10 years at such a low price when the market lease value of the land is Sh8.7 million per acre annually.

Ms Gathungu revealed that internal valuers at Kenya Power valued the land in February 2023 at a price that was way below the actual price based on a valuation done in June 2020.

The undisclosed firm has leased the land for 10 years and will pay a total rent of Sh110,000,000. Had the company leased the land based on its actual value as per the 2020 valuation, it would have collected a rent of Sh257,989,800.

“The decline in rental reserve value of the land was not supported or explained. As a result, the company was at risk of losing rental income amounting to Sh147,989,800 over the lease period,” said Ms Gathungu.

“In addition, the valuation carried out in February 2023 was conducted by the company’s employees instead of independent professional valuers. Although the company employees were qualified valuers, their independence and objectivity could not be confirmed.”

Kenya Power, which owns a vast network of distribution and transmission lines and related infrastructure across the country, owns many pieces of land on leasehold.

In the year to June 2024, the company’s freehold land was valued at Sh785.7 million.

Ms Gathungu has, however, raised the alarm over the company’s lack of title deeds for 16 parcels of land valued at Sh29.7 million.

The utility, however, stated that most of the parcels of land that did not have title deeds were allotted from trust land and that there had been delays in the demarcation of the areas and adjudication processes required to facilitate the acquisition of the documents.

Kenya Power has leased many parcels of its land to third parties. The company, however, struggles to recover rent from some of its tenants, according to the Auditor-General.

Ms Gathungu disclosed that 38 tenants that leased the company’s premises in Mombasa have defaulted on paying rent totalling Sh13.9 million.

“However, the tenants have since vacated the premises without settling the outstanding rents, with some of the debts dating back to eight years. Management did not provide measures to recover the outstanding rents,” she said.

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