• Mumias Sugar Company crumbled in 2018 despite a persistent government bailout.
•In 2019, KCB Group appointed Rao to run the company until the group recovers close to Sh3 billion it lent to the miller.
Image: FILE
The process of reviving the troubled Mumias Sugar Company will take longer after senators ordered a fresh start of the leasing procedure.
The senators want the sugar miller to place a new call for expression of interest into the leasing process and conduct a fresh technical evaluation.
The company, under the KCB-appointed receiver manager Ponangipalli Rao, is currently evaluating bids from eight local and international firms that had expressed interest.
But the Senate Agriculture committee has given the manager until July 31 to advertise a fresh intention to lease the company and carry out a technical valuation.
“Following the deliberation and the need for transparency and public participation, the committee resolved that the advertisement for the intention to lease Mumias Sugar Company limited be done in two weeks,” committer chairman Njeru Ndwiga said.
The receiver manager had opted for a private treaty as opposed to public tendering in the leasing process, saying it was less expensive and faster.
However, leaders raised concerns about the opaqueness of the process, with Kakamega Senator Cleophas Malala petitioning the House to inquire into the process.
Ndwiga tabled, in the Senate, the status report on the committee’s inquiries into planned leasing of the company by the receiver manager.
Already, Rao has been served with a court order restraining him from selling any asset of the company.
Two applications have also been filed in court seeking to stop the ongoing process to lease the company to resuscitate its activities.
In the report, Rao cited a shortage of molasses, a high cost of transportation and huge debts as some of the obstacles that have hampered the revival efforts.
“Further, the receiver manager also began development in the nucleus estates from marginal revenues derived from the distillery,” the report read.
However, the distillery operations were suspended in March following directions from the ethanol plant lenders.
“These developments left the receiver manager with only one option of leasing the company’s assets to revive its operations and progress recovery efforts for the secured creditors and other stakeholders of the company,” Ndwiga said.
In the report, Rao denied reports that the firm has already been leased out.
According to Rao, the company, which was once an economic backbone of the entire Western region, is insolvent.
Citing audited financial results of the year 2018, Rao said the value of the company’s assets stood at Sh15.7 billion while its liabilities were Sh30.1 billion.
“The net asset's position stood at negative Sh14.4 billion, implying that the company will not be able to meet its long-term and short-term financial obligations from its assets and was therefore insolvent,” read the report.
The report adds that the company’s assets have deteriorated and its liabilities increased from June 2018 owing to additional interest and penalties on loan repayment defaults and tax arrears.
Mumias Sugar Company crumbled in 2018 despite a persistent government bailout.
In 2019, KCB appointed Rao to run the company until the group recovers close to Sh3 billion it lent to the miller.
“On the part of the receivership, the company owed Sh2.6 billion and currently owes Sh2.76 billion as a result of accrued interest,” read the report.
“As such, a minimum of Sh3 billion, in the opinion of the receiver manager, will be necessary for investment into the company for its revival,” Rao told the committee.
Edited by Kiilu Damaris