What you need to know:
- Kenya Power has attributed the expected profit slump to the rapid depreciation of the Kenyan shilling against major global currencies which has sharply raised its obligations.
- The utility has had a tough financial year during which the 15 per cent power cut that was put in place last year ate into nine months of the current year as well as the continued slump of the local currency.
Kenya Power has issued a profit warning indicating that its net profit for the financial year ending June 2023 will be at least 25 per cent lower than its profit for the previous financial year.
The company earned Sh3.5 billion in profit after tax in the year to June 2022 with the profit alert that was sent to the Capital Markets Authority (CMA) on Friday, meaning the firm sees its earnings fall below Sh2.62 billion.
Firms listed at the Nairobi Securities Exchange (NSE) are required by CMA to notify investors and the public should they expect their after tax full-year earnings to fall by at least 25 per cent.
The utility has attributed the expected profit slump to the rapid depreciation of the Kenyan shilling against major global currencies which has sharply raised its obligations.
About 90 per cent of the company’s loan book is denominated in foreign currency which has placed a greater strain on its coffers, while about 60 per cent of its power purchases are also in foreign currency.
“The depreciation of the shilling has been the single biggest hit to our earnings this year. It has a huge negative impact on both our on-lent and commercial debt as well as our power purchase costs,” said Kenya Power finance manager Stephen Vikiru.
The utility has had a tough financial year during which the 15 per cent power cut that was put in place last year ate into nine months of the current year as well as the continued slump of the local currency.
Kenya Power sunk into a net loss of Sh1.14 billion for the six months to December 2022, a sharp drop from the Sh3.8 billion it had earned in the same period in 2021.
The utility’s revenues for the last three months of the current fiscal year will however be significantly boosted by the increase in electricity tariffs last month even though the company is weary of further deprecation of the shilling.
For instance, Kenya Power’s revenues rose by Sh1.3 billion in April partly driven by the State’s increase of electricity tariffs.
The upturn in revenue underlines the effect the delays by the energy regulator to approve new tariffs for the utility for more than two years could have had on its bottom line.
“On overall the revenues were up approximately Sh1.3 billion although there are several dynamics to this not just the tariff,” Mr Vikiru said earlier this week.
The company has also been negatively impacted by the failure by the government to pay it an estimated Sh14 billion for the reduction in power prices that lasted for 15 months.
The power cut cost the company an estimated Sh26 billion which was to be shared unequally between Kenya Power, KenGen, the Geothermal Development Company (GDC) and the Kenya Electricity Transmission Company (Ketraco).