Big State utilities explore new revenue streams to stay afloat

Most state corporations are formed to deliver specific services like education, energy, health, and air travel.

This has often limited their ability to withstand shocks with exclusive revenue lines that can easily be swept away by competition, new technologies, or even an economic downtime like the Covid-19 crisis.

While some have chosen to wait for bailouts that delay due to State bureaucracies, some public corporations are seeking to evolve and compete beyond traditional revenue sources.

Kenya Power which has fallen into lean times has awoken from slumber to the oncoming opportunity of electric cars that may replace petrol and diesel engines.

The utility company revealed plans for a larger stake in the electric car market through building countrywide charging points and pushing for further lowering of import taxes for non-fuel-driven cars.

The electricity distributor said it would build a network of public electric vehicle charging points, targeting one of the hurdles for use of electric cars in Kenya.

Electric cars

It is also in talks with the State to cut taxes on electric cars and equipment for building charging points to meet the State target of having at least five percent of registered cars being non-petrol.

The utility is looking at the electricity charging points as new revenue streams in its race to diversify from selling power to homes and businesses.

 “We are also planning to set up charging facilities across the country, and will make use of our existing workshops to provide after-sale services such as mechanical support,” Kenya Power acting CEO Rosemary Oduor told shareholders at the firm’s AGM on December 3.

Kenya has joined the global push to promote the use of electric vehicles and reduce reliance on petrol and diesel. Fuel products are the country’s biggest import item.

To help encourage the adoption of electric vehicles, Kenya reduced excise duty on the cars from 20 percent to 10 percent.

Kenya Power joins Kenya Electricity Generating Company (KenGen), which also recently announced it is investing in an electric car charging system.

KenGen has been strategic in its plans for business diversifications for a long time, setting sights on new markets for its geothermal business and looking to turn by-products into money-making enterprises to supplement incomes.

The firm has been diversifying revenue streams away from the traditional business of producing electricity and selling to Kenya Power, supplying drilling services to Ethiopia and Djibouti.

KenGen is already reaping benefits from its diversification having booked Sh440.34 million revenue from drilling geothermal wells in Ethiopia commercial consultancy and drilling services contract signed with Tulu Moye Geothermal Operations.

The firm also plans to start drilling services for the Aluto-Langano project, also in Ethiopia and has signed a Sh709 million contract to drill three geothermal wells in Djibouti.

The company said it is eyeing similar deals in Uganda, Tanzania, Djibouti, Rwanda, South Sudan, The Sudan, Zambia, and Comoros to boost revenues.

Commercial treatment

Other projects in the pipeline include commercial treatment and bottling of drinking water following the commissioning of the Gitaru Water Drinking Plant and the KenGen Calibration Centre.

KenGen set its sights on electric cars earlier than Kenya Power when in 2020 it announced plans for investments in electric car charging systems as it eyes new revenue streams.

Strategy and innovation director David Muthike said Monday through a webinar that the firm is positioning itself to the possibilities of the rollout of electric public service vehicles as Kenya eyes reduced reliance on diesel.

“The case to have electric vehicles is there and KenGen is ready to support that with renewable energy,” said Mr Muthike in the webinar convened by Energy Society Kenya.

“On innovation, we are exploring to participate in manufacturing and we have also rolled out charging infrastructure with a pilot within our premises.”

Mr Muthike did not however give details on the location of the pilot vehicle charging infrastructure.

Scaling up the project will see KenGen generate revenue from vehicle owners who will require to charge their vehicles but this is heavily dependent on the technology picking up locally.

Another State firm, Kenya Pipeline Company (KPC) has also read the signs of the times and wants to spread its wings to connect Liquefied Petroleum Gas (LPG) to homes and provide high-speed data through fibre optics.

Its board chairperson, Rita Okuthe said the company is focused on building a strong foundation to accelerate business diversification and has already gone into the provision of high-speed data through “our fibre-optic business” and signed lease agreements with key telecommunication players in the industry.

She said the board will continue to roll out and optimise fibre optic, especially given the advent of 5G services in the country.

“KPC is also looking into the LPG business as a key revenue diversification stream in the near to medium-term. All these initiatives are underpinned by a strong project governance framework to ensure that projects are prioritised, completed on time and budget, in full compliance with Government guidelines and regulations” Ms Okuthe says in its 2020 Annual report.

The company installed a 92 core fibre optic cable for internal use along all the existing pipelines and has sold excess capacity to major telecommunication providers mainly as dark fibre products.

This has diversified the company’s revenue base while providing a solid communication backbone that is secure and scalable to meet the growing needs of the business.

“There is potential for growth in this business line” Macharia Irungu, KPC Managing Director said.

Mr Irungu said the firm is undertaking economic diversification to ensure new streams of revenue for its business continuity.

KPC has budgeted for the development of LPG depots in Mombasa and Nairobi for the financial year 2020/21 at the cost of Sh520 million as graduated investment overtime.