KenGen net earnings hit 22-year low on tax payout

KenGen

KenGen Managing Director and Chief Executive Officer Rebecca Miano at her office in Nairobi on March 18, 2021.

Photo credit: Jeff Angote | Nation Media Group

Electricity generator KenGen has recorded a 93.5 per cent fall in net profit in the year to June on payment of a deferred corporation tax from last year.

The company posted a Sh1.18 billion net profit for the financial year 2020/21, the lowest since 1999 when the power generator booked a net profit of Sh213.9 million, after paying the Sh8.79 billion tax following its reinstatement to the previous rate of 30 per cent.

This is down from the Sh18.37 billion the company recorded in the last financial year after the government lowered corporation tax to 25 per cent to cushion firms from the Covid-19 pandemic effects, giving KenGen a tax credit of Sh8.14 billion.

This is the third fall in net profit KenGen has recorded in five years, after declining to Sh7.89 billion in 2018 from Sh9 billion the previous year, and again to Sh7.88 billion in the following year before jumping last year.

However, the power utility’s revenue grew 4.06 per cent from Sh44.11 billion in 2020 to Sh45.9 billion in the year to June, which was mainly attributed to higher earnings from the Tulu Moye venture in Ethiopia.

Diversification

KenGen Managing Director Rebecca Miano said the earnings from Ethiopia underline the importance of the company’s diversification strategy.

The company’s ongoing geothermal drilling services in Tulu Moye netted Sh1.78 billion, up from Sh440 million last year.

“This was mainly attributed to revenues from geothermal, hydro generation and the diversification venture at Tulu Moye in Ethiopia,” Ms Miano says adding:

“KenGen remained strong recording a steady performance and demonstrating sound financial position which reaffirms the company’s promise and commitment to continual business growth and maximisation of shareholder value.”

Profit before tax grew 7 per cent from Sh13.79 billion last year to Sh14.76 billion, while electricity sales grew 3 per cent from 8,237GWh to 8,443GWh on higher demand as the economy opened gradually.

At the same time, Kenya Power has bounced back from a Sh939 million net loss in 2020 to a Sh1.49 billion after tax profit for the period to June on higher electricity sales and lower operating costs.

Operating costs

The power supplier posted an 8.4 per cent rise in revenue from electricity sales to Sh125.92 billion, while operating costs fell by Sh7.97 billion to Sh39.86 billion from Sh47.83 billion in 2020.

This follows increased power sales of 400GWh to 8,571GWh from 8,171GWh following connection of more homesteads to the national grid and increased power demand during the year following resumption of economic activity that had stalled because of the pandemic.

The company’s financing costs also reduced by Sh3.42 billion to Sh9.05 billion from Sh12.47 billion last year.

Kenya Power Board did not recommend the payment of a dividend to the company’s shareholders.

The firm’s positive performance was announced just weeks after the company was declared a “special government project” as the State moves to implement reforms to revive the company’s fortunes.

A steering committee has been formed to look into the company’s operations to cut sleaze that has dodged the monopoly for years and review power purchase agreements signed by the company with independent power producers in a bid to lower power costs.

President Uhuru Kenyatta has given the reforms team until December 24 to quickly carry out the reforms and lower electricity costs by a third.

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