Kenya Power in whopping 91pc profit plunge
Kenya Power officials disconnect electricity from a transformer at Imara Daima estate in Nairobi in June in a crackdown on illegal connections.
What you need to know:
- Transmission and distribution costs also decreased by 7.9 per cent to Sh41 billion.
- The directors of Kenya Power did not recommend the payment of a dividend to its shareholders.
- Counties are expected to operate as profit generating units to enhance responsiveness to existing customer needs.
Kenya Power has reported a 91 per cent plunge in profits after tax for the year ended June 30, 2019.
The utility service provider said its profits after tax dropped to Sh262 million from Sh3.2 billion. The results were delayed due to the absence a substantive auditor general.
It released its financial statements to the Nairobi Securities Exchange (NSE) on Monday, almost one year late.
Kenya Power board blamed the drop in profitability to an increase in non-fuel power purchase costs, commissioning of two power plants and a surge in finance costs due to short-term borrowing.
Non-fuel power purchase costs shot up by Sh18 billion from Sh52.7 billion to Sh70.8 billion following the commissioning of the two power plants with a combined generation capacity of 360MW.
In addition, finance costs rose by Sh3.2 billion due to increased levels of short-term borrowings and foreign exchange losses.
A company in financial stress usually results to short-term borrowing which are often more expensive and come with more stringent terms.
Finance costs
This saw Kenya Power’s finance costs jump by 46.4 per cent from Sh7 billion to Sh10.3 billion as it fought to bridge cash flow shortfalls and unrealised foreign exchange losses.
Despite the drop in bottom line, the company recorded an increase in revenues, which means increase in costs are its biggest Achilles heel.
Revenue from electricity sales grew by Sh16.9 billion from Sh95.4 billion to Sh112.4 billion. This represents a 17.8 per cent increase.
“The rise in revenue was partly attributed to a tariff review at the beginning of the year prior to the subsequent tariff harmonisation that lowered rates for Small commercial customers and broadened life-line tariff for domestic customers,” Kenya Power said in the statement.
Unit sales rise
It added that the growth in revenues was also supported by a 3.4 per cent increase in unit sales from 7,905GWh to 8,174Gwh owing to an expanding customer base.
Kenya Power said the fuel cost decreased by Sh5.3 billion to Sh18.2 billion due to an improved energy mix as a result of less utilisation of expensive thermal plants the year. Units generated from thermal plants decreased by 904GWh from 2,202GWh the previous year to 1,298GWh.
Transmission and distribution costs also decreased by 7.9 per cent to Sh41 billion.
The directors of Kenya Power did not recommend the payment of a dividend to its shareholders.
“Kenya Power will continue to implement the ongoing business turnaround strategy to improve operational efficiency and ensure financial sustainability,” the statement further said.
“In this regard, the company is undertaking several key initiatives aimed at enhancing revenue collection and protection, improving system efficiency, managing costs, and pursuing diversification of revenue streams,” the utility firm said, commenting on its future outlook.
It is counting on the new devolved corporate structure where counties are expected to operate as profit generating units to enhance responsiveness to existing customer needs.
