Kenya Power has sunk into a Sh1.14 billion net loss for the half-year period to December 2022 owing to a 15 percent power tariff cut implemented in January last year and a weakening shilling.
This is a sharp drop from the Sh3.8 billion net profit recorded during the same period in 2021.
“This drop is attributable to increased foreign exchange losses and the implementation of the 15 percent reduction of the end user electricity tariff as recommended by the government in January 2022,” said Kenya Power in a statement on Monday.
The price cut, which was meant to lower the cost of electricity, coupled with a weak shilling to significantly increase the utility firm's costs and send it to loss-making territory for the first time since 2020.
Former President Uhuru Kenyatta had introduced the tariff cut in January last year to lower the cost of living. The 15 percent reduction in power prices saw the basic electricity revenue earned by Kenya Power during the six-month period decrease by Sh6.69 billion despite an increase in sales.
Kenya Power recorded a 4.4 percent growth in electricity sales during the period to 4,764 gigawatt-hours (GWh) attributed to growing demand occasioned by increased economic activities and an expanded customer base.
The weakening shilling has increased its costs of repaying its debts as well as payments of power supplies from power producers.
This saw its operating costs rise to Sh21.72 billion from Sh19 billion in the six months to December 2021 while fuel costs rose to Sh15.08 billion from Sh10.87 billion owing to higher fuel prices during the period.
Kenya Power's management, however, maintains a positive outlook for the second half of the year and has earmarked growth of sales to return it to a profit-making position.
“The company projects to improve its business performance in the second half of the financial year by retaining the unwavering focus on increasing electricity sales, enhancing system efficiency and prudently managing its resources,” said the company.
The company had sunk into a net loss of Sh2.98 billion in the full financial year ended June 2020, which was its first net loss in 17 years, but had since wriggled its way back into profitability.