Kenya Power has issued a profit warning for the second year running, an indicator of the tough times the power distribution monopoly is going through.
In a public notice, the Nairobi Stock Exchange listed power utility said it expects its profits for the financial year ended June 30 to drop by more than 25 per cent compared to last year.
This means the firm's net earnings for the year will drop to Sh1.44 billion or below.
Kenya Power acting managing director Jared Othieno attributed the expected decline to among other things, an increase in non-fuel costs in line with the company’s long-term strategy of switching to cheaper and cleaner renewable energy.
"We wish to inform shareholders and the general public that the company’s net profit for the financial year ended June 30, 2019, are projected to decline by more than 25 per cent of the net earnings reported last year," Othieno said.
He is however optimistic that the firm’s long strategy pegged on growing cheaper and cleaner energy will ease the cost for consumers and ensure long-term profitability.
Shareholders went into a panic sell mode immediately news about impending shrink in earnings reached them, pushing the share price to Sh3 at noon compared to Sh3.14 earlier in the day.
The company’s share has been on a downward trend, shedding almost Sh9 in value or 75 per cent since August 2017 when it hit a high of Sh12.
Last year, the power distributor issued profit warning before posting a 63.7 per cent decline in net profit to Sh1.92 billion on higher costs. It said the performance was constrained by the depressed economic environment, poor hydrological conditions in 2017 and the protracted electioneering period.
Over Sh100 billion debt
Kenya Power has been reeling under high debt for the past three years, a move that saw Kenya Electricity Generating Company (KenGen) slap it with Sh1 billion penalty for defaulting part of Sh28 billion payments last year.
While unveiling results for 2018/19, Othieno said the company’s total debt had shrunk to Sh113 billion from Sh122 billion the previous year. He, however, said short-term credit was piling pressure on the company.
Pending liabilities due for service in the financial year ended June 30 stood at Sh106 billion, perhaps a key factor to the expected drop in net earnings.
The high debt obligation last year saw the company to turn short-term debts to refinance maturing once while negotiating for an extension with others.
Apart from Kengen, syndicated loans from Standard Chartered Bank (Sh50.4 billion), Rand Merchant Bank (Sh7 billion), Stanbic Bank (Sh1.1 billion) and Agence Francaise de Development (Sh1.1 billion) are haunting the power agency’s financial muscle.
Fraud claims
Moreover, Kenya Power has been faced with corruption allegations, system failures and token fraud allegations that saw its immediate former bosses and several other senior staff arraigned in court
The company’s suspended chief executive Ken Tarus and his predecessor Ben Chumo have since denied multiple fraud charges against them.
