POOR PERFORMANCE

Empty pockets for Kenya Power shareholders as profits plunge

Kenya Power suffers huge profit drop

In Summary

•The power distributor yesterday announced a 92 per cent drop in net profit to Sh262 million as at June 30, 2019 from Sh 3.3 billion the previous year.

•The growing cost of purchasing electricity however dampened the impact increased revenue from sales had on the firm’s balance sheet.

Kenya Power Company workers at a power substation.
Kenya Power Company workers at a power substation in Kisumu Kenya Power Company workers at a power substation.
Image: MAURICE ALAL

Kenya Power shareholders will for the second year in a row miss out on dividends after the firm recorded a massive profit drop.

The power distributor yesterday announced a 92 per cent drop in full year 2019 net profit to Sh262 million from Sh3.3 billion the previous year.

This was attributed to an increase in the firm’s cost of buying electricity from power producers.

During the review period, non-fuel purchase costs increased by Sh18 billion to Sh70.87 billion.

 

Finance costs also rose from Sh7 billion to Sh10.3 billion due to increased levels of short-term borrowing to bridge cash flow shortfalls and unrealised foreign exchange losses.

“Revenue from electricity sales grew by 17.8 per cent from Sh95.4 billion to Sh112.4 billion,” said the company in its unaudited results.

It delayed delayed publication of its results due to a vacancy at the auditor general’s office, which audits state-controlled firms.

The rise in revenue was partly attributed to a tariff review at the beginning of the financial year prior to the subsequent tariff harmonisation that lowered rates for small commercial customers and broadened life-line tariff for domestic customers.

It was also supported by a 3.4 per cent increase in unit sales to 8,174GWh owing to an expanding customer base.

The growing cost of purchasing electricity however dampened the impact increased revenue from sales had on the firm’s balance sheet.

Fuel cost decreased by 22.5 per cent to Sh18.3 billion due to improved energy mix following less utilisation of the thermal plants during the review period.

Units generated from thermal plants decreased by 904 GWh from 2202GWh the previous year to 1298GWh.

 

Transmission and distribution costs also reduced to Sh7.2 billion from Sh44.5 billion due to the less provisions for trade and other receivables during the year.

In September 2019, the electricity supplier issued a profit warning on the increase of electricity costs.

“Kenya Power’s profits will be down by more than 25 per cent compared to the corresponding period last year,” the public notice read.

In 2018, the firm also issued a profit warning before posting a 63.7 per cent decline in net profit to Sh1.92 billion on higher costs.

Yesterday Kenya Power’s share was trading at Sh 2.66 up from Sh 2.62, the share has been reducing in value for the last 16 years due to its poor financial performance.

“While many are surprised to note that a monopoly distributor is making losses, the “monopoly” is in name only and the company is used for political gain and is helpless to roadside declarations,” said Mihr Thakar, a financial analyst.

On a positive note he said since the firm is still generating cash from operations it was capable of bailing itself.