POOR PERFORMANCE

Kenya Power stares at profit drop as Covid-19 affects power uptake

Net earnings likely to drop to Sh196.5 million

In Summary

•Drop blamed on Covid-19 effects on the local economy which has witnessed reduced industrial and commercial activities.

•It will be the worst performance since it returned to profitability in 2004, after a Sh2.89 billion loss the preceding year.

Kenya Power engineers carry out maintenance work at a power Sub station in Mombasa. /FILE
Kenya Power engineers carry out maintenance work at a power Sub station in Mombasa. /FILE

Kenya Power expects its full year earnings to drop by at least 25 percent, a sixteen year low performance.

It attributes this to the impact of the Covid-19 restrictions which has led to a major drop in industrial and commercial power demand.

Shareholders will for the third year in a  row go without dividends.

The  power distribution monopoly's net profits is expected  to go below the Sh262 million it posted in the year ended June 2019, after a 92 per cent drop from Sh3.3 billion the previous year.

 

The Nairobi Securities Exchange (NSE) listed firm’s profit after tax is likely to drop to Sh196.5 million or below.

It will be the lowest since it returned to profitability in 2004, after a Sh2.89 billion loss the previous year.

“The Covid-19 pandemic has adversely affected our business operations leading to slow growth in electricity sales and an increase in financing costs resulting in reduced earnings,” Company Secretary Imelda Bore said in a notice.

The industrial sector accounts for about 70 per cent of Kenya Power unit sales.

“The board and management are focused on enhancing the company’s financial performance through improving operational efficiency, growing sales, reducing system losses and managing costs,” it said in the notice through NSE.

The drop in profit comes even as Kenya remains with one of the highest, electricity tariffs in the region, where main grid tariffs range between Sh10 to Sh21 per kilowatt-hour, depending on utility.

 

Last year, Kenya Power made an application to increase prices by up to a fifth.

It wanted to increase the consumption charge for those consuming less than 100 kilowatts per month to Sh12.50 a unit, up from the current Sh10, and Sh19.53 per unit from Sh15.80 for those consuming 200 units.

According to the Energy and Petroleum Regulatory Authority (EPRA), introduction of the lockdown and continued calls for working remotely has driven the daily energy demand down by about 20 per cent.

Electricity demand reduced by one per cent from approximately 997GWh in January 2020 to 978GWh in March 2020, EPRA data shows, mainly on cuts by commercial and industrial customers.

“This is because most companies have encouraged their employees to work from home. Additionally, educational institutions are closed hence all students are at home. Electricity demand is expected to be lower compared to last year due to the impact of the Covid-19 pandemic,” EPRA notes in a recent report.

Most affected sectors according to the National Treasury include tourism, trade, transport and storage, agriculture, manufacturing and construction.

Consumption by domestic customers has however increased by about five per cent, according to EPRA.

In the year ended June 30, 2019, Kenya Power reported an increase in non-fuel power purchase costs from Sh52.795 billion to Sh70.878 billion.

Nevertheless, revenues grew by Sh16.994 billion from Sh95.435 billion in the previous year to Sh112.429 billion.

The rise was attributed to tariff reviews and increase unit sales owing to an expanding customer base, currently at 7.5 million.

During the period, transmission and distribution costs dropped by 7.8 per cent from 44.541 billion in the previous year, to Sh41.045 billion.

The company, which operates most of the electricity transmission and distribution system in the country , is owned 50.1 per cent by government with private investors enjoying a 49.9 per cent shareholding.