Kenya Power eyes cost cuts

Kenya Power has embarked on a turnaround strategy that it expects to lift it out of losses with a focus on cost-cutting.

The electricity distributor said it has already reduced its corporate budget and is evaluating other areas to cut including staff costs.

“As we go forward, we are focusing on implementation of a recovery strategy that focuses on growing electricity sales, enhancing revenue collection, managing costs and improving system efficiency,” said Managing Director Bernard Ngugi.

“A key pillar of the success of the recovery strategy is prudent cost management…we are also looking at reduction of staff costs, office expenses and other recurrent expenditure.”

Mr Ngugi spoke yesterday during the company’s annual general meeting.

The meeting, which appraised shareholders of the company’s results for the year to June 2019, had been delayed for nearly a year following the lengthy process of appointing the country’s new Auditor General, who has to look at the books of State firms before shareholders meet to approve the accounts.

During the financial year, Kenya Power reported a profit after tax of Sh262 million, a 90 per cent drop from Sh3.26 billion in 2018.

Unaudited results for the period to June 2020 issued by Treasury last week indicate the firm sank into a loss of Sh2.98 billion.

Ngugi said the company has recently rolled out a county-focused business model to turn the regions into profit centres, which is expected to help improve the firm’s fortunes.

“Our target this year is to grow sales by three per cent driven by new customer connections, enhancement of revenue protection measures and supporting demand growth for customers,” he said.

He added that the firm had since July this year connected 140,000 new customers against a target of 125,000 despite the Covid-19 pandemic, which has slowed down activities by many firms.

Kenya power is also seeking a tariff hike in a bid to increase revenues, which the CEO said they would continue pushing for. The new structure, if the firm has its way, might see low-income households pay more for power.

Currently, households consuming less than 100 units of electricity per month pay Sh10 per unit.

This has, however, dented earnings by the company.

The tariff was framed after a 2018 review, which the firm noted in its annual report had dimmed its revenue prospects by Sh4.8 billion. It had to apply stop-gap measures including short term borrowings to meet its financial obligations.

“We are actively engaging the regulator and other stakeholders on the critical need for a cost-reflective tariff, which will include a restructure of the lifeline band and review around system losses to reflect grid dynamics,” Ngugi told shareholders.

Energy Principal Secretary Joseph Njoroge said the Government had also given the firm a moratorium on concessional loans it had procured on behalf of Kenya Power, as among the initiatives the State has employed to help the company find a firm footing.

The Energy ministry, he said, is also helping the company in debt collection from other State agencies and counties.