Kenya Power profit more than doubles to Sh3.5 billion

Kenya power and lighting company employees relocating power lines on, September 25, 2020 [David Gichuru, Standard]

Kenya Power more than doubled its profit for the year to June 2022 as the electricity distributor continues to improve its efficiency.

Profit after tax rose by 134.8 per cent increase to Sh3.5 billion from Sh1.49 billion the previous year.

The firm attributed the strong financial performance to lower tax expense, reduction in operating expenses and taming of electricity theft.

It said the higher profit was on account of a lower tax expense, which dropped to Sh1.62 billion over the year from Sh6.71 billion in 2021.

"Profit after tax increased to Sh3.5 billion from Sh1.49 billion after the tax expense for the year under review reduced from Sh6.71 billion to Sh1.62 billion," the company said in the financial report.

"The corporate tax rate reverted to 30 per cent from 25 per cent in 2021, hence the significant movement in the comparative tax expense."

Kenya Power, however, suffered major setbacks owing to the weakening of the shilling against major world currencies as well as a surge in use of costly thermal electricity following major downtimes recorded by geothermal, wind and hydro power plants.

The growth in profit was despite a 15 per cent reduction in the cost of power in January this year. It was also amid a decline in revenues.

This was made worse by a weak shilling, which meant that the company had to spend more in servicing foreign currency denominated loans.

Its finance costs went up to Sh12.69 billion in 2022 from Sh9.05 billion in 2021.

"Our focus for this financial year set on building on the momentum built during the previous financial
years when the turn-around strategy was rolled out," said acting Managing Director Geoffrey Muli.

Despite some curve balls, all our core business lines have registered remarkable improvement."

Basic revenue (excluding foreign exchange surcharge and fuel recovery) registered a slight decline from Sh125.9 billion to Sh125.6 billion.

This, together with a 40.2 per cent increment in finance costs, attributable to the depreciation of the Kenya Shilling against major world currencies, resulted in a 37.5 per cent decline in profit before tax compared to the previous trading period, the company said.

Profit before tax dropped to Sh5.12 billion in 2022 from Sh8.2 billion the previous year.

The company also has a negative working capital, with liabilities at Sh110.43 billion exceeding its current assets at Sh54.69 billion.

Over the year, Kenyans heavily relied on costly thermal power plants as the major geothermal and hydro power plants failed.

A number of geothermal power plants tripped and experienced lengthy downtimes when the power transmission line between Loyangalani and Suswa collapsed in December 2021.

The failure of the line itself also meant that power from the Lake Turkana Wind Power plant could not be evacuated until it was restored, which took two weeks.

Additionally, power generated by hydro dams reduced following the prolonged dry spell the country is experiencing.

The result has been increased reliance on power from thermal plants, which use heavy fuel oil to generate electricity.

The cost of this fuel is borne by electricity consumers and reflects in power bill as the fuel cost charge.

This more than doubled to Sh26.5 billion from Sh11.2 billion in 2021.

"Fuel costs increased from Sh11.18 billion to Sh26.49 billion because of increased dispatch of thermal energy plants from 876 GWh (gigawatt hours) to 1,539 GWh," Kenya Power said.

"This is attributable to low hydrology, unavailability of key geothermal plants, the interruption of the Loyangalani - Suswa transmission power line, and an increase in fuel prices globally."

Non-fuel power purchase costs, which is what the company pays power producers for electricity, increased by 4.75 per cent from Sh76.037 billion to Sh79.65 billion, which Kenya Power said was due to increased energy uptake from new generation plants during the period.

The firm also said it starting to make gains in the fight against system losses. The company has over the last six years seen system losses - which are due to theft of power as well as loss owing to aged infrastructure - worsen but now says it has been able to starting reducing the losses.

"Notably, system efficiency, which has been on a six-year decline, improved because of the deployment of a clear strategy to curb losses pegged on enhanced field presence with focussed inspections and use of data analytics," said Eng Muli.

"The war on losses was amplified through the deployment of 77,000 smart meters to the SME customer segment, bringing the total number of smart meters to 83000.

The company plans to install an additional 75,000 to SME and high end domestic customers this financial year.