Kenya Power profit to drop over tariff cut and forex losses

Kenya Power employees in a mobile workstation at Uhuru Gardens on May 1,2023, during Labor Day celebrations. [Denish Ochieng, Standard]

Kenya Power on Thursday issued a profit warning, indicating that it expects its profit for the period to June this year to decline by more than 25 per cent.

The firm attributed the drop to foreign exchange losses incurred on account of the weakening of the Shilling against the US dollar as well as a 15 per cent reduction in power prices implemented in January 2022.

Finance General Manager Stephen Vikiru said a substantial proportion of the company's loans, about 90 per cent, is denominated in foreign currency.

A weak shilling usually sees Kenya Power use more of the local currency in servicing its debts.

Its loan portfolio is a mix of government on-lent loans, which account for 65 per cent of its debt and all of which are in foreign currency, as well as commercial loans, some of them also denominated in foreign currency.

The company also pays some of the power producers in foreign currency, mostly US dollars and Euros. About 60 per cent of the power purchase cost is in foreign currency, Mr Vikiru said.

The Shilling has depreciated from 118 to the US dollar on average in June last year to a new low of 138 yesterday, according to Central Bank of Kenya data.

Kenya Power made a net profit of Sh3.5 billion in the year to June 2022. Over the first half of its 2022-23 financial year, the company reported a loss of Sh1.14 billion.

It attributed the loss to the twin problems of increased foreign exchange losses, and the implementation of the 15 per cent reduction of the electricity tariff.

The Energy and Petroleum Regulatory Authority in April increased electricity prices.

Kenya Power, however, does not expect the new tariff, which will be in place over the last quarter of the financial year, to reverse the damage caused in the first three quarters of the year.

It expects to see the impact of the new tariff over the next year.