Kenya Power’s operating profit up 12 pc to Kes19.2 billion

By Monica MUEMA

Kenya Power Thursday announced a 12% growth in operating profit during the financial year ended 30th June 2023, from KShs.17.1 billion posted during the previous year to KShs.19.2 billion.

Revenue from electricity sales grew by 21% from KShs157.3 billion to KShs.190.9 billion, mainly supported by an expanding customer base.

Consequently, unit sales increased from 9,163 GWh to 9,566 GWh, mainly driven by a 5.9% expansion in consumption within the commercial and industrial customer segments.

In the period under review, operating expenses reduced from KShs.36.9 billion to KShs.34.9 billion, owing to deliberate efforts by the company to minimise costs as part of its strategic initiatives to accelerate performance.

“The overall fundamentals remained stable despite the challenging macroeconomic environment that was characterised by a depreciating shilling and an increase in the overall cost of doing business,” said Kenya Power’s Managing Director and CEO Dr. (Eng.) Joseph Siror.

Power purchase costs increased by 22% during the year to KShs.143.5 billion as a result of a rise in units purchased to meet the rising demand for electricity.

In line with this increment, the unrealised foreign exchange losses on power purchases increased to KShs.5.3 billion. This increase was primarily a result of the depreciation of the Kenya Shilling against the US Dollar and Euro, the currencies in which most of the power purchase agreements are denominated.

The country’s energy mix includes thermal power, whose consumption has been minimised over the years, in favour of cheaper and cleaner sources of energy such as geothermal, hydro, wind and solar.

Thermal power is necessary to steady the grid and enhance generation capacity, especially during the drought season when poor rains reduce generation from hydropower plants. In the year, the Company dispatched less thermal energy mainly due to increased generation from geothermal, wind, and imports from Ethiopia.

“The gains achieved with the dispatch of less thermal energy during the year, which decreased from 1,577GWh to 1,396GWh, were outweighed by the increase in fuel prices, leading to a 6% increase in the fuel power purchase costs, to KShs. 28 billion,” said Dr. (Eng.) Siror.

Additionally, finance costs rose significantly by 89% from KShs.12.76 billion to KShs.24.15 billion mainly driven by the depreciation of the Kenya shilling against major international currencies.

In the period, the Kenya Shilling depreciated by 19% from KShs.118 per USD in June 2022 to KShs.140 per USD in June 2023.

The impact of the currency fluctuation as reflected in the finance costs and cost of power purchase eroded the operational gains recorded during the year, resulting in a net loss of KShs 3.2 billion.

To mitigate the impact of forex exposure on operational performance, the Company is working on restructuring its loan book to minimise the loan obligation that is dollar-denominated.

Part of this process involves the transfer of some transmission assets to the Kenya Electricity Transmission Company (KETRACO) to offset the government on-lent loans.

Additionally, the Company will continue to tap into new business growth areas to drive demand for electricity for sustainable growth.

“In this regard, the Company is implementing strategic initiatives to drive the adoption of electric motorisation.

The gains from these initiatives will complement other revenue growth and diversification strategies already in place, including implementing the Time-of-Use tariff to encourage energy consumption during off-peak periods and the fibre leasing business,” said Siror.