High costs return to haunt Kenya Power in 92pc profit wipe out

Kenya Power has announced a 92.1 per cent profit narrowing in the year to June 30, 2019 to Ksh.262 million in a delayed relay of its unaudited results on Wednesday.

The near total wipe out in profitability is attributable in large part to higher non-fuel power purchasing costs which grew by Ksh.18.1 billion to Ksh.70.9 billion in part, from new purchases from the completed Lake Turkana Wind Power (LTWP) project and the 50 megawatt (MW) Garissa solar farm.

The company’s financial costs further expanded by 46.4 per cent to Ksh.10.3 billion as Kenya Power struggled to pull out of short-term commercial borrowing with cash-flow shortfalls and losses from Forex Exchange (FX) adjustments forcing the firm’s hand in the overly expensive short-credit facilities.

Nevertheless, Kenya Power has grown its revenues with electricity sales surging by 17.8 per cent to Ksh.112.4 billion with the company’s recent tariff review and subsequent harmonization pushing up the return from its core business.

Further, the firm’s unit sales rose by 3.4 per cent to 2,202 gigawatt hours (Gwh) from 1298 Gwh in 2018.

Moreover, transmission and distribution costs narrowed by 7.8 per cent to Ksh.41 billion in the period.

The performance by Kenya Power is a near carbon copy of the firm’s struggles for operational efficiencies in recent years with costs growing ahead of revenues to leave the solo electricity distributor on the brink of loss making.

Last year, Kenya Power announced a 64 per cent slide in profits to Ksh.1.9 billion with on the back of a similar rise to power purchasing costs as the firm sort to expand its network reach.

Kenya Power has however restated its 2018 financials to reveal a Ksh.3.3 billion profit after the rebasing of its earnings from fuel costs recharges on Kenyans to Ksh.26.6 billion from an originally recorded sum of Ksh.21.1 billion.

From the lacklustre results, Kenya Power shareholders will miss out on a dividend pay for another year with the companies’ cash generation from operations and cash and cash equivalents sliding to Ksh.26.8 billion and Ksh.5.4 billion.

The firm had already forewarned investors of the impending doom in performance having issued a profit warning in September.

Wednesday’s unaudited results have been issued under the guidance of the Capital Markets Authority (CMA) and ends the wait for the disclosure to invested parties with the firm having delayed its results last year from the lack of audit from a vacant Office of the Auditor General (OAG).