Kenya Power issues profit warning, blames COVID-19

Electricity distributor Kenya Power has issued a warning indicating its earnings for the year closing on June 30 will be lower than those previously recorded.

In its cautionary statement issued Tuesday, the publicly listed firm says the ensuing pandemic has watered down operations leading to a slow growth in electricity sales.

“The COVID-19 pandemic has adversely affected our business operations leading to slow growth in electricity sales and an increasing in financing costs resulting in reduced earnings,” the board of Kenya Power noted.

However, save for the pandemic, the company has continued to run into widened overhead costs to dwarf profitability in recent years — a testament to growing operational inefficiencies.

For instance, Kenya Power saw a near profit wipe out in the year ending June 30, 2019 as earnings dipped by 92.1 percent to Ksh.262 million in the unaudited trading results.

The near total wipe out in profitability was 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.

Kenya Power’s financial costs further expanded by 46.4 per cent to Ksh.10.3 billion as the company 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.

The fresh cautionary statement to earnings follow a similar profit warning issued in September 2019.

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

The trend in thinning earnings continued in the half year period as Kenya Power reported another 72.3 percent drop in profit over a six months period closing on December 31 2019.

The lesser earnings by Kenya’s solo electricity distributor has seen the company’s share price at the Nairobi Securities Exchange take a battering in recent years.

Kenya Power currently trades at Ksh.2.37 per share and below its Initial Public Offer (IPO) price of Ksh.2.50 in 1954.