Electricity tariffs raise returns Kenya Power into profits

 

Kenya Power has posted a Sh319 million net profit for the six months ended December 2023 on increased electricity sales and an upward review of tariff, lifting it from a loss position.

The utility firm's unaudited results released Friday showed it had emerged from the Sh1.15 billion net loss it posted in the preceding similar period.

Revenue from electricity sales increased by 31.3 percent from Sh86.67 billion to Sh113.55 billion, coming in the period the Nairobi Securities Exchange-listed firm said it connected 225,000 new customers to the grid surpassing its target by 13.87 percent.

“The improved profitability is attributed to increased revenue resulting from increased electricity sales. Additionally, the adoption of a more cost-reflective tariff review in April 2023 as well as the growth in unit sales by 129GWh,” said Kenya Power.

Kenya Power in April last year increased the base consumption charge to Sh12.22 per unit from Sh10 for lifeline consumers whose usage stands at no more than 30 units a month, even as it revised the lifeline threshold from 100 units previously.

Households and consumers whose monthly consumption ranges between 31kWh and 100kWh saw their tariffs increase by 19 percent to Sh26.10 and Sh26.22 respectively.

The increased revenue helped Kenya Power’s operating profit rise 2.6 times to Sh14.45 billion from Sh5.65 billion despite the operating costs rising 9.4 percent to Sh19.7 billion.

Kenya Power said the Sh1.72 billion rise in operating costs was due to higher wheeling charges and increased staff costs as a result of hiring additional staff to reinforce field operations, enhance overall operational efficiency, and improve service to customers.

However, the doubling of finance costs from Sh7.39 billion to Sh15 billion slowed the rise in earnings. Kenya Power attributed the increased finance costs to the rise in unrealised foreign exchange losses on loan revaluations as the shilling shed value against major foreign currencies.

About 90 percent of Kenya Power’s loans are in foreign currency, making it susceptible to movements in local currency. The devaluation of the shilling also increased non-fuel power purchase costs by Sh9.79 billion since about 60 percent of power purchase agreements are denominated in foreign currencies.

Kenya Power managing director Joseph Siror hopes the recent strengthening of the shilling from the lows of 161 against the dollar to under 145 will be sustained to cut the forex losses and also reduce spending on thermal power purchases.

“We are happy to note that the shilling is gaining against the dollar and other major currencies in the current period. We hope that this positive trend continues in the remaining part of the year to ease our forex exposure and enable us to finish the year in a stronger financial position,” said Mr Siror.

Kenya Power remained in a negative working capital position, with the current liabilities of Sh134.1 billion being more than the Sh91.6 billion current assets.

The utility firm has been undergoing restructuring. National Treasury expects the restructuring, supported by the upward review of tariffs, will eventually cut the utility firm’s dependence on exchequer support.

Kenya Power says it is exploring various ways to mitigate the forex exposure impact including restructuring the balance sheet where proceeds from the transfer of part of the transmission line assets to Kenya Electricity Transmission Company will be applied to offset on-lent loans which are entirely denominated in foreign currency.

By PATRICK ALUSHULA