Kenya Power recorded a 12 per cent growth in operating profit during the financial year ended June 30, 2023, from Ksh17.1 billion posted during the previous year to Ksh19.2 billion.
Revenue from electricity sales grew by 21 per cent from Ksh157.3 billion to Ksh190.9 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 per cent expansion in consumption within the commercial and industrial customer segments.
In the period under review, operating expenses were reduced from Ksh36.9 billion to Ksh34.9 billion, owing to deliberate efforts by the company to minimize costs as part of its strategic initiatives to accelerate performance.
“The overall fundamentals remained stable despite the challenging macroeconomic environment that was characterized by a depreciating shilling and an increase in the overall cost of doing business,” stated Kenya Power’s Managing Director Joseph Siror.
Power purchase costs increased by 22 per cent during the year to Ksh143.5 billion due to a rise in units purchased to meet the rising demand for electricity.
In line with this increment, the unrealized foreign exchange losses on power purchases increased to Ksh5.3 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 minimized 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,” stated Siror.
Additionally, finance costs rose significantly by 89 per cent from Ksh12.76 billion to Ksh24.15 billion mainly driven by the depreciation of the Kenya shilling against major international currencies.
In the period, the Kenya Shilling depreciated by 19 per cent from Ksh118 per USD in June 2022 to Ksh140 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 Ksh3.2 billion.
To mitigate the impact of forex exposure on operational performance, the Company is working on restructuring its loan book to minimize 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 motorization. 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.
FULL STATEMENT FROM KENYA POWER
