How Kenya Power beat KenGen in profitability

Going by the latest financial disclosures by Kenya’s key energy sector State Corporations, Kenya Power is the more profitable entity in what is a rare fete.

Traditionally, it has been electricity generating company KenGen with the better tidings to its peer- the sole electricity distributor in the country.

During the financial year closing on June 30, 2021, Kenya Power posted at Ksh.1.5 billion net profit trouncing KenGen’s Ksh.1.2 billion in earnings made over the same period.

In doing so, Kenya Power stepped back from a dismal Ksh.939 million loss in June 2020, a first loss in nearly two decades.

Lower costs have been Kenya Power’s saving grace as the company now seemingly faces less pressure following the turnaround.

To start with, the utility company saved in excess of Ksh.2.9 billion from lower provisions on trade and receivables helping cut Kenya Power operating expenses by 17 per cent to Ksh.39.9 billion.

Additionally, Kenya Power saved an estimated Ksh.3.5 billion in interest on loans and overdrafts after partial conversion of overdrafts into term loans.

This means that Kenya Power spent less paying back loans with the conversion lengthening the frequency of both interest payments and redemptions.

Put together, the savings from operations and finance costs help cover a Ksh.6.7 billion tax charge with the balance leaving the utility company still in the profitable zone.

The savings were complemented by an 8.2 per cent growth in revenue to Ksh.144.1 billion.

On its part, KenGen’s near profit wipe out was largely a factor of a hefty Ksh.13.6 billion tax charge which offset a seven per cent growth in pre-tax profit to Ksh.14.8 billion.

Revenue for the generator were up by 4.1 per cent to Ksh.45.9 billion on ongoing revenue diversification while its operating expenses stood at Ksh.12.9 billion having risen from Ksh.10.9 billion on the greater deployment of capital.

KenGen results had a similarity to Kenya Power in trimmed fianance costs which were down by 63 per cent to Ksh.3.1 billion on lower foreign exchange losses in foreign currency denominated loans.

However, between the two, KenGen still the healthier outfit as demonstrated by its declaration of a 30 cents final dividend for the year, to be paid on February 10, 2022 if approved by shareholders at its December 16 Annual General Meeting (AGM).

On its part, Kenya Power continues to battle potential insolvency as demonstrated by a higher count of short-term liabilities to readily available assets.

At the close of the reporting period, Kenya Power current liabilities were twice as large as current assets-Ksh.49.6 billion at Ksh.116.1 billion.

The disparity means Kenya Power cannot meet its short-liabilities today through disposing readily available assets should all its creditors come calling.

Kenya Power which marks its 100th year in business in 2022 is banking on ongoing energy sector reforms to wade off the insolvency ghosts while Kengen expects ongoing revenue diversification efforsts to pay off over the long-term.