Companies

KenGen’s no dividend ends near decade of shareholder payouts

KENGEN

KenGen shareholders at a past AGM. PHOTO | SALATON NJAU

Electricity generator KenGen will not pay its shareholders a dividend for the first time since the company went public in 2006, marking a departure from a near decade-long tradition.

The State-controlled power producer declared the dividend drought after its net profit for the year to June dropped 41 per cent to Sh6.7 billion, hurt by the absence of a tax credit the company enjoyed a year ago.

KenGen, which paid its shareholders a dividend of 65 cents per share in 2015 and 40 cents apiece the previous year, is implementing several power projects that it says will inject an additional 706 megawatts (MW) into the grid by 2020.

The projects include 140MW Olkaria V, whose groundbreaking will happen by the end of the year, as well as 80MW Meru Wind Phase 1 and 10MW Ngong Wind Phase 2 whose funding has been secured and procurement is underway.

“To sustain our current growth direction, and in line with our strategy, we continue with our investment plan to drive geothermal and wind generation capacity growth,” KenGen said in a statement.

“In view of the pipeline of projects enumerated above, the board of directors does not recommend payment of dividends for the year.”

KenGen’s zero dividends payout comes after shareholders were in June asked to dig deeper into their pockets to take part in a Sh28.6 billion rights issue which was under-subscribed.

The Treasury — which owns a 70 per cent stake in KenGen — took part in the cash call by converting Sh20.15 billion of on-lent loans advanced to the firm into equity.

READ: KenGen raises Sh26.4 billion in the largest rights issue at Nairobi bourse

KenGen was selling 4.4 billion new shares at Sh6.55 each to existing shareholders at a ratio of two for each share but fell short of its target by Sh2.3 billion.

In the rights issue prospectus released in May, the power firm promised its shareholders a tidy dividend return.

“The company targets a dividend payout ratio of up to one third (33 per cent) of the company’s profit before tax or up to 50 per cent of the company’s profits after tax,” the power firm promised investors.

KenGen, which owns more than 30 power generating plants, closed the fiscal year with an installed capacity of 1,623MW from a mixture of hydro, thermal, geothermal and wind sources.

The power producer’s revenue for the year to June increased 28.8 per cent to Sh38.6 billion buoyed by new geothermal capacity which significantly boosted electricity sales and steam revenue.

KenGen’s operating expenses increased by half a billion shillings to Sh8.94 billion while total assets grew seven per cent to Sh367.2 billion mainly due to investments in new wells.

In the year to June 2015, KenGen’s profits were boosted by a tax credit of Sh2.8 billion following the completion of the 280 MW Olkaria geothermal plants.

The company’s profitability was further negatively impacted by depreciation and amortisation expenses which increased 58 per cent to Sh10.2 billion mainly due to “revaluation of assets and full-year depreciation of Olkaria 280MW.”