KenGen’s profit dips to Sh4.6bn on lower sales, higher expenses

Business Editor

Nation Media Group

What you need to know:

KenGen reported an 18.4 per cent drop in net profit in the half year ended December on lower sales and higher expenses.
This came as operating expenses increased six per cent to Sh4.3 billion while sales declined 11.4 per cent to Sh20 billion.
The firm said its performance in the second half will improve due to connection of some of its power plants to the national grid and repair of machine breakdowns at others.

Power producer KenGen reported an 18.4 per cent drop in net profit in the half year ended December, weighed down by lower sales and higher expenses.

The firm’s net profit in the period stood at Sh4.6 billion compared to Sh5.6 billion the year before.

This came as operating expenses increased six per cent to Sh4.3 billion while sales declined 11.4 per cent to Sh20 billion.

The drop in turnover was largely due to absence of steam revenue arrears which stood at Sh1.6 billion the previous year.

“The results for the period were impacted by the decommissioning of Garissa, Lamu and Embakasi gas turbine thermal power plants and non-receipt of revenue from commercial drilling services,” KenGen said in a statement.

KenGen’s “other income” — fees for commercial drilling services — also dropped 47.5 per cent to Sh598 million.

Electricity sales dropped marginally to Sh14.6 billion from Sh14.7 billion.

The company’s finance income more than doubled to Sh632 million from Sh289 million, driven by interest earnings on the Sh6.3 billion it had raised in the rights issue in which the Treasury also converted Sh20.1 billion worth of loans into equity.

“There was improvement in interest income … mainly attributable to investment of funds raised during the rights issue in June 2016. The funds are awaiting the implementation of projects in the pipeline,” KenGen said.

The power producer said its performance in the second half will improve due to connection of some of its power plants to the national grid and repair of machine breakdowns at others.

It added that construction of the 158 megawatt Olkaria V is expected to start in coming weeks.

The company is set to raise another Sh2.3 billion from sale of a 5.33 per cent stake to South African pension fund Public Investment Corporation (PIC), filling the funding gap in last year’s cash call.

The transaction will see the company hit the target of raising Sh28.7 billion.

The company earlier said it was considering taking a loan to raise the Sh2.3 billion shortfall which will now be provided by the South African fund in a deal that will dilute existing shareholders by 5.33 per cent.

It will, for instance, take Treasury’s ownership from the current 73.92 per cent back to the previous 70 per cent.

The government’s stake had risen after a section of shareholders declined to take up 351.2 million shares in the cash call.

Cash from the share sale will boost KenGen’s financial position at a time when it has lined up more capital-intensive power projects.