Companies

Corona tax discount boosts KenGen profits to Sh18bn

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KenGen MD Rebecca Miano. FILE PHOTO | NMG

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Summary

  • Electricity generation firm Kengen more than doubled its net profit to Sh18.3 billion in the year ended June 2020 compared to Sh7.8 billion a year earlier on lower corporate taxes introduced to curb the coronavirus pandemic.
  • The 133 percent jump in net profit, boosted by a Sh4.5 billion tax credit, will see the company reward shareholders with dividends of Sh0.3 per share or a total of Sh1.9 billion. This is up from a dividend of Sh0.25 per share paid for the prior year.
  • Total revenue declined to Sh44.1 billion from Sh45.9 billion, mainly due to lower fuel charge.

Electricity generation firm Kengen #ticker:KEGN more than doubled its net profit to Sh18.3 billion in the year ended June 2020 compared to Sh7.8 billion a year earlier on lower corporate taxes introduced to curb the coronavirus pandemic.

The 133 percent jump in net profit, boosted by a Sh4.5 billion tax credit, will see the company reward shareholders with dividends of Sh0.3 per share or a total of Sh1.9 billion. This is up from a dividend of Sh0.25 per share paid for the prior year.

Total revenue declined to Sh44.1 billion from Sh45.9 billion, mainly due to lower fuel charge.

KenGen CEO Rebecca Miano said the corona taxes decreased Kengen’s deferred tax liability by Sh8.1 billion.

“The tax credit was largely due to the impact of the temporary reduction of the corporate tax rate from 30 percent to 25 percent introduced as one of the Covid19 tax relief measures. This tax change led to a decrease in the deferred tax liability by Sh8.1 billion,” Ms Miano said.

Kengen, she noted, recorded a 13.4 percent growth in electricity revenue mainly attributed to the “full operationalisation of our 165 megawatts of Olkaria V geothermal power plant in November 2019 which boosted geothermal production by 14 percent”.

KenGen said electricity demand was partly affected at the second half of the year owing to the restriction of movement measurers to stop the spread of coronavirus.

However demand picked up following the reopening of the economy to peak at 1966 megawatts (mw) on December 11 surpassing levels of demand seen before the pandemic of 1926mw as the economy was reopened.

KenGen controls 64 percent of electricity generation market share with an installed capacity of 1,803mw.

The firm also attributed the growth to the roll-out of the company’s business diversification strategy netting Sh440 million from its two drilling contracts in Ethiopia.

KenGen however saw a spike in the cost of its dollar denominated loans following the shilling depreciation pushing up finance costs by 63 percent from Sh5 billion to Sh8.2 billion.

Completion of Olkaria V geothermal power plant helped the company cut reliance on thermal generators saving on costs while dispatching cheaper geothermal power which boosted electricity sales 11.3percent to Sh39.8 billion.

Reimbursable expenses from use of thermal plants declined 57.9 percent from Sh10.1 billion to Sh4.2 billion cutting the costs for the company in the year that witnessed demand challenges over coronavirus lockdowns on businesses and industry.

Fuel Cost Charge (FCC) levy is influenced by the share of electricity from the costly thermal power.