KenGen #ticker:KEGN is earning substantial interest income from money it would have used to pay banks after the power producer got loan repayment moratoriums in the wake of the Covid-19 pandemic.
The company said its finance income rose by Sh180 million or 22 percent to Sh1.009 billion in the six months to December 2021 on the back of holding higher bank deposits that would have otherwise been eaten up by loan repayments.
It also earned interest on cash held for ongoing projects, helping protect its bottom line in a period when the end of the Covid corporate tax incentives and capital allowances for its geothermal plant in Olkaria V plant ate into its gross earnings.
“The interest was earned on increased cash balances held for ongoing projects and loans whose repayment has been rescheduled as part of Covid-19 relief programme by financing partners,” said KenGen in its half-year results update.
The firm had also booked a gain of Sh449 million in finance income to Sh1.88 billion in the year ended June 2021 based on the loan repayment moratorium, which was introduced by the Central Bank of Kenya (CBK) in March 2020 to shield borrowers from financial distress after the Covid-19 pandemic hit the country.
The emergency measure ended in March 2021, with lenders having restructured Sh1.7 trillion worth of loans, accounting for 57 percent of the banking sector’s gross loans.
KenGen was among the borrowers who continued to enjoy the softer repayment terms well beyond the end of the period the emergency measure was in place.
It also indicates that it was not just small businesses and individuals who took advantage of the loan repayment moratorium, but also large corporates which hold billions in cash reserves.
KenGen also saw its finance costs fall by 27 percent or Sh334 million to Sh897 million in the six-month period, attributing it to a reduction in loan balances.
The company’s net profit for the period rose by 1.3 percent to Sh5.12 billion.
Revenue rose by 14 percent to Sh24.8 billion, while costs rose by eight percent to Sh14.13 billion, attributed to increased business activities in Ethiopia where the company has been drilling geothermal wells for Ethiopia Electric Power (EEP) company.
The firm also incurred higher steam costs, which were up by 8.3 percent or Sh127 million to Sh1.65 billion, due to increased dispatch from Olkaria geothermal plants.