KenGen half-year profit drops 9pc to Sh2.96 billion on weak shilling

KenGen's Ol-Karia IV power plant as seen from a vantage point. File Photo | AFP

Kenya Electricity Generating Company (KenGen) net profit for the half year ended December 2023 declined by 9.2 percent to Sh2.96 billion on increased foreign exchange losses.

The power generator said Thursday its net earnings had retreated from Sh3.26 billion it posted in the preceding similar period despite net revenue rising by 7.8 percent to Sh24.7 billion from Sh22.9 billion.

The drop in net earnings was on the back of operating expenses increasing 16.4 percent to Sh10.1 billion and the tax bill going up 25.7 percent to Sh1.87 billion — being a faster jump than the 1.8 percent growth in pre-tax earnings to Sh4.83 billion.

KenGen said the rise in operating expenses was a result of higher plant operating and maintenance costs in the period the shilling shed about 11.3 percent of its value against the US dollar. The weak shilling also contributed to the higher tax expense.

“The tax expense increased … due to increase in unrealised foreign exchange losses owing to the depreciation of Kenya shilling that are disallowable for tax purposes, among others. Consequently, profit after tax declined by 9.2 percent,” said KenGen in a commentary accompanying the financial results.

KenGen’s finance income rose by 82.4 percent to Sh1.87 billion from Sh1.03 billion during the review period, helping soften the fall in the bottom line. The increased finance income was linked to increased return on cash investments.

More rainfall helped the Nairobi Securities Exchange-listed firm cut reimbursable fuel and water costs by 16.1 percent to Sh3.8 billion from Sh4.53 billion owing to increased hydropower generation.

The firm says it increased hydropower by seven percent and cut thermal generation by 3.5 percent to lower its spending on fuel.

However, the power generator’s finance costs —the cost, interest, and other charges involved in the borrowing of money— rose by 27.2 percent from Sh1.17 billion to Sh1.49 billion.

KenGen is betting on increased geothermal power generation and uptake to the national grid in line with growing demand to grow its sales.

It is for instance continuing with the rehabilitation of the 41-year-old 45 megawatts (MW) Olkaria I geothermal power plant to boost the generation capacity to 63MW.

The firm says the implementation of Olkaria I additional units 4 and 5 and Olkaria IV uprating project to increase their combined capacity from the current 300MW to 340MW is also in progress and is expected to be completed by the end of 2026.

KeGen is also rebuilding the Gogo hydropower plant from the current 2MW to 8.6MW. It has also secured funding for the 42.5MW Seven Forks Solar PV project.

“The timely delivery (of these projects) is key in ensuring reliability of power supply in the country while growing our business for continued shareholder value creation,” said KenGen.

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