Kenya Power issues profit warning on forex lossesFriday May 26 2023
Kenya Power has issued a profit warning for the financial year ending June 2023, preparing investors for a drop of at least 25 percent of net profit in the period.
The utility firm which had already posted a net loss of Sh1.1 billion for the half-year ended December 2022 attributes the looming drop to the widening foreign exchange losses.
Read: How to buy wholesale electricity from Kenya Power
Kenya Power chief finance officer Stephen Vikiru made the disclosures on Thursday, offering a glimpse into the impact of the free-falling shilling against the dollar, especially in paying loans and electricity supplies that are dollar-denominated.
The drop is also linked to the impact of the 15 percent cut on electricity retail prices that lasted from January last year to December.
“On a prudence basis, it is necessary to issue the profit warning based on how things stand today, especially with the forex problems,” Mr Vikiru said.
The profit warning means that Kenya Power will not surpass Sh2.63 billion in net profit for the year ending next month.
The utility had recorded a Sh3.5 billion net profit in the year ended June 2022.
The local currency has been weakening against the dollar, moving from an average of Sh118.89 at the start of July last year to close December at 138.3 units on Thursday.
The free-falling shilling has significantly increased the burden of paying commercial loans that are dollar-denominated and also electricity supplied by independent power producers.
The drop has been sustained despite the start of a deal to import fuel on credit in a bid to ease demand on the dollar and prop up the shilling.
The utility is next week expected to pay a dollar-denominated loan which is equivalent to Sh24 billion.
Read: World Bank lines up Sh40bn soft loan for Kenya Power
Kenya Power is also grappling with the likelihood of forgoing some Sh3.5 billion it had committed to surrender under last year’s 15 percent cut on electricity tariffs.
KenGen is instead expected to issue a credit note.
The anticipated drop comes despite the start of higher electricity tariffs that came into force at the start of last month.
Mr Vikiru says that the impact of the higher tariffs would have been significantly felt had they been effected from the start of this year.
The expected drop in profit comes at a time the utility has announced an ambitious plan to spend Sh10 billion from July to revamp its ageing network.
The plan is meant to increase the reliability of the grid and stem an exodus of wealthy customers and big consumers who are turning to alternative sources such as solar and biomass.