Kenya Power posts profit drop second year in succession

Closing the tap on new investments has not helped Kenya Power #ticker:KPLC slow down the listed State firm’s decline in profits as the firm warned investors yesterday that its net earnings will drop significantly for the second year running.

The utility company has issued a profit warning, saying that profits for the year ending June 2019 will be more than 25 percent lower than the Sh1.92 billion after-tax profit posted in the financial year ended June 2018.

This means that Kenya Power expects to post a net profit of Sh1.44 billion at most for the full year to June 2019.

Acting Managing Director Jared Othieno said the performance was tied to costs related to electricity generation from renewable energy as alternatives to thermal power which will pay dividends in the future on cleaner and cheaper power.

“The drop in profits is attributed to among others, an increase in non-fuel costs in line with the company’s long term strategy to grow cheaper and cleaner renewable energy,” he said in a public notice.

The profit warning comes despite the company indicating that its revenue for 2019 has improved compared to last year.

“The revenues have grown. However the non-fuel costs have grown by a higher margin. This is as a result of a tariff delay and structure. The electricity revenues have however substantially increased as indicated in half-year results,” the firm added in response to Business Daily’s queries on its performance yesterday.

Last year Kenya power issued a similar warning and the shock decline was up to 63.7 percent from the Sh5.3 billion posted in 2017.

This saw Kenya Power slide into technical insolvency as at June 2018, where current assets stood at Sh54 billion less than current liabilities of Sh106 billion resulting in negative working capital of Sh51 billion.