Williamson Tea Plc #ticker:WTK has resolved to start producing its own power in a bid to boost efficiency on its plantations, citing frequent outages on electricity supplied by State-controlled Kenya Power #ticker:KPLC to its factories.
The publicly-traded agricultural firm says unrelenting power blackouts have raised operating costs at some of its tea processing plants, with Western Kenya-based Kaimosi factory being the hardest hit.
“The power supply failures from Kenya Power and Lighting Company Limited have reached epic proportions.
“Kaimosi remains the worst hit but not the only victim,” Williamson chair Ezekiel Wanjama in the firm’s annual report for the year ended March 31.
“The non-delivery of power has forced our hand and during the next financial year to (March) 2020 we shall be considering investing in sustainable, but deliverable power of our own.”
If implemented, Williamson will be joining a raft of other companies which have largely turned to cheaper solar photovoltaic (PV) grid-tied system to supply power for internal use.
They include Kapa Oil Refineries, Oserian Flowers, Africa Logistics Properties, London Distillers, Garden City and Strathmore University.
The plan is part of Williamson’s strategy to return to profitability largely by checking on its cost of production.
The company slipped into a net loss of Sh172.36 million in the 12-months period through March 31, its full-year financial performance statement showed on June 28, from a Sh502.77 million profit a year earlier.
The firm has also hinted at plans to cut administrative costs at its Nairobi hub, a move which could result in layoffs.
“In addition to implementation of effective automation (in tea harvesting), we are mindful of that the costs we carry must add value to the business. The cornerstone to the business is our tea, our factories and manufactured output,” Mr Wanjama, who has chaired the firm’s board since October 2012, says.
“If it is necessary to reduce costs in Nairobi we shall act as required in order to ensure long-term prosperity to the business that we operate.”
While the company has reported reduced pressure emanating from labour disputes which are now usually handled through Kenya Tea Growers Association, it is increasingly facing a new wave of pressure over historical land disputes.
“The populist belief spread by local politicians to their voters that the group should become embroiled in historical issues that have nothing to do with us remains a costly pressure point in terms of human and fiscal capital,” he said.