Extractive and Energy

KenGen weathers prolonged drought to post 34% increase in after tax profits

The Nairobi Securities Exchange listed firm’s net profit rose to Ksh9.1 billion, up from Kshs 6.7 billion over the same period last year

Kenya Electricity Generating Company (KenGen) has recorded a 34 per cent growth in after tax profit for the financial year ended June 30, 2017.

The Nairobi Securities Exchange listed firm’s net profit rose to Ksh9.1 billion, up from Kshs 6.7 billion over the same period last year, buoyed by increased interest income.

The company which produces about 75 per cent of electricity capacity installed in the country, selling its units to Kenya Power and Lighting Company, however recorded a one per cent drop on its electricity revenue which closed at Ksh29.36 billion down from Ksh29.5 billion last year.

The drop has been attributed to “severe drought which affected hydro generation and power evacuation constraints which reduced the dispatch of geothermal power.”

KenGen acting managing director and CEO Rebecca Miano, who unveiled the full year financial results at an investor briefing in Nairobi, attributed the growth to the company’s resilience to grow and sustain business in a difficult environment.

“The impressive results were achieved in an environment characterised by severe drought which affected our hydro generation, and power evacuation constraints which reduced geothermal dispatch,” Miano said.

She said the power evacuation constraints had since been resolved with the completion of the Olkaria-Suswa line, which has enabled more electricity to be dispatched from the Olkaria plants, thus mitigating the impact of low hydro generation due to drought.

The company’s recorded earnings per share grew by 27 per cent, compared to the previous year, which is a positive outcome attributed to efficient power plant operation.

Miano noted that the results were further driven by continued cost discipline and the successful implementation of the company’s revamped Good-to-Great (G2G) strategy, which focuses on delivering 720MW of renewable energy by 2020.

Operating expenses which comprise employee, plant operation and maintenance expenses increased by eight per cent from Kshs 8.9 billion in 2016, to Kshs 9.7 billion in 2017.

This was mainly driven by continued investment in power capacity expansion to support future business and increased operational scope and capacity building.

Interest income registered a growth of 123 per cent, mainly attributable to earnings from investment of funds raised during the Rights Issue awaiting full implementation of earmarked projects.

Miano said the results were also impacted by lower income from steam revenue compared to previous year,  due to arrears of Kshs 1.6 billion earned last year and lack of income from commercial drilling services compared to the previous year.

Under the revamped G2G strategy, KenGen is developing several renewable energy projects including Olkaria V 158MW whose ground breaking was undertaken during the second half of the year and is expected to be completed by 2019.

Other projects at different stages of procurement are Olkaria I Unit 6, 70MW, Ngong Wind Phase III 10MW, Olkaria VI PPP 140MW, Olkaria I Rehabilitation 50MW, Olkaria I AU and  IV topping plant 40MW, Modular wellheads 50MW, Meru Wind Farm 80MW among others.

Miano said once the projects were completed, the company would be able to increase its earnings and deal with weather challenges faced by hydro power generation during droughts.

In March 2017, KenGen’s rights issue achieved 100 per cent success following the issuance of the remaining Rights totalling 351 million shares to the Public Investment Corporation (PIC) of South Africa.

The issue raised Ksh2.3 billion which improved its equity base and provided the much-needed headroom to support future growth.

By Martin Mwita

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