Perennial loss making parastatal, Kenya Power has plunged further into deeper financial woes under the leadership of Managing Director Engineer Joseph Siror to post a Sh3.19 billion net loss for the year ending in June 2023.
The listed state-owned utility had posted Sh3.2 billion in net profit the previous year.
In what manifest bleak future for the utility company, in 2020, the Auditor General Nancy Gathungu warned in her that KPLC could be on its deathbed.
In the audit summary for the year ending June 30, 2020, the company recorded a staggering Sh7 billion loss before tax. This, against a pre-tax profit of a meagre Sh333.6 million in 2019, states the report.
It also reveals that the company’s current liabilities of Sh117.5 billion far exceed its current Sh42.6 billion assets by a whopping 74.8 billion as at June 30, 2020.
“The company’s current liabilities of Sh117,475,761,000 exceeded its current assets of Sh42,626,939,000 by Sh74,848,822,000 resulting to negative working capital, and a current ratio of 0.361:1 for various loans, which was below the current ratio of 1:1 threshold set out in the respective loan covenants. Consequently, the management is in breach of the regulation.” The report read in part.
Siro has attributed the latest performance that saw Kenya Power return to lossmaking to high finance costs owing to fluctuations in the exchange rate between the dollar and the shilling.
“The overall fundamentals remained stable despite the challenging macroeconomic environment that was characterised by a depreciating shilling and an increase in the overall cost of doing business.” Siror said in a statement.
The state-owned utility, now under new management, had previously posted a net profit of Sh3.2 billion in the fiscal year ending June 2022 and Sh1.49 billion in the year ending June 2021.
Kenya Power’s revenue from electricity sales grew by 21 per cent from Sh157.3 billion to Sh190.9 billion, mainly supported by an expanding customer base.
This came as operating expenses reduced from Sh36.9 billion in the prior year to Sh34.9 billion in the year.
The utility however said finance costs rose significantly by 89 per cent from Sh12.76 billion to Sh24.15 billion mainly driven by the depreciation of the Kenya shilling against major international currencies.
“The impact of the currency fluctuation as reflected in the finance costs and cost of power purchase eroded the operational gains recorded during the year, resulting in a net loss of Sh3.2 billion,” said Kenya Power.
“To mitigate the impact of forex exposure on operational performance, the Company is working on restructuring its loan book to minimise the loan obligation that is dollar-denominated.” Kenya Power said.
The company said it would not pay a dividend for the fiscal year that ended on June 30, following the performance
In December 2022, Kenya Power made a loss of Sh3.66 billion following a nine-month government-backed electricity subsidy plan that was aimed at cushioning consumers from high energy bills.
The government kept electricity prices constant between December 2021 year and September 2022 to prevent an increase in power costs pushed by high fuel and currency fluctuation costs to appease Kenyans ahead of the August polls amid a high cost of living.
The Energy and Petroleum Regulatory Authority (Epra) kept the fuel cost charge (FCC) and foreign exchange fluctuation adjustment rate (Ferfa), which are adjusted monthly to cater to changes in the market cost of fuel and forex, unchanged during the period.
The fuel charges are collected by the company and paid to KenGen and independent power producers (IPPs), while the forex adjustment charge cushions the company as it pays for its foreign debt, electricity purchases, and other costs in foreign currency.
Kenya Power’s financial statements for the fiscal year to June 2022 show the firm received revenues amounting to Sh7.3 billion in forex adjustment charges and Sh24.4 billion in fuel cost charges during the period, but incurred costs of Sh9 billion and Sh26.3 billion on the two components respectively.
This saw the company spend Sh3.66 billion more to plug the disparity in the earnings from customers.
“Management has indicated that the variance was due to the actual recovery rates approved by Epra for billing to customers, being lower than the actual rates applied at the point of purchasing power from the producers,” said Auditor-General Nancy Gathungu.
Kenya Power however braved the costs to more than double its profit after tax from Sh1.5 billion to Sh3.5 billion during the period. This marked the second financial year in a row in which the company recorded a profit after moving from loss-making territory in 2021.
Immediate former President Uhuru Kenyatta introduced the subsidy on electricity among other subsidies to pacify the masses ahead of the August general elections.
This was in addition to a subsidy on fuel that helped prevent a sharp increase in the price of the commodity following a surge in global crude oil prices.