Analysts predict increased revenue for the energy-producing company, Kengen, in the near term. The company has recently been involved in ambitious capacity expansion initiatives that are expected to boost its revenues.
Genghis Capital analysts say that the 165MW Olkaria V connected to the grid in 2019, the upcoming 83 MW Olkaria unit 6 geothermal plant, and the 140MW Olkaria VI power plant under construction are some of the promising initiatives by the company. The investments company has a buy recommendation on the KenGen stock with a target price of KSh 7.11 per share.
Besides the energy capacity expansion initiatives, Kengen is also undertaking drilling projects in neighboring Ethiopia and South Sudan and is set to earn KSh12.5 billion from the projects according to research by Genghis Capital.
In November 2020, Kengen revealed plans to sell power directly to large power consumers, a move that could add significant revenue to the energy company once it is approved.
“We expect the 33% dividend policy to be sustained on the back of income growth from the capacity expansion initiatives and the additional non-electricity revenue channels,” says Genghis Capital.
Nonetheless, Genghis warns about the single buyer risk whereby Kenya Power is the only buyer of Kengen’s energy. Kenya power is experiencing financial challenges which threaten to negatively impact Kengen’s financials.