The strength of the Kenyan shilling for the most part of the year significantly reduced Kenya Power & Lighting Company’s (KPLC) finance costs, enabling the utility company to record a profit-after-tax of KSh 30.08 billion by June 2024.
- Kenya Power’s loss-after-tax in the FY 2023 stood at KSh 3.19 billion because of magnanimous finance costs worth KSh 24 billion.
- The listed utility stated that 90% of their loan facilities are denominated in foreign currencies and the stability of the Kenyan shilling revaluated incurred debt.
- The shilling’s performance enabled Kenya Power to purchase electricity cheaply and accommodate higher demand.
“While the company’s revenues are billed entirely in Kenya Shillings, power purchase contracts are predominantly denominated in foreign currencies. As a result, the strengthening of the shilling in the second half of the year led to an increase in the cost of sales that was lower than the growth in revenue thus contributing to the higher gross margin,” Kenya Power said.
The listed power utility company connected 447,251 new customers to the power grid in FY2024. Slightly higher demand from commercial and industrial enterprises led to the company using KSh 150.61 billion to buy more electricity units compared to 2023 when it purchased units worth KSh 143.58 billion.
Inflation and provisions of the Finance Act 2023 forced Kenya Power to embrace zero-based budgeting to stabilize their financial margins. The company’s operating costs rose in the FY2024 due to a 92% rise in wheeling charges for the expanding transmission network.
“The expected growth will be supported by a balanced allocation of resources to effectively serve our customers, secure revenues, and leverage high-impact investments that enhance our shareholder value proposition,” Kenya Power stated.
Kenya Power’s aging grid
Kenya Power lost 23.47% of power it purchased due to a rapidly aging transmission grid. Plans to refurbish the system have seen the entry of private investors looking to manage power lines in Kenya. A KSh 95.68 billion deal between Adani Energy Solutions and KETRACO, which operates the high voltage electricity grid and regional power interconnections, came under sharp public criticism due to its secrecy. The deal, which sought to build almost 400 kilometers of new power transmission lines, has been suspended by the High Court pending determination of a case challenging the process.
President William Ruto insisted that the deal, which would see Adani operate the power lines for 30 years, was cheaper and more desirable than pursuing a loan. However, some observers feel that the money Adani has invested in the project will be recouped in more expensive tariffs, which will hike power charges, citing case studies from other countries where Adani Energy operates.
