After more than a year of waiting for the auditor-general to clear its financial results, Kenya Power has reported a 91 per cent plunge in profits after tax for the year ended June 30, 2019.
The utility service provider said its profits after tax dropped to Sh262 million from Sh3.2 billion.
The results were delayed due to the absence a substantive auditor-general.
It finally released its financial statements to the Nairobi Securities Exchange (NSE) on Monday having been cleared by the new Auditor-General Nancy Gathungu.
The Kenya Power board blamed the drop in profitability to an increase in non-fuel power purchase costs, commissioning of two power plants, and a surge in finance costs due to short-term borrowing.
Non-fuel power purchase costs shot up by Sh18 billion from Sh52.7 billion to Sh70.8 billion following the commissioning of the two power plants with a combined generation capacity of 360MW.
In addition, finance costs rose by Sh3.2 billion due to increased levels of short-term borrowing and foreign exchange losses.
A company in financial stress usually resorts to short-term borrowing, which is often more expensive and comes with more stringent terms.
This saw its finance costs jump by 46.4 per cent from Sh7 billion to Sh10.3 billion as it fought to bridge cash flow shortfalls and unrealised foreign exchange losses.
Despite the drop in bottom line, the company recorded an increase in revenues, which means increase in costs are its biggest Achilles heel.
Revenue from electricity sales grew by Sh16.9 billion from Sh95.4 billion to Sh112.4 billion. This represents a 17.8 per cent increase.
"The rise in revenue was partly attributed to a tariff review at the beginning of the year prior to the subsequent tariff harmonisation that lowered rates for small commercial customers and broadened life-line tariff for domestic customers," Kenya Power said in the statement.
Expanding customer base
It added that the growth in revenues was also supported by a 3.4 per cent increase in unit sales from 7,905 GWh to 8,174 GWh owing to an expanding customer base.
Kenya Power said the fuel cost decreased by Sh5.3 billion to Sh18.2 billion due to an improved energy mix due to less utilisation of expensive thermal plants in the year.
Units generated from thermal plants decreased by 904 GWh from 2,202 GWh the previous year to 1,298 GWh.
On its part, transmission and distribution costs also decreased by 7.9 per cent to Sh41 billion.
The directors of Kenya Power did not recommend the payment of a dividend to its shareholders.