The Kenya Power and Lighting Company (KPLC) recorded a net loss of Ksh3.2 billion in the financial year ended June 30, 2023.
In a statement on Thursday, October 26, KPLC Managing Director and CEO Eng. Joseph Siror said the loss resulted from increase in financial costs due weakening of the Kenyan shilling against major international currencies.
According to Eng. Siror, the financial costs rose by 89% from Ksh.12.76 billion to Ksh.24.15 billion while Kenyan shilling depreciated by 19% from Ksh,118 per USD in June 2022 to Ksh.140 per USD in June 2023.
“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 KSh. 3.2 billion,” said Eng. Siror.
Moreover, Dr. Siror said the Company is working on restructuring its loan book to minimize the loan obligation that is dollar-denominated to mitigate the impact of forex exposure on operational performance.
Part of this process involves the transfer of some transmission assets to the Kenya Electricity Transmission Company (KETRACO) to offset the government on-lent loans.
Additionally, the Company will continue to tap into new business growth areas to drive demand for electricity for sustainable growth.
“In this regard, the Company is implementing strategic initiatives to drive the adoption of electric motorization.
The gains from these initiatives will complement other revenue growth and diversification strategies already in place, including implementing the Time-of-Use tariff to encourage energy consumption during off-peak periods and the fibre leasing business,” said Eng. Siror.
KPLC Growth in Operating Profit
However, KPLC recorded a 12% growth in operating profit during the same period, from Ksh.17.1 billion posted during the previous year to Ksh.19.2 billion.
Also, revenue from electricity sales grew by 21% from Ksh.157.3 billion to Ksh.190.9 billion, mainly supported by an expanding customer base.
Consequently, unit sales increased from 9,163 GWh to 9,566 GWh while operating expenses reduced from Ksh.36.9 billion to Ksh.34.9 billion.
“The overall fundamentals remained stable despite the challenging macroeconomic environment that was characterized by a depreciating shilling and an increase in the overall cost of doing business,” said Eng. Joseph Siror.
Furthermore, power purchase costs increased by 22% during the year to Kshs.143.5 billion because of a rise in units purchased to meet the rising demand for electricity.
In line with this increment, the unrealized foreign exchange losses on power purchases increased to Ksh.5.3 billion.
“This increase was primarily a result of the depreciation of the Kenya Shilling against the US Dollar and Euro, the currencies in which most of the power purchase agreements are denominated,” said Siror.
Kenya’s Energy Mix
KPLC explained that the country’s energy mix includes thermal power, whose consumption has been minimized over the years, in favor of cheaper and cleaner sources of energy such as geothermal, hydro, wind and solar.
According to the Company, thermal power is necessary to steady the grid and enhance generation capacity, especially during the drought season when poor rains reduce generation from hydropower plants.
Also Read: KPLC Gives Update on Token Hitch
In the year, the KPLC dispatched less thermal energy due to increased generation from geothermal, wind, and imports from Ethiopia.
“The gains achieved with the dispatch of less thermal energy during the year, which decreased from 1,577GWh to 1,396GWh, were outweighed by the increase in fuel prices, leading to a 6% increase in the fuel power purchase costs, to Kshs. 28 billion,” said Dr. (Eng.) Siror.
Kenya Power Outlook
Going forward, KPLC will sustain the implementation of strategic initiatives to enhance operational and business performance.
In the audited financial results, KPLC Secretary Imelda Bore said the initiatives are aimed at growing sales and revenue, enhancing operational excellence, increasing business efficiency, and ensuring financial sustainability.
“To boost electricity sales, we are implementing a Rapid Results Initiative to connect all pending customers totaling 320,000 in the next three months.
Also Read: We Preached Together-KPLC Boss on Relationship with Ruto
The Company will extend the deployment of smart meters across all customer segments including domestic customers for improved operational efficiency,” said Bore.
Further, the Secretary said KPLC will work with Commercial and Industrial customers to encourage the uptake of Time of Use tariff to drive electricity consumption during off-peak period and support the growth of the manufacturing sector.
She said Kenya Power has commenced bulk metering targeting informal settlement areas as a strategic measure to enhance operational efficiency and improve revenue growth.
In addition, KPLC is also tapping into emerging business growth areas such as e-mobility to bolster our sales and revenues.
“Recognizing that sales growth hinges on adequate and reliable supply, the Company is making strategic grid investments in system reinforcement and expansion projects to enhance reliability of the network,” she said.
Additionally, Bore said the Company is working with the Government and key stakeholders to enhance the generation capacity to meet the growing electricity demand.
