Higher taxation lowers KenGen’s net profit to Sh6.7 billion

The Kenya Electricity Generating Company (KenGen) has reported a 41 per cent drop in net profit for the financial year ending June 30, 2016.

The power producer reported a Sh6.7 billion profit after tax during the year, a dip from Sh11.5 billion realised during 2014/2015 financial year. However, its profit before tax rose 30 per cent to Sh11.2 billion during the year under review, from Sh8.6 billion in the 2014/15 financial year.

The drop in profit after tax was attributed to an increase in the amount of taxation paid during the year. The firm got a tax break in 2014/15 after commissioning power plants in its geothermal fields at Olkaria in Naivasha.

“Profit after tax for the year declined by 41 per cent... due to tax charge for the year compared to tax credit the previous year. Last year, the company benefited from tax allowances following the completion of Olkaria 280MW plants,” said KenGen Chief Executive Albert Mugo in a statement Thursday.

The firm paid Sh4.5 billion in taxes compared to Sh2.8 billion it received as tax credit in the 2014/15 financial year. The National Treasury offers tax incentives in a bid to encourage companies invest in heavy machinery, manufacturing plants and other production infrastructure. Companies then make tax credit and allowance claims once these plants are operational.

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Isolated thermal plants

Following the drop in the profit after tax for the year, the firm will not be paying dividends to shareholders. Revenue grew 29 per cent to Sh38.6 billion from Sh29.9 billion in the previous year. The company attributed the growth in revenue to increased geothermal capacity and a diversification of its revenue streams to include hiring out its equipment and services.

During the year, the company reduced the amount of electricity generated using the costly diesel-fired thermal generators, two of which were shut down. It also increased its installed capacity after bringing geothermal plants online.

“We added 15MW well-head power plants to our fleet bringing our total installed capacity to 1,623MW. However, the increase was partly offset by the decommissioning of a total of 9MW at our two isolated thermal plants of Garissa and Lamu,” said Mugo.

“We continue with our investments plan to drive geothermal and wind capacity growth. KenGen’s current project pipeline, when implemented will deliver an additional 706MW by 2020.”

Among the projects that are in pipeline include 140MW Olkaria V, 70MW Olkaria I unit 6, 80MW Meru Wind and 10MW Ngong Wind phase III. The firm said it has secured financing for many of these projects.