By James Anyanzwa and Reuters

Kenya’s biggest electricity producer, KenGen, posted a 48 per cent increase in annual pre-tax profit to Sh4.56 billion ($60.6 million), as higher prices offset the impact of a severe drought.

The group is heavily reliant on hydroelectric power, which has been hit by a steep drop in water levels this year, following several seasons of poor rains.

"Hydrology this year was the worst we have had in the last 75 years. As a consequence, units sent out declined from 4,818 million kWh last year to 4,339 million kWh this year," the company said in a statement.

"In spite of this, earnings were impacted favourably by the implementing of a new power purchase agreement with Kenya Power and Lighting Company, which yielded a higher average yield of Sh2.42 per kWh compared with Sh2.36 last year.

KenGen said total revenue rose 9.6 per cent to Sh12.7 billion, but earnings per share plunged to Sh0.94 from Sh2.68 last year.

KenGen closed a bond issue earlier this month to raise Sh25 billion, which it plans to use in the expansion of geothermal production facilities by 500 MegaWatts (MW) in four years.

The power utility firm hopes to expand its power generation capacity by 528 MW by 2012 and 1,635 MW between (2013 and 2019).

A thermal plant in Mombasa to generate 120 MW, upgrading of Tana, Masinga and a third unit of Kindaruma dams are to benefit from proceeds of the bond.

The upgrading of closed Masinga dam is expected to increase its capacity by 25 per cent to generate about 90 gigawatt hours of power.

KenGen wants to increase its geothermal power production capacity through an upgrade of the Olkaria Power Project.

The company hopes to ensure it has enough capacity to cope with the projected eight per cent growth in annual power demand.

Kenya has a generating capacity of 1,296 MW, with an effective capacity of 1,204 MW against a system peak demand of 1,071 MW.

Investment in additional generation capacity will not only help the country cope with additional demand, but also the power demand associated with the implementation of Vision 2030.