Kenya Power to pay dividend despite cash flow hitches

Kenya Power Managing Director Ken Tarus during an investor briefing in Nairobi. [Willis Awandu, Standard]

Kenya Power may struggle to meet its short-term obligations after it sunk into negative working capital of Sh9.97 billion despite posting a marginal rise in profits.

The firm, which recorded two million new customers in the financial year ending June 30, also had a Sh1.2 billion negative cash flow in its books.

However, despite the cash flow problems, Kenya Power Managing Director Ken Tarus said the company would pay a dividend of Sh0.50 per ordinary share come January 2018.

During an investor briefing yesterday, Dr Tarus downplayed fears over the power distributor’s financial health, saying the firm has diversified its revenue streams.

“It is true that we took an overdraft facility in March this year from a local commercial bank for our working capital. We took the best rates available,” he said.

“Despite the negative cash flow, there should be no worry on how the dividend will be paid or how the overdraft will be financed because we have diversified to other revenue streams apart from electricity payments.”

The company said it is currently in the process of restructuring its debt to bring the levels lower, with further revenues expected to come from the nascent fibre optic business that the company is trying to develop.

In the period under review, Kenya Power spent Sh5.7 billion on servicing loans.

During the financial year, the firm borrowed $500,000 (Sh51.5 million) from the World Bank to help it retire some of its more expensive debts from commercial banks as part of its long-term debt restructuring plan.

Bring down

“We still intend to continue striving to bring our debt levels down, especially from new revenue from fibre optic business,” said Tarus.

In the financial report, finance income went down 21 times from Sh965 million in June 2016 to Sh46 million in 2017.

That was as a result of reduced bank balances, which Tarus said were a result of the company reinvesting some of its revenue in the power network instead of holding the money in the bank.

“We ploughed back Sh14 billion as reinvestment in the network so that we can realise some long-term revenue instead of holding it in a bank, and that is why our finance income went down,” he said.

He also revealed that the power firm has received Sh13 billion from the China Exim Bank for the Nairobi underground cabling project.

The power firm’s customer satisfaction level for the period under review also went down from 68.4 per cent to 67.8 per cent.