KenGen ups profit to Sh9b despite 8pc revenue drop

An engineer with KenGen near a geothermal well in Olkaria Naivasha which is home to over 5,000mw of geothermal power |Photo: Antony Gitonga

KenGen has gained from investing the proceeds of a rights issue concluded in March to post a Sh9.1 billion profit for the year to June 2017.

The power generator said the 34 per cent profit growth over the Sh6.7 billion made last year was despite an eight per cent drop to Sh35.4 billion compared to Sh38.6 billion in 2016.

Revenue decline was from its diversified areas of business, including sale of steam and provision of well drilling services to competing firms that are looking to generate electricity using geothermal steam.

The firm said it expected to earn more than Sh3 billion from sale of steam and provision of well drilling services in the course of 2017.

The decline was, however, offset by growth in interest income, which increased by 123 per cent to Sh1.24 billion following the investment of money raised from the rights issue, as the company waits for the use of the proceeds in the implementation of planned projects.

Severe drought

“The results were achieved in an environment characterised by severe drought, which affected our hydro generation, and power evacuation constraints, which reduced geothermal dispatch,” said KenGen Acting Chief Executive Rebecca Miano at an investor briefing yesterday.

Revenues were also affected by the drought that has persisted over the past two years, affecting generation from the hydroelectricity dams as well as transmission constraints in evacuating geothermal power from Olkaria, Naivasha.

The company’s electricity revenue decreased by one per cent to Sh29.4 billion in 2017 from Sh29.5 billion in 2016 due to the drought.

KenGen also said it would not pay dividends for the year. This is the second year in a row that shareholders will go without dividends, with the firm saying it is putting the money back into the business.

It has a policy where it pays 50 per cent of the profit after tax as dividend to shareholders.

The company's finance and ICT director, John Mudany, said the firm would this year invest the money in some of the geothermal projects that are in progress, as was the case in 2016.

The projects include the 158-megawatt (MW) Olkaria V plant, whose construction started in March this year and is scheduled to start generating electricity in 2019.

“Our dividend policy remains. But we carried out an evaluation and decided to reinvest the money in fast-tracking some of the projects without going to financiers again,” said Mr Mudany.

“So in addition to money that we have received from the lenders, we will be putting into the business what we would have paid as dividends,” he said.

Additionally, the company plans to spend Sh200 billion over the next five years in putting up new wind and geothermal power plants. The investments will increase KenGen’s generating capacity from 1,631MW to 2,352MW by 2022.

[email protected]