Kenya Power’s fuel costs have nearly doubled, cutting the company’s profits by a third to Sh2.9 billion in six months ended December 2017.
The firm posted a profit of Sh4.2 billion in a similar period in 2016 but despite revenue growing by 15 per cent to Sh67 billion, its earnings were weighed down by high operating costs.
Total operating costs shot up by Sh8.75 billion to Sh59.3 billion as a result of a Sh6 billion (97.4 per cent) surge in fuel costs.
Managing Director Kenneth Tarus said fuel costs jumped to Sh12.3 billion from the previous expenditure of Sh6.2 billion as the dry season forced the company to turn more to thermal generation.
“There was increased usage of thermal generation as a result of poor hydrology. The units generated from thermal plants increased by 416 Gigawatt hours (GWh), or 47 per cent, from 885 GWh the previous year to 1,301 GWh,” he said.
High operational and maintenance costs on expanded electricity network facilities also saw transmission and distribution costs rise by five per cent.
The firm purchased 4,882 GWh, higher by 96 GWh when compared to the previous period. This cost the firm Sh27.4 billion.
Its finance costs rose by 42.8 per cent to Sh3.3 billion, with Mr Tarus attributing the increase to short-term borrowing. The firm’s books point to a constraint in servicing short-term liabilities.
Working capital, which refers to the difference between current assets and current liabilities, is in negative zone.
Liabilities expected to mature within 12 months have outstripped the assets available to service such obligations by Sh15.5 billion. This has widened from December 2016 when the gap was Sh7.2 billion.
The performance setback comes even as the firm battles a class action suit filed by lawyer Apollo Mboya over backdated customer bills worth Sh10.1 billion.
Going forward, Tarus is counting on the Time of Use tarrif - which bills large customers less for off-peak power usage - to grow revenue.
He hopes manufacturers will increase consumption of power through the preferential charges.