KenGen half year profit dips on higher costs

KenGen Geothermal Plaza offices in Naivasha. [Jonah Onyango, Standard]

Kenya Electricity Generating Company (KenGen) has reported a drop in profit for the half year to December 2022, which it attributed to higher operating costs.

The power producer said its profit after tax dropped marginally to Sh3.26 billion in the six months from Sh3.37 billion over a similar half in 2021.

Performance was affected by an increase in depreciation expense following a revaluation of assets, addition of Olkaria One Unit 6 and an increase in insurance costs.

Operating costs increased to Sh18.1 billion from Sh15.64 billion in 2021.

KenGen also said there was an increase in finance costs as it resumed normal repayment of loans following the end of relief that lenders had offered the firm in the wake of the Covid-19 pandemic.

"Finance costs rose from Sh897 million to Sh1.17 billion owing to the expiry of a moratorium on some of the borrowings as part of Covid-19 relief measures by financiers," said the firm when it released the half-year results yesterday.

The majority State-owned power producer said its revenue grew 11 per cent to Sh27.5 billion for the six months ending December 31, 2022, from Sh24.7 billion in 2021.

This was on account of higher energy sales due to increased geothermal production capacity, with the recently commissioned 86 megawatt (MW) Olkaria One Unit 6 geothermal power plant leading to growth in electricity sales from 4,006-gigawatt hours (GWhs) in 2021 to 4,200GWhs in the period ending December 2022.

The new plant, the firm said, has helped absorb shocks caused by the prolonged drought, one of the longest in recent history, which has affected KenGen's hydro generation capacity due to low water levels.

It enabled the country cope with increased power demand, with the national peak demand rising 5.6 per cent from 2,036MW to 2,149MW during the period under review.

"In previous years, we would be having serious scenarios of power rationing affecting the entire country at a time like now when the rains have failed," said KenGen acting Chief Executive Abraham Serem.

He saidt the company's fundamentals were strong enough to support business growth into the future, adding that the growth in revenue was a result of the company's investment in renewable energy sources, particularly geothermal power.

"Thanks to our geothermal-led strategy and investments in geothermal development over the years, we have been able to save the country from scenarios of power rationing as was the case in earlier years, and we are confident that this growth will remain as we continue to work on stabilising the national grid," said Serem.

The NSE-listed company plans to redevelop the 40-year-old 45MW Olkaria I geothermal power plant to boost its capacity to 63MW.

The plan also includes upgrading of Olkaria I Additional Units 4 and 5 and Olkaria IV from the current combined 300MW to 340MW.

"We remain focused on our strategic initiatives, which include diversification of our revenue streams, innovation and cost optimisation," Serem said.

"Today, our electricity is the most competitively priced and this has continued to cushion Kenyans from rising power prices."