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Kenya Power revives plan for dollar-based bills after Sh3.1b loss

Kenya Power employees repair power lines in Kisii town on September 18, 2023. [Sammy Omingo, Standard]

Kenya Power is considering implementing dollar-based billing for its electricity sales after posting a Sh3.19 billion annual loss blamed on currency fluctuations.

The State-owned utility, now under new management, had previously posted a net profit of Sh3.2 billion in the fiscal year ending June 2022 and Sh1.49 billion in the year ending June 2021.

However, the utility's Managing Director Joseph Siror yesterday attributed the latest net loss to higher finance costs resulting from fluctuations in the exchange rate between the dollar and the shilling.

Past efforts by Kenya Power to bill customers based on the shilling's exchange rate against the dollar were rebuffed by the energy regulator, the Energy and Petroleum Regulatory Authority (EPRA).

The utility’s General Manager in charge of Finance Stephen Vikiru, however, told The Standard ahead of yesterday’s investor briefing that the new proposed model that is under consideration could potentially be implemented for large customers, such as exporters.

Kenya is confronting a currency crisis involving the steep decline in the value of the shilling, which is causing a negative ripple effect throughout the economy.

This has seen more traders and corporates shun the troubled shilling in favour of the greenback for day-to-day transactions.

The trend referred to as dollarisation, has seen the use of dollars as a means of exchange to gain fast currency for ordinary transactions like rent payments and other utilities.

The Nairobi Securities Exchange-listed firm yesterday said its performance was negatively impacted by the US dollar and Euro gains against the shilling, which increased its foreign-denominated loan exposures.

Kenya Power's revenue from electricity sales grew by 21 per cent from Sh157.3 billion to Sh190.9 billion, mainly supported by an expanding customer base. This came as operating expenses reduced from Sh36.9 billion in the prior year to Sh34.9 billion in the year.

The utility, however, said finance costs in the period rose significantly by 89 per cent from Sh12.76 billion to Sh24.15 billion mainly driven by the depreciation of the shilling against major international currencies.

“The overall fundamentals remained stable despite the challenging macroeconomic environment that was characterised by a depreciating shilling and an increase in the overall cost of doing business,” said the Kenya Power boss Mr Siror.

In the period under review, the shilling depreciated by 19 per cent from Sh118 per dollar in June 2022 to Sh140 per dollar in June 2023. The dollar is now trading at Sh150.27, according to the Central Bank of Kenya (CBK). Retail dollar buyers are, however, paying upwards of 156 per unit in banking halls.  

“The impact of the currency fluctuation as reflected in the finance costs and cost of power purchase eroded the operational gains recorded during the year, resulting in a net loss of Sh3.2 billion,” said Kenya Power.

“To mitigate the impact of forex exposure on operational performance, the Company is working on restructuring its loan book to minimise the loan obligation that is dollar-denominated,” said Kenya Power.

The company said it would not pay a dividend for the fiscal year that ended on June 30 following the performance.

Kenya Power however added it hopes to improve its financial performance by prioritizing operational efficiency, sales growth, and cost management.

As part of a comprehensive restructuring effort led by the Ruto government, the company intends to transfer valuable assets worth billions of shillings to its sister state-owned entity, Kenya Electricity Transmission Company (Ketraco). 

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