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KP anticipates Sh8.6b pre-tax profit on new debt collection plans

Friday, December 8th, 2023 07:30 | By
KP anticipates Sh8.6b pre-tax profit on new debt collection plans
Technicians work on collapsed high voltage electricity transmission pylons from the Kiambere hydroelectric dam in Embakasi district of Nairobi, Kenya January 12, 2022. REUTERS/Monicah Mwangi

Kenya Power (KP) expects to reverse its current loss-making position to profitability from next year as it intensifies revenue collection while restructuring foreign-denominated debts.

In its five-year Strategic Plan for the 2023/24 and 2027/28 fiscal years, the power distributor will net a pre-tax profit of Sh8.86 billion in the current year ending June 2024, just seven months away from now.

The company had a pre-tax loss of Sh4.43 billion by the close of the previous year ended June 2023, signalling more aggression to recover previously lost revenues, seal leakages, and dispose of specific assets to shore up its coffers within the current year.

Increase in demand

The profitability is expected not to deviate by any big margin across those five years except in years three and five, when the electric utility projects pre-tax profits to drop to Sh7.63 billion and Sh3.92 billion, respectively.

“KPLC aims at a regular increase of its revenues that is in line with the increase in demand and improved system efficiency as the country moves towards universal coverage and more generally to greater economic development which requires more power,” the utility states in the statement.

The Nairobi Securities Exchange-listed firm is, therefore, expected to continue using debt collectors as part of enforcement measures and improve cash flows.

This will come at a time when businesses and households are battling the high costs of living amid costly energy prices and meagre salaries.

Domestic power consumers pay about Sh28 per unit of electricity, up from Sh26 in December. Electricity debt rose faster to hit Sh35.69 billion in June 2023 due to the combined effects of the depreciation of the local currency against the dollar, high fuel, and the revised tariffs, which took effect on April 2023.

In addition, the customer payment rate declined mainly due to the prevailing economic conditions. But by June 2024, the utility sees these collection efforts as partly helpful in delivering a higher total revenue of Sh218.355 billion before rising year-on-year to hit Sh275.34 billion by June 2028.

Collection efficiency is set to rise to 85 per cent in 2028. “The Strategic Plan will deliver projects and initiatives that strengthen the Company’s competitive advantage, secure its profitability, increase access to electricity, and improve the reliability and efficiency of power supply,” says KP’s CEO Joseph Siror.

KP has already received approval from the Energy and Petroleum Regulatory Authority (Epra) to recover another Sh6.5 billion in revenues it lost when President William Ruto’s government offered a temporary tariff cut extension months after ascending to office.

Due to the depreciation of the Kenya shilling, the utility is structuring its balance sheet since it is finding it costly to repay its loans, most of which are priced in foreign currency and are on concessional terms. KP has already initiated a proposal for the consolidation and conversion of the outstanding on-lent debt book to local currency as the moratorium offered by the government in June 2020 comes to an end. Commercial loans are currently Sh35 billion while on-lent loans stood at Sh70 billion by last June.

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