Power firm reaps benefits of sectoral re-alignment
Kenya Power is set to continue reaping big from its strategic re-alignments and support from the government after it got the nod to bill its customers in US dollars.
The nod by the government coincides with the announcement of a re-bound in its earnings, making a profit of Sh319 million for the half-year period ended December 31, 2003 from a loss of Sh1.1 billion the prior year.
The decision by the power distributor to bill in US dollars is a strategic move that could significantly alleviate the company’s forex-related challenges.
It has previously suffered from a Sh23 billion forex exchange fluctuation impact due to its obligations of about $1 billion (Sh160.75 billion), 70 per cent of which was forex-denominated debt.
By billing in US dollars, KP can mitigate the risks associated with currency fluctuations. This means that the company can stabilise its revenue streams and reduce the impact of forex losses on its financial performance.
Billing strategy
The company had previously seen a Sh16.87 billion revaluation on loans and a Sh5.32 billion revaluation on power purchases due to the weakening of the shilling. With the new billing strategy, such losses could be significantly reduced.
It is also focusing on expanding its customer base as part of its revenue enhancement strategy. Further, the company aims to increase its metered customers to 1.4 million by 2030.
To achieve this, KP has launched the Rapid Results Initiative (RRI) to fast-track meter connections and is leveraging the government’s Last Mile Connectivity Project (LMCP), to connect new customers to the national grid. This strategy has shown promising results, with electricity sales growing by 31 per cent to Sh113.6 billion in the half year to December 2023.
The increase in metered customers will lead to more electricity consumption, thereby generating more revenue for the company. This strategy has already shown promising results.
In the half year to December 2023, Kenya Power recorded a significant growth in revenue, with electricity sales growing by 31 per cent to Sh113.6 billion.
This growth was attributed to increased electricity sales, the implementation of a cost-reflective tariff, and the success of strategic initiatives like the RRI.
To further enhance connectivity, Kenya Power is set to channel Sh92.7 billion into the Last Mile Connectivity project, with the goal of connecting an additional 1.4 million customers to the national grid and thereby increasing sales revenue.
Kenya Power CEO, Joseph Siror, noted while speaking in his office last week that the project has already boosted sales by Sh1.98 billion over the past three years by generating 83.15 GWHrs.
To enhance power stability in the country, KP is undertaking six crucial projects. These projects are designed to stabilize voltage, increase capacity, provide alternative power paths, and support overloaded lines, thereby enhancing the reliability and reach of the power supply.
Overloaded lines
The projects include terminating a 220kV line at Lessos, completing a 220kV line and substations at Ortum and Kitale, constructing a 132kV line between Narok and Bomet, establishing a 23 MVA substation at Bomani, completing 66kV lines at Kimuka substation, and the Lokichar – Lodwar 66kV line project. The total cost of these projects is estimated at Sh14.2 billion.
Siror stated: “These initiatives aim to stabilise voltage, increase capacity, provide alternative power paths, and support overloaded lines, thereby improving the reliability and reach of the power supply.” As of February this year, KP had 9.5 million metered customers, according to Siror.
