Kenya’s sole power distributor recently made headlines after declaring an interim dividend of Ksh 0.20 per share for the first time in nine years. Kenya Power's general manager for finance Stephen Vikiru speaks to CFO East Africa about the milestone, which marks a major turnaround for the utility.
Over the years, Kenya Power has had its fair share of challenges, which have stood in the way of efforts to grow its revenue. The half year ending December 2023 saw the company recover from a Ksh 1.1 billion loss to report a profit of Ksh 319 million after tax. Its Ksh 9.97 billion profit in the half year ending December 2024 represents a whopping 3025 percent increase. The company attributes this to a more reliable network, which has resulted in higher electricity consumption and increased unit sales. Kenya Power also revealed that it had improved its timelines for resolving power outages and experienced an increase in new connections during that period.
According to Kenya Power's general manager for finance Stephen Vikiru, the strengthening of the Kenyan shilling against the dollar also played a role in reducing the utility’s costs.
“Finance cost, especially relating to unrealised forex losses, has been a major factor in the reported earnings of the organisation. The high quantum of forex loans at over 90 percent is a major contributing factor. In the short to medium term, we expect the currency to remain stable and thus not distort the business performance. In the long-term, however, we are focusing on reducing the quantum of exposure by aligning any future borrowings to local currency in which we receive our revenues. It is important to note that 75 percent of the loan book is concessional on-lend loans which are wholly in foreign currency.,” he says.
In the reporting period, Kenya Power’s finance costs reduced to KSh 1.9 billion in December 2024 from Ksh 15 billion in December 2023. With its profitability now looking up, Kenya Power hopes to channel its resources into strengthening its infrastructure and improving service delivery. Although its network, which dates back more than 100 years, has been modernised over the years, parts of it still require improvement. Stephen believes reinvesting the funds will play a large part in enhancing Kenya Power’s efficiency and reliability for its customers, who number nearly 10 million. The move is also expected to address frequent power outages.
“The company has a very expansive electricity transmission and distribution network which comprises some very old sections that require refurbishment. We are thus reinvesting the funds to enhance efficiency in the distribution system and support reliability and redundancy in the system. This will ensure that we optimise revenue and improve service to our customers.”
Because of its reliance on debt denominated in foreign currency, Kenya Power has suffered the brunt of fluctuations, which have affected its financial performance. This became apparent after Kenya shilling depreciated by 26.8 percent in the year ending December 2023. To address this, Kenya Power is implementing a strategy intended to mitigate currency risks. Stephen is confident that this, coupled with the plan to take out future loans in local currency, will reduce the impact of currency fluctuations and improve Kenya Power’s financial stability in the long term.
“The first strategy is to pay up faster on forex denominated loans. We have in the recent past made some pre-payments just to reduce the exposure going forward. On the reporting front, we are exploring a technical non-derivative hedge arrangement that will leverage on the tariff mechanisms that allow for the recovery of realised forex losses to eliminate the distortion effect of forex fluctuations,” he says.
