Anticipating a pre-tax loss of Kshs 5.6 bn for the fiscal year concluding in June 2023, Kenya Power is bracing for its most dismal performance in seven years. Disclosures from the Treasury to the International Monetary Fund (IMF) reveal that the utility company, having issued a profit warning in May, is poised to witness a drastic decline in pre-tax earnings from the Kshs 5.1 bn profit recorded in the preceding fiscal year. The projected pre-tax loss of Kshs 5.6 bn would mark the worst financial outcome since the conclusion of the fiscal year ending June 2017, during which the company suffered a pre-tax loss of Kshs 6.0 bn.
Read more: IMF Demands an Overhaul of Kenya Power’s Board of Directors
Kenya Power envisions an 11.2% growth in gross revenue, reaching Kshs 175.0 bn in 2023 from Kshs 157.4 bn in 2022; however, this growth is overshadowed by an impending increase in expenses, which is expected to push the company into a loss position. The firm estimates that operating expenses will escalate by 12.1% to Kshs 42.6 bn in 2023 from Kshs 38.0 bn in 2022, while financial expenses will surge by 29.1% to Kshs 16.4 bn in 2023, up from Kshs 12.7 bn in 2022. Nonetheless, Kenya Power remains hopeful, anticipating a rebound from the loss position, projecting a pre-tax profit of Kshs 10.6 bn in the fiscal year ending June 2024, followed by a rise to Kshs 12.0 bn in the subsequent fiscal year.
Read more: Kenya Power Takes Measures to Address Financial Challenges Amid Profit Decline
In May, the company attributed the expected profit decline to the depreciation of the Kenyan shilling against major currencies, significantly increasing its financial obligations. Notably, in the year ended June 2022, Kenya Power reported a net profit of Kshs 3.5 bn. A crucial factor exacerbating the financial strain on Kenya Power lies in approximately 90.0% of its loan book being denominated in foreign currency, further burdening its financial resources. Moreover, about 60.0% of the utility firm’s power purchases are conducted in foreign currency.
Read more: IPPs Advocate for the End of Kenya Power’s Monopoly
Addressing these challenges, the National Treasury conveyed its expectations to the IMF, emphasizing that Kenya Power’s recovery would be bolstered by tariff revisions and operational restructuring, aiming to reduce the company’s reliance on exchequer support.
Email your news TIPS to editor@thesharpdaily.com
