KenGen H1 2017 Financial Results Released


KenGen, the largest power producing company in Kenya, yesterday released their second half of the year 2016/2017 financial results expecting to witness a boost in its profitability as a result of increased electricity generation and diversification of revenue streams. The performance for the remaining period to June 30th, 2017 is also projected to improve following completion of the evacuation line for the wellheads and fixing of machine breakdowns which affected some power plants.

KenGen accounts for 1630MW of the country’s total installed power capacity that currently stands at 2730MW. In recent years, however, the company and the nation at large saw an increase in electricity revenue attributed to the growth in sales through their hydro segment, which remains one of the biggest contributors of energy. The contribution from hydro has however significantly reduced due to unfavourable hydrological conditions including prolonged seasons of drought and undependable rainy seasons.

Speaking at an investor briefing on the company’s performance, Managing Director, Eng. Albert Mugo, disclosed an additional 5MW of geothermal energy was connected to the grid from its innovative wellhead program in December 2016. He said that this would see the company’s performance continue to rise as all the wellhead plants – that total 15 in number – have been connected to the national grid.

The project to be funded by the Japanese International Cooperation Agency (JICA) to a tune of Ksh40 billion will inject an additional 158MW to the national grid. It involves the construction of two geothermal power units of 79MW each.

The following are some of the major highlights from the 2016/2017 second half year release:

  • Revenue declined by 2.3 billion due to transmission constraints in the dispatch of the wellheads. The wellhead is a technology that entails the use of small power units fitted next to the wells that ensure electricity generation before the main power plant is put up.
  • Plans to add a total of 743MW from renewable energy to the national grid by 2022 in order to sustain the growing urban population dependent on electricity.
  • The Company also expects to begin construction of Olkaria V geothermal power station in the third quarter of 2016/17 financial year.
  • The company’s interest income increased from Ksh289 million in December 2015 to Ksh632 million in December 2016 due investment funds raised during the Rights Issue in June 2016.
  • However, KenGen also posted a 17 percent drop in profits for the Half Year period ending December 31th 2016 following poor performance in the non-traditional revenue streams. The profits before tax decreased to Kshs 6,566 million from Kshs 8,384million while profit after tax dropped to Kshs 4,625 million from Kshs 5,653 million in 2015.

Some of the factors said to affect the company’s performance include:

  • Transmission constraints – there was a noted revenue loss of Kshs 355 million from the delay dispatch from 15MW of wellheads.
  • Mechanical breakdowns – a number of mechanical breakdowns also occurred last year including the cooling tower for one unit in Olkaria 1 that contributed to a revenue loss of 75GWhs ~ Kshs 150 million.
  • Decommissioning of Garissa and Lamu power stations led to a revenue loss of 15 GWhs ~ Kshs 163 million.
  • New revenue streams delays – commercial drilling services revenue not realized due to outstanding contractual matters.
  • Expiry of PPA – expiry of the Embakasi Gas Turbine PPA led to a revenue loss of 17 GWh.

Despite this, Eng. Mugo said the company is committed to ensuring resources are put in place to drive implementation of its business development strategy to meet growth in demand for electricity and enhance return for shareholders.

He also expressed that the country would continue deepening the use of renewable energy in order to help manage the use of thermal power plants by reducing the cost of fuel and eventually see the company sustain the nation’s need for power especially during the period of drought where there have been a number of power outages seen in many parts of the country.

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