KenGen Shareholders To Miss Dividends For The Second Year

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This year KenGen shareholders will not receive dividends again as the company is re-investing the money in capacity expansion.  This week the largest power producing company KenGen released its 2016/2017 financial results. Mrs. Rebeca Miano, the company’s Acting Managing Director, and CEO unveiled the results at an investor briefing held in Nairobi. She credited the team for their resilience to sustain and grow the business to produce impressive results amidst having gone through a difficult year. The company which relies on hydroelectric power, geothermal and wind-generated power took a hit this year due to the severe drought which affected their hydro generation, and power evacuation constraints reducing geothermal dispatch.

The power evacuation constraints had since been resolved with the completion of the Olkaria-Suswa line which has enabled more electricity to be dispatched from the Olkaria plants. This worked to mitigate the impact of low hydro generation due to drought Rebecca Miano

One of the issues that stood out this year was the lack of dividend payout to the investors. This is due to the heavy capacity intensive trajectory recently taken up by the company. So the funds are reinvested in order to deliver the projects. Though having acquired some funds through lending institutions, paying their dividends could easily prevent them from accomplishing their financial obligation to these projects. However, even with the lack of dividend payout for the last two years, this year saw a 50% return price appreciation on the share price which is a great show of investor confidence.

The Company recorded major boost of a 34% growth in after-tax profit hitting Kshs 9,057 million for the financial year ended June 30th, 2017 up from Kshs 6,743 million over the same period last year. The company’s recorded earnings per share grew by 27%, compared to the previous year, which is a positive outcome attributed to efficient power plant operation. Mrs. Miano credited the results to the continued cost discipline and the successful implementation of the company’s revamped Good-to-Great (G2G) strategy. This will focus on delivering 720MW of renewable energy by 2020.

Some of the other highlights included;

  • The company’s electricity revenue decreased by 1% from Kshs 29,544 million in 2016 to Kshs 29,369 million in 2017. This is due to severe drought which affected the hydro generation and power evacuation constraints which reduced the dispatch of geothermal power.
  • Operating expenses which comprise employee, plant operation and maintenance expenses increased by 8% from Kshs 8,948 million in 2016 to Kshs 9,691 million in 2017. These were mainly driven by continued investment in power capacity expansion to support future business and increased operational scope and capacity building.
  • Interest income registered a growth of 123% due to earnings from investment of funds raised during the Rights Issue awaiting full implementation of earmarked projects.

Mrs. Miano said the results were also impacted by lower income from steam revenue compared to previous year due to arrears of Kshs 1,613 million earned in 2015-2016 and lack of income from commercial drilling services compared to the previous year.

In March 2017, KenGen’s rights issue achieved 100% success following the issuance of the remaining Rights totalling 351 million shares to the Public Investment Corporation (PIC) of South Africa. This raised Kshs 2,300 million which improved its equity base and provided the much-needed headroom to support future growth. Under the revamped G2G strategy, KenGen is developing several renewable energy projects including Olkaria V 158MW whose groundbreaking was undertaken during the second half of the year and is expected to be completed by 2019.

Other projects at different stages of procurement are Olkaria I Unit 6, 70MW, Ngong Wind Phase III 10MW, Olkaria VI PPP 140MW, Olkaria I Rehabilitation 50MW, Olkaria I AU & IV topping plant 40MW, Modular wellheads 50MW, Meru Wind Farm 80MW among others. Mrs. Miano said once the projects were completed, the company would be able to increase its earnings and deal with weather challenges faced by hydropower generation during droughts.

In regards to social responsibility, the KenGen Foundation funds sponsorships, water and health projects. All in all, the company members expressed great pride in where they are at and believe that the sky is the limit.

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