Why Kenya Power Could Post Higher Profits In 2017

Declining costs could back profit improvement at Kenya Power (KPLC) in the current fiscal year ending June 2017, or FY2017.

The company recently provided an update of its business plan for FY2017 and beyond and one of the highlights was that executives expect operating expenditure to decrease this fiscal year compared with last year.

In particular, Kenya Power anticipates a 16% YoY decline in operating expenditure. That tells you that instead of Ks50 billion that the company sank into operations that included distribution network maintenance last year, Kenya Power now expects operating expenses to consume only Ks42 billion in FY2017. That potential Ks8 billion savings could make a huge difference on the company’s bottom-line this year.

 

FY2016 profit up 1.6%

The chart above shows Kenya Power’s net profit in the last four years.

Kenya Power reported profit in FY2016 rose 1.6% to Ks7.56 billion. Electricity sales for the period was Ks88 billion, up 12%, while total revenue for the year was Ks108.4 billion, up from Ks106.8 billion a year earlier. The topline growth was backed by Kenya Power’s expanding customer base.

Kenya Power had about 4.87 million electricity customers at the end of FY2016, having added 1.2 million households in the year. More homes are getting connected to the grid under a government programme that has subsidized power connection cost. Kenya Power hopes to connect 1.5 million new customers this year as it seeks to cover the whole country in the next few years.

Benefit of internal efficiency
It is amazing that Kenya Power expects its operating costs to fall this year despite its expanding network. Perhaps that signals that the company is winning the war against runaway costs and the effect should be felt on the bottom-line. Kenya Power has in recent times stepped up efforts to curb destruction and theft of its power transforms, which has been a major cause of financial loss in the company.