Here’s everything wrong with KPLC numbers

After maintaining a low public profile, utility company and electricity monopoly Kenya Power & Lighting Company (KPLC) is as it again having posted more lethargic numbers at the end of February.

Nevertheless, despite challenges tied to COVID-19 related disruptions on the economy, the firm continues to post unflattering reports.

Late last year, the firm run with multiple unproven concerns including the reduced demand for electricity during the pandemic and the switch of users from the grid to alternatives such as solar.

However, its full-year results to June 2020 and half year earnings to December have put the narrative to shame.

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For instance, the company’s revenues from its contracts with customers remained stable in both reporting periods at KSh133.3 billion and KSh69 billion respectively growing marginally from KSh133 .1 billion to June and dipping from KSh69.6 billion in the period ending in December last year.

Kenya Power lack-lustre results despite being the only electricity distributor in the country.

The masking of its overarching challenges in lines such as customer revenues could only suffice until the full disclosure of its financial.

Fortunately, investors are not surprised by the depressive earnings, with the elephant in the power room remaining scandalous overhead costs.

While KPLC was forced to make provisions amounting to more than KSh3.5 billion for the year ended June 2020 and related to slow and non-moving inventories, the company’s financing mix remains the greatest adversity to the firm’s continuity.

The impact of lop-sided power purchase agreements with independent power producers was once again laid bare for all to see.

In an annual pre-tax loss estimated at a whooping KSh7 billion, finance costs increased by 21 per cent to KSh12.5 billion from foreign exchange losses arising from its power purchase agreements.

The devil has remained in the details of the purchase schemes shortly put in initials as PPAs as the utility company is forced to pay for power which isn’t consumed.

In the year, the State through tax credits proved to be the firm’s saving grace reversing the KSh7 billion pre-tax loss to an after tax loss of just KSh939 million.

In six months to December 2020, finance costs trended upwards once again to more than double to KSh8.1 billion from a previous KSh3.8 billion in December 2019.

To reverse the trend in deplorable earnings for the electricity monopoly, KPLC must clean up after itself and perhaps renegotiates its power purchasing contracts.

With Auditor General Nancy Gathungu already having cited the continuity of the company to be a going concern in her first audit of the company financials late last year.

Moreover, Kenya Power must take steps to better its service in electricity distribution lest the migration to solar wrecks real havoc to the company’s bottom-line.

High and ridiculous overhead costs to include charges on power purchasing agreements denominated in dollar terms will meanwhile continue eating up the utility firm from inside until the full overhaul of the company’s cost base.

Ultimately it may only be a matter of time until Kenya Power sinks into an even deeper hole.

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