Standard Investment Bank (SIB) warns that Kenya Power's margins will increasingly depend on hydroelectric power to counteract reduced electricity tariffs, citing concerns about second-half profitability following the November 2018 rate adjustments.
The state-owned utility must balance declining revenue from lower pricing with rising demand, as SIB notes that increased consumption alone may not offset financial pressures. The bank emphasizes that adequate rainfall to sustain hydro generation remains critical for maintaining profitability.
Despite a 21.4% surge in electricity sales to Sh56.96 billion in the first half of 2019, Kenya Power's net profit fell 16% to Sh2.46 billion. SIB highlights that fuel costs dropped 44% to Sh6.88 billion due to reduced thermal power usage, while 44% of power sold came from geothermal and 39% from hydro sources.
SIB advises the utility to prioritize working capital management amid liquidity risks, suggesting asset disposals could help reduce debt. The analysis warns that sustained profitability hinges on favorable weather patterns and continued hydropower availability.
