Kenya Power, the state-owned electricity distributor, reported a net loss of KSh 3.2 billion for the fiscal year ending June 2023 in an unexpected turn. This stark contrast to their previous year’s net profit of KSh 3.3 billion has provoked scrutiny and necessitated an examination into the contributing factors behind this surprising downturn.
Center Stage: Currency Depreciation
Joy Brenda Masinde, Chairperson of Kenya Power’s board, attributed the company’s overshadowed financial success—despite an increase in operating profit from KSh 17.1 billion to KSh 19.2 billion—mainly to “exceptionally high finance costs.” She pointed out that these costs were primarily a result of the Kenyan Shilling depreciating against major international currencies; indeed, this was one significant challenge they faced.
The Declining Currency
The Kenyan Shilling underwent a significant depreciation of 19% during the reviewed period: it plummeted from KSh 118 per US$ in June 2022 to an alarming low—KSh 140 per US$ by June the following year. This dramatic alteration in currency value profoundly impacted the financial robustness of our company; indeed, its consequences were far-reaching.
Debt Ascends, Losses Lurk Unforeseen
Driven by a surge in unsettled customer debts, provisions for electricity debt and other receivables escalated by KSh 3.2 billion; this marked an increase. Dr. Eng. Joseph Siror, the Managing Director & CEO of Kenya Power and Lighting Company Limited, emphasized that unrealized foreign exchange losses on power purchases had reached KSh 5.32 billion, painting a stark picture of escalating challenges with currency fluctuation at play within their operations. The Kenyan Shilling’s depreciation against the US Dollar and the Euro directly caused this surge: these are the primary currencies in which power purchase agreements are denominated, resulting in a direct effect.
The Horizon Presents Challenges
Kenya Power, in response to the financial setbacks, has initiated a board restructuring process. Shareholders will elect directors at the Annual General Meeting (AGM) scheduled for December 8, 2023; this election reflects reduced government control by ensuring vacancies are filled.
The concept of “Shareholder Empowerment” encompasses several key principles, including increased transparency in corporate governance, active involvement, and participation by shareholders in decision-making processes, and enhanced accountability from company management towards its owners – the shareholders.
In November 2023, at an Extraordinary General Meeting, shareholders approved the restructuring proposal. This approval pivots Kenya Power’s governance: private shareholders will elect four directors while retaining authority for appointing five directors remains with the government. The intent behind this shift in governance is to align strategically with the evolving landscape of Kenya Power’s shareholding structure.