KenGen to register new company to diversify revenue sources
NAIROBI, Wednesday 22nd November 2017…Kenya Electricity Generating Company KenGen is planning to register a subsidiary to help diversify its revenue streams by focusing on non-generation opportunities.
KenGen Managing Director and CEO, Mrs. Rebecca Miano, told shareholders during the company’s Annual General Meeting that the new company, KenGen Energy Services Limited, will leverage on the vast resources of the company to build a resilient business.
Mrs. Miano said regulatory approvals for the 100% owned subsidiary of KenGen were being sought. She said the new company would pursue several revenue initiatives.“We want to run our business in a sustainable manner while creating value for our stakeholders, and one way of achieving this is to diversify our revenue streams,” she said.
Among the revenue streams that KenGen Energy Services will be handling are consultancy services in geothermal development, drilling services, geothermal spa and tourism, geothermal mineral extraction and an industrial park to be established at the Olkaria geothermal field.
The company has been pursuing a revamped Good-to-Great (G2G) strategy that is aimed at responding to changing market dynamics and utilizing available opportunities for growth.
The strategy envisages the creation of a sustainable growth by delivering 721MW of renewable energy by year 2020 at an investment close to KShs 135 Billion.
It has already commenced the development of Olkaria V 158MW, marking the beginning of Horizon II project pipeline. “We are committed to making available affordable and competitive power from renewable sources. To operationalize the achievement of this vision, priority initiatives are being pursued to improve the returns of current plants by optimizing and reducing operations and maintenance expenses and optimizing capital expenditure for future projects through lowering costs and improving delivery,” she said.
The company, she disclosed, was also improving Power Purchase Agreement (PPAs) regulation to increase profitability and pursue new financing approaches like equity partnerships in new projects, asset monetisation of plants, or asset-backed securities.
KenGen will not pay dividends as the Board recommended the re-investment of the cash generated in projects for better value.
KenGen Chairman, Mr. Joshua Choge, said the Company had revamped its strategy for the next decade with a primary focus on developing additional renewable energy. “Investing in renewable energy will yield competitively priced electricity which will significantly grow the market share, translating into increased shareholder value,” he said.
KenGen recorded a 34% growth in profit after tax from Kshs 6,743 million in 2016 to Kshs 9,057 million for the year ended 30 June 2017.
Total revenue decreased by 8%, from Kshs 38,610 million to Kshs 35,440 million, attributable to declines in energy revenue, forex recovery adjustments, steam revenue and commercial drilling services.
Electricity revenue decreased marginally by 1% due to poor hydrology, expiry of Power Purchase Agreement(PPA) for Embakasi GT 30MW, decommissioning of Lamu and Garissa power stations, evacuation constraints and forex exchange movements.
KenGen is the leading power generator in the country with a market share of about 70%. In the financial year 2016/17, the company generated about 74% of the electric energy consumed in the country.