Tax credit lifts KenGen profit 86pc despite sluggish sales

The Masinga Power Station operated by KenGen. TKengen has posted an 86.68 per cent growth in net income during the full year ended June helped by a tax credit related to the construction of power plants. Photo/FILE

In Summary

• The firm reported a net profit of Sh5.2 billion in the year to June compared to Sh2.8 billion a year earlier as its sales grew 3.79 per cent to Sh16.4 billion.
• Its pre-tax profit grew 1.2 per cent to Sh4 billion — reflecting the impact of the Sh2.3 billion tax credit that wiped out the firm’s entire income levy bill under  a government initiative that rewards firms for investments outside Nairobi.

A tax credit has helped electricity producer Kenya Electricity Generating Company (KenGen) record a 86 per cent rise in net profit despite a sluggish growth in sales.

The firm reported a net profit of Sh5.2 billion in the year to June compared to Sh2.8 billion a year earlier as its sales grew 3.79 per cent to Sh16.4 billion.

Its pre-tax profit grew 1.2 per cent to Sh4 billion — reflecting the impact of the Sh2.3 billion tax credit that wiped out the firm’s entire income levy bill under  a government initiative that rewards firms for investments outside Nairobi.

The tax concessions on capital expenditure in new projects began in the 1980s and allows industrialist duty credits of up to 150 per cent of the value of their investment.

But the sluggish pre-tax performance highlights the lack lustre performance of energy utilities given that Kenya Power announced a 5.7 per cent drop in net profit for the year to June and failed to declare a dividend for the first time since 2004.

KenGen, however, kept its dividend at last year’s level of Sh0.60 a boon to the power generator’s owners who have seen the value of their shares appreciate 84 per cent over the past year to Sh17.05.

READ: KenGen posts 87 per cent growth in net income on tax credit

Shares of Kenya Power, which is the sole buyer and distributor of electricity, have shed nearly a quarter of its value over the period to stand at Sh14.25.

“The increase is attributable to a tax credit resulting from capital allowances enjoyed by the company following the completion of Sang’oro and Kindaruma power plants,” said acting KenGen managing director Simon Ngure in a statement.

Sang’oro power added 21 megawatts of power to the national grid while Kindaruma injected 24 megawatts in the year under review.

These investments are what allowed KenGen to earn tax rebates in a scheme started to promote investments outside the city due its economic dominance at the expense of other regions.

The imbalance has made it much harder for Kenya to break the chains of inequality that began with the colonialists mapping of the country and the concentration of wealth along the railway line.

An Ukwala Supermarket outlet on Tom Mboya Street in Nairobi. Tuskys Supermarket has taken over operations of outlets owned by rival Ukwala in Nairobi. Photo/Salaton Njau  Nation Media Group

By NEVILLE OTUKI

KenGen said that it will inject 844 megawatts of power, the bulk of it coming from geothermal, over the next 40 months to rev up its sales and starve off an electricity crisis.

The country suffers from frequent blackouts due to supply shortfalls and an aging grid, forcing most businesses and wealthy people to have stand-by generators.