Listed power firms KenGen and Kenya Power cut their borrowings by at least Sh48 billion in the year to June 2024, helped by the shilling’s appreciation in the forex market against the dollar and the euro.
KenGen reported a contraction of Sh29.3 billion in its long-term borrowings to Sh107.8 billion during the period, comprising a foreign exchange revaluation of Sh21.22 billion and debt repayments of Sh8.08 billion.
At the beginning of the financial year, the currency composition of the company’s debt was 41 percent in dollars, 42 percent in Japanese yen and 16.6 percent in euros.
In the review period, the shilling gained 8.5 percent against the dollar, 10.2 percent versus the euro and 20 percent on the yen.
The gains had the effect of slashing the shilling equivalent of foreign borrowings denominated in these currencies, helping the firms improve their financial health and reduce the outlay on servicing these obligations.
“Borrowings reduced primarily owing to downward revaluation following the strengthening of the Kenya shilling against major currencies and loan repayments,” said KenGen in its financial report.
Kenya Power, for its part, reduced its current liabilities by Sh26.8 billion to Sh105.5 billion, reflecting the contraction of the value of its loans once converted into shillings.
The utility firm’s debt is 90 percent denominated in dollars and euros, and it is also a major buyer of forex, which it uses to pay foreign independent power producers (IPPs) for electricity supplied to the national grid.
“During the year, finance costs decreased by Sh24.8 billion, mainly due to unrealised foreign exchange gain of Sh7.9 billion, compared to a loss of Sh16.9 billion in the previous period, as a result of loan revaluations,” said Kenya Power.
“This gain was due to the appreciation of the Kenya shilling against the dollar and the euro, both of which represent approximately 90 percent of our loan portfolio.”
These forex gains had a significant impact on both companies’ profitability for the period.
Kenya Power saw its net profit jump to a record Sh30.08 billion, reversing a net loss of Sh3.19 billion reported in the previous year, while KenGen posted a 35.5 percent growth in net profit to Sh6.79 billion.
The electricity distributor announced a dividend of Sh0.70 per share (Sh1.3 billion in total) after the performance turnaround, ending a six-year payout drought. KenGen raised its dividend per share to Sh0.65 from Sh0.30 in 2023, raising its total payout to Sh4.28 billion from Sh1.97 billion previously.
The gains by the shilling in the forex market have also been benefiting other listed companies with significant exposure to foreign currency denominated debt, including Safaricom, EABL and banks that have tapped such loans to bolster tier two capital.
