What is the problem with Kenya Power?

What is the problem with Kenya Power?

Kenya Power shares are not doing well currently in the stock market. The bad news is that Kenya Power shareholders may have to endure the pain for a long time or bail out before their losses grow too big.

Kenya Power distributes electricity to homes and businesses. It makes money by billing customers for power consumption. It makes more money when customers use more power but sales drop when electricity demand is low.

 

Kenya Power shares investors may be in trouble

Electricity demand has dropped significantly since the Covid-19 outbreak. In homes where people have lost jobs or salaries reduced, electricity use has decreased as households try to cut costs.

Similarly, electricity use in businesses has dropped as many companies have scaled down operations and some shut down completely in response to the pandemic. The low electricity demand means Kenya Power is not able to make good money.

But Covid-19 impact is not the only problem the company faces. Many of Kenya Power’s business customers are developing solar farms to generate their own electricity, further reducing demand for Kenya Power’s electricity.

The situation looks dire as business customers that contribute about 55% of Kenya Power’s revenue are building their own solar power systems. These are mostly factories and universities. The shift to solar electricity leaves the utility bracing for large-scale customer defection and massive revenue loss.

Besides, many rural households are going straight to installing solar panels on their rooftops instead of seeking connection to the Kenya Power grid. The need to cut costs is fuelling the shift to solar electricity, suggesting Kenya Power may have a difficult time trying to persuade the defecting customer back.

Investors are avoiding Kenya Power shares as the company seems to sink into deeper trouble. Kenya Power price fell 0.63% to closed at Ksh1.59 Tuesday. The stock is down about 50% in 2020.

 

Kenya Power’s financial results

Kenya Power’s financial results show a struggling business. The company made a loss of about Ksh3 billion in its financial year ended June 2020. It made a profit of Ksh262 million in the financial year ended June 2019. Rising costs and shrinking revenue have been weighing on Kenya Power’s earnings.

 

How to buy or sell Kenya Power shares

Kenya Power shares trade on the Nairobi Securities Exchange under “KPLC” ticker symbol. To be able to buy and sell Kenya Power shares, you’ll need to open a CDS account. You can open the account through a stockbroker or investment bank.

Once you open CDS account, you will decide the number of shares you want to buy and place your order. Make sure to provide the stockbroker with the funds to purchase the shares for you. Keep in mind also that you can only buy a minimum of 100 shares per transaction.

CATEGORIES
Share This

COMMENTS

Wordpress (0)
Disqus (0 )