KenGen blames high taxes for profit decline

Kenya Power managing director Dr Ben Chumo (left) with KenGen managing director Albert Mugo at Villa Rosa Kempinski Hotel, Nairobi on October 1, 2014 during the Launch of Power Demand Study. KenGen has posted an 85 per cent drop in profit after tax for the year ended June, on higher tax payment. FILE PHOTO | EVANS HABIL | NATION MEDIA GROUP

What you need to know:

  • Last year’s profits were lifted by a Sh1.15 billion tax discount granted under a government initiative that rewards firms for investments outside Nairobi.
  • Taxation breaks from capital expenditure in new projects began in the 1980s and allow industrialists duty credits of up to 150 per cent of the value of their investment.

KenGen has posted an 85 per cent drop in profit after tax for the year ended June, on higher tax payment.

The power generating company recorded Sh2.82 billion in after- tax earnings against Sh5.22 billion recorded over a similar period last year.

Last year’s profits were lifted by a Sh1.15 billion tax discount granted under a government initiative that rewards firms for investments outside Nairobi.

“The tax credit last year arose from higher capital allowances enjoyed at 150 per cent for investments in power projects outside major cities,” the firm said in a statement on Thursday.

Taxation breaks from capital expenditure in new projects began in the 1980s and allow industrialists duty credits of up to 150 per cent of the value of their investment.

Improved electricity revenue from new capacity saw total revenue grow by 4.3 per cent from Sh17.7 billion last year to Sh18.5 billion in the period under review.

Financing costs declined by 13.8 per cent from Sh3.0 billion last year to Sh2.6 billion in the current period, attributed mainly to lower interest expenses on loans taken to fund completed projects.

An increase in operational and maintenance costs due to the rising prices of spare parts and additional staff pushed up expenses by 11 per cent, from Sh10.6 billion in 2013 to Sh11.8 billion during the period under review.