Kenya Power share price sheds 6pc

Kenya Power share price declined by 6.7 per cent to touch a two-month low a day after the government rejected its proposal to increase power tariffs.

Investors also punished the Kenya Electricity Generating Company, an indication of fear that the government directive would hurt investment prospects and future earnings of the two firms.

The electricity distributor’s share price declined to a low of Sh17.5 during the trading on Friday compared to the closing price of Sh18.75 per share with the stock of power generator, KenGen, also declining by seven per cent to Sh14.50 per share.

Burden to the economy

“After an announcement that the government would not raise retail electricity tariffs, investors were selling both Kenya Power and KenGen,” analysts at Standard Investment Bank noted in their daily report. Both counter traded over 700,000 shares each.

On Thursday, the government vetoed a proposal by Kenya Power to increase electricity tariffs, saying it would be a burden to the economy. In February, Kenya Power made a proposal to the ERC seeking to increase power tariffs by over 50 per cent to raise funds to finance expansion of its distribution network and upgrade of the current power lines to reduce blackouts.

The tariff review would also have enabled Kenya Power to raise the amount of money it buys electricity from KenGen.

While issuing the directive, the Deputy President, Mr William Ruto, who addressed a meeting of the Ministry of Energy, Kenya Power, the Energy Regulatory Commission (ERC) and Ministry of Finance, asked the power distributor to find other means of raising revenue.

The directive leaves the question of power outages unaddressed as Kenya Power had indicated that part of the money would go to stabilising the system.

The last power review was conducted in 2008, but Kenya Power was hoping the next adjustment would cover the period to 2016.

A day after rejecting its proposal, Kenya Power unveiled a Sh16.9 billion power system upgrade project, dubbed the Nairobi Ring Project, aimed at strengthening and stabilising power supply in Nairobi.

Kenya Power managing director, Eng. Joseph Njoroge, who commissioned the power substation at Nairobi’s Komarock Estate said completion of the project in 2015 will enhance quality of electricity supply through improved voltage levels and reduced electricity outage cases in the city.