Kenya Power, a monopoly that rakes in more than Sh130 billion a year in revenues, is broke and is now running dangerously closer to empty.
The power distributor, which has been on the perilous path that leads firms into financial distress for the past three years, has now become technically insolvent.
This is after its current liabilities, the amount that falls due and that it must have to pay its creditors in the next 12 months, has expanded so fast to overtake its current assets.
When this happens over a long period, a company starts living on borrowed time and must immediately change tack, borrow heavily or turn to shareholders for a bailout to stop it from going bankrupt.
Another red sign is that the company is burning through its reserves, that are needed for a rainy day, at a high speed.
The company’s latest financial statements for the year ended June 2019 released this week, show that it only managed to squeeze a net profit of Sh262 million, out of enviable revenues of Sh133 billion.
This translates to a 92 per cent profit drop from the Sh3.2 billion in net profit the company made over a similar period in 2018.
At Sh262 million, the company went 16 years back since it returned to the profit territory in 2004.
The profit plunge saw the market punish its value on Nairobi Securities Exchange (NSE). Its share price nosedived to trade at the lowest price in the last 17 years of Sh2.49 per piece. This is the lowest level the company has traded in at the bourse since May 2003.
But what should worry investors most is that the firm has remained in a negative cash position of over Sh5 billion for the second year running.
This means that the only way it can meet its obligations is by borrowing or turning to the shareholders for a cash injection.
The new Kenya Power Managing Director, Mr Bernard Ngugi, told the Nation in an interview that although the books look bad, the company is ''not that much distressed''.
“The picture does not look good in the books of accounts but we are not that distressed because we are still selling power and we are collecting money,” Mr Ngugi said.
“We are not yet out. We are operating based on the internally generated cash and most of the operations are moving on,” he said.
Mr Ngugi, however, said that the company must do something to correct the situation and stop its downward spiral.
“We must ensure that we sell to the maximum. We also must ensure that all our customers who are using our power must be metered,” he said.
The other low hanging fruit for the company is to strike hard at the cartels stealing its power and making an already bad situation worse.
“Cartels have taken over our business. They are selling our power. There are places where we are finding meters are faulty or tampered with,” Mr Ngugi said.
The electricity distributor said it also wants to ensure that it collects money from its customers.
“There is an aggressive campaign right now that we have put in place to ensure that we go and collect our debts, which are out there,” Ngugi said.
The company is battling a running debt of about Sh20 billion in electricity used but not paid for.
The firm says government agencies are no longer on the list of bad debtors after the government rolled out a campaign to pay pending bills, which has boosted income.
“All this debt is attributed to small customers. The government has done well in the recent past by dealing with the issue of pending bills.”
The company said that it is also competing with solar alternatives of energy and it must now ensure quick turnaround times for new connections to remain competitive.
Currently, the company has 20 per cent system losses compared to the allowable 14.9 per cent by the energy sector regulator.
This means that it is losing about 5.1 per cent more power in system losses above the threshold. Every one per cent of power lost through the system translates to about Sh600 million in lost revenue.