KenGen to set up service subsidiary building on core competencies
Olkaria Geothermal Spa, Kenya (source: HapaKenya)
Alexander Richter
29 Oct 2016
KenGen is setting up a service subsidiary focusing on non-core business that could help the company to tap into core competencies to add different revenue streams.
Kenya Electricity Generating Company (KenGen) has announced plans for the set up of a service subsidiary to grow business and revenues from non-core business, as reported by Standard Media in Kenya.
KenGen recently started to diversify its product offering. In addition to its core business of electricity generation, it is now selling other products and services including geothermal steam and commercial drilling services.
KenGen, which generates over 80 per cent of electricity consumed in the country, said it is looking at enhancing these revenue streams to grow revenue and mitigate risks.
KenGen Chief Executive Albert Mugo said the firm’s earnings for the last financial year were boosted by non-core income and it is evaluating modalities of further growing these. For instance, steam revenue for the year to June 30, 2016 rose 85 per cent to Sh6.8 billion from Sh3.6 billion in 2015.
Geothermal steam, which the firm uses to generate electricity, is also sold to flower farms neighbouring Olkaria geothermal fields in Naivasha that use it to heat greenhouses and generate power for internal use.
“We have also drilled two wells for another firm neighbouring our Olkaria fields that is looking to produce electricity using geothermal,” said Mugo. He spoke yesterday in Nairobi at an investor briefing. “We have already negotiated with the same developer to drill more wells. We see this as a growing business because it is not just a single developer but there are others that have approached us.”
The energy services company would be 100 per cent owned by KenGen and offer consultancy services not just for players in geothermal but also other sectors, including oil and mining both in Kenya and the region.
“We will be bidding to do more jobs be it in oil, geothermal or other areas that are in line with our expertise. We have three powerful rigs that can drill up to four kilometres below the ground and a team of skilled personnel that is unmatched in the region,” said Mugo.
Other than steam and commercial drilling, the firm also plans to expand its geothermal spa and set up an industrial park at Olkaria. “We have engaged a consultant to do a feasibility study that will give us an outline of how to set up the various industries within the industrial park,” said Mugo.
“This will be completed in the course of this month and we will soon present it to the Ministry of Industrialisation as it will fall under the special economic zones. In the course of next year we expect to see activity in regard to the industrial park.” Despite an 18 per cent growth in revenues to Sh39 billion last year, KenGen reported a 41 per cent decline in profit after tax for the financial year to June 30 and in turn said it would not pay dividends to shareholders. Yesterday, the company explained that in addition to the drop in profitability, this was also necessitated by the need to plough back the money into planned projects.
Read more at: http://www.standardmedia.co.ke/business/article/2000221191/kengen-to-set-up-subsidiary-to-grow-revenue-from-non-core-business
Source: Standard Media
