KenGen delivered strong FY2025 results with notable improvements in profitability, cost efficiency, operational performance, and cash generation. Profit after tax increased by 54%, operating profit rose by 43%, and finance costs fell by 20% due to continued loan repayments and a stronger Kenyan shilling.
The Board recommended a 38.5% increase in dividend per share (KShs 0.65 → KShs 0.90), reflecting confidence in future cash flows and stability. KenGen remains financially stable, moderately leveraged, and strategically positioned for long-term renewable energy expansion with a 252MW pipeline and regional geothermal consultancy growth.
Verdict: KenGen is a stable, defensive, income-generating utility stock—suitable for medium- and long-term investors rather than short-term traders.
📊 1. FINANCIAL PERFORMANCE ANALYSIS
1.1 Profitability
- Revenue: KShs 56,098M (vs 56,297M in 2024 — flat)
- Operating profit: KShs 13,617M (↑ 43% from 9,551M)
- Profit before tax: KShs 15,473M (↑ 41%)
- Profit after tax: KShs 10,481M (↑ 54% vs 6,797M)
- EPS: KShs 1.59 (↑ from 1.03)
Drivers of improved profits:
- Operating expenses decreased 11%
- Strong FX gains of KShs 1,453M (vs a loss of 722M prior year)
- Finance costs declined by 20%
- Diversified income grew 235% driven by geothermal consultancy (Eswatini)
Profitability Verdict: KenGen is more profitable, more efficient, and financially healthier than in recent years.
1.2 Balance Sheet Strength
- Total Assets: KShs 505B (↑ from 491B)
- Total Equity: KShs 284.5B (↑ from 278B)
- Borrowings: KShs 109B (slightly up from 107.7B)
- Current Assets: KShs 53B (↑ from 48B)
- Current Liabilities: KShs 20.3B (↑ from 18.8B)
- Cash & Equivalents: KShs 30.1B (↑ from 25.6B)
Balance sheet verdict: Debt levels are stable, equity is growing, and liquidity is strong.
1.3 Cash Flow Quality
- Operating cash flow: KShs 30.6B (vs 36.8B)
- Investing outflow: -16.9B (capex for expansion)
- Financing outflow: -9.1B (debt repayments & dividends)
Cash Flow Verdict: KenGen is generating sufficient cash to fund expansion and pay dividends without depending on new borrowing.
💰 2. DIVIDEND & VALUATION ANALYSIS
2.1 Dividend Metrics
- Annual dividend: KShs 0.90
- Dividend yield (at KShs 10.25): 8.78%
- Payout ratio: 40.9% (sustainable)
- Dividend growth: +38.5% YoY
- Ex-dividend date: Dec 5, 2025
- Pay date: Feb 12, 2026
Dividend Sustainability: A payout ratio of 40.9% indicates the dividend is well covered by earnings and supported by cash flow — low risk of cuts.
2.2 Valuation Metrics
P/E ≈ 6.44 — a low P/E for a profitable, dividend-paying utility, suggesting the stock is undervalued or fairly valued rather than expensive.
🧭 3. INVESTOR ACTIONS — WHAT TO DO AT PRICE 10.25
A) Long-term Investors (3–10 years)
Recommendation: STRONG BUY / HOLD
Why: Low P/E, high dividend yield, improving earnings & cash flow, 252MW renewable pipeline, government-backed stability. Ideal for compounding dividend income.
B) Dividend Investors
Recommendation: STRONG BUY
Perfect fit due to attractive yield (~8.8%), low payout ratio, and predictable cash flows.
C) Short-term Traders
Recommendation: HOLD / CAUTIOUS BUY
Slow-moving stock with low volatility; possible short-term catalyst is the ex-dividend date (Dec 5, 2025).
D) Layman / Average Retail Investors
Recommendation: BUY SMALL AND HOLD
Low risk, simple business model, steady dividends — a beginner-friendly long-term option.
E) High-Risk / Growth Investors
Recommendation: AVOID
Stable but slow-growing — not suitable for aggressive growth strategies.
⚡ 4. BUSINESS QUALITY CHECK
How KenGen Makes Money:
- Electricity generation (geothermal, hydro, wind, thermal)
- Steam sales from geothermal wells
- Geothermal consultancy (major growth area)
- Pass-through reimbursements (fuel costs recovered from KPLC)
- Interest income from deposits & receivables
Key Strengths: Generates ~59% of Kenya’s electricity, leading geothermal capability, 252MW pipeline, declining finance costs, stable cash generation.
Key Weaknesses / Risks: KPLC delayed payments, high capex needs, weather/hydrology risks, slow revenue growth, policy/regulatory exposure.
🏦 5. INSOLVENCY RISK ASSESSMENT
KenGen’s risk of insolvency is LOW due to strong equity (KShs 284B), cash (KShs 30B), stable borrowings (KShs 109B), strong operating cash flows, and government majority ownership.
📈 6. SHARE PRICE OUTLOOK (Next 12–24 months)
Bullish Factors: Profit up 54%, dividend up 38%, strong expansion pipeline, lower debt costs, FX gains, rising cash.
Bearish Factors: Flat revenue growth, KPLC payment risk, utilities are slow movers.
Price Expectation: Likely sideways to moderately upward, targeting KShs 11–13 within 12–24 months. Not a rapid mover, but stable.
⭐ FINAL RECOMMENDATION
At the current share price of KShs 10.25, KenGen is a fairly valued to undervalued defensive income stock.
Best For: Dividend investors, long-term holders, conservative & retirement portfolios, investors seeking stability over speculation.
Not Ideal For: High-risk or high-growth strategies, short-term speculators.
Overall Rating: BUY / HOLD — STRONG BUY for dividend-focused investors
How KenGen & KPLC Share Prices Are Related
1. KPLC Is KenGen’s Biggest Customer
KPLC buys almost all electricity generated by KenGen.
So when KPLC struggles financially:
- Delayed payments → Cash flow pressure on KenGen
- Market fears → KenGen share price weakens
- Negative news on KPLC → Investors expect impact on KenGen
When KPLC improves:
- Faster payments
- Stronger demand for power
- Better financial stability
→ KenGen stock sentiment improves.
Relationship: KPLC health → affects KenGen cash flows → affects KenGen share price
2. Both Operate in the Same Sector
Because both are utility companies, sector-wide news often affects them together:
- Tariff changes
- Government regulations
- Election periods
- Power sector reforms
- Droughts (which affect hydro generation & revenue)
→ They often move in the same direction on sector news.
3. But Their Fundamentals Are Very Different
This is where the relationship breaks down — their business quality and balance sheets differ materially:
KenGen
- Profit-making
- Strong balance sheet
- Big cash reserves
- Pays dividends
- Generates power (less operational risk)
KPLC
- Historically higher debt levels
- Working capital challenges
- Delayed payments (at times)
- Thin margins & operational challenges
👉 As a result, KPLC tends to fall harder on bad news and can rally more sharply on major reforms, while KenGen is generally steadier.
4. Historical Relationship
- When KPLC issues negative profit warnings → KenGen dips slightly
- When government announces reforms or tariff hikes → both often rise
- When KPLC delays payments → KenGen weakens
- When KenGen posts strong results → KPLC may not benefit directly
Correlation Summary: “Loose correlation” — related movements but not tightly linked like twin companies.
5. Which Stock Is Better for Investors?
KenGen
- ✔ Dividend-paying
- ✔ Cash generative
- ✔ Government-backed
- ✔ Low insolvency risk
- ✔ Long-term stability
KPLC
- ⚠ Historically higher risk
- ⚠ High debt (historically)
- ⚠ Working capital pressure
- ⚠ Turnaround story — higher volatility
- ⚠ Note: KPLC has recently started paying dividends, which is an important positive development for investors.
Conclusion: KenGen is an income & stability stock. KPLC is a more speculative turnaround play — both move with sector news, but their risk/reward profiles differ substantially.
Summary: KPLC’s financial health influences KenGen’s price direction, but the two stocks have very different fundamentals and do NOT move in perfect correlation.
.png)
.png)
.png)
.png)
.png)
.png)
.png)
.png)
.png)
.png)
0 Comments