* Production of 26 megawatts electricity has started
* Expects a better H2
* Eyes bottled water segment in six months
By Duncan Miriri
NAIROBI, June 16 (Reuters) - Kenya's Mumias Sugar has started to generate 26 megawatts of electricity in an income diversification move it expects to bolster its financial performance, its chief financial officer said on Tuesday.
Ranked as the No. 1 sugar producer in east Africa's biggest economy, Mumias has been aggressively seeking new income streams, to lift its performance ahead of an expected rise in competition when the government privatises five sugar factories.
"It (the power project) has already been commissioned and now they are working on it to get its full capacity. We are producing about 26 megawatts and selling about 15," CFO Peter Kebati told Reuters.
He said that the project, which uses sugar by-products to generate power through a process called co-generation, would start contributing to the company's finances this year, even though it is capital intensive.
"There will be quite a bit of depreciation, particularly with the equipment that we bought, but it will have a positive impact on the cash flow for the company," he said.
Mumias is also in the process of establishing markets for carbon credits accruing from the project, to boost its revenues, Kebati said.
Pretax profit slid 73 percent in the first half, ending in December, but the producer expects a much better second half, Kebati said.
The CFO said the firm is also looking to enter the bottled drinking water segment.
"When you are doing a power plant, you have to run some very high-quality water treatment plants in order to cool the boilers and the turbines," said Kebati. "That same plant is going to be able to yield some good drinking water."
He said the bottled water will hit the market in about six months time.
"Obviously we are going to ride on our distribution networks."
Kenya's sugar industry has been criticised for having high production. The government has been giving it a helping hand for years by limiting sugar imports. (Editing by Rupert Winchester)