THE KENYA POWER AND LIGHTING COMPANY LIMITED THE ABRIDGED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 CHAIRMAN’S STATEMENT Together with my management team and staff, we are Dividend payable committed to work with passion to enhance efficiency The Directors recommend to shareholders, a first and and performance for the growth and continued final dividend of Shs 0.50 (previous year - Shs 0.50) per prosperity of the Company. ordinary share for the year ended 30th June 2017, subject to withholding tax where applicable, to shareholders registered in the books of the Company at the close Performance overview of business on 30th November 2017. If approved, In the period under review, we focused on three  the dividend will be paid on or about 31st January major objectives that are prioritised in our medium- 2018. term strategic plan: improving power supply quality and reliability, increasing electricity access through a sustained connectivity drive, and reducing energy Moving forward losses. These are core areas which not only determine As we look into the future, it is important to reflect how our business performs but also generate value on the tremendous gains we have made in the last and increase satisfaction to our customers. Our five years. In line with our business growth strategy, commitment towards achieving these goals is indeed we have invested heavily in network expansion and demonstrated by the substantial investments in modernisation projects to improve service delivery infrastructure expansion and modernisation projects and accelerate customer connectivity to grow sales. Hon. Kenneth Marende, EGH over the last three years. Consequently, our assets have doubled and our Chairman, Board of Directors customer base tripled within the period. n line with the Company’s strategy, we continued I extending our network coverage by building new Our medium term corporate strategy is centred substations and power lines across the country, and on five priority areas: infrastructure development, Once again, I am pleased to present the Company’s upgrading and modernising the existing infrastructure effective network management, customer focus, loss annual report and financial statements for the year by adopting system control technologies for improved reduction and resource alignment for efficiency. In ended 30th June 2017 during which we recorded good technical and operational efficiency. Consequently, we addition, we will leverage on the goodwill from our performance in a challenging business environment. registered significant improvements in power supply stakeholders including government and development reliability and quality. To secure the market and grow partners to foster business growth and increase Trading performance revenue, we sustained connection of over one million returns to shareholders as we work towards achieving  During the year under review, our electricity sales new customers during the period. This initiative also our corporate mission of powering our people for grew by 4.5 percent to 8,272 GWh from 7,912GWh compliments our country’s development goals. better lives. the previous year. This growth was mainly attributed to increased sales in the Industrial and Commercial Investing in the grid Appreciation consumer category, a 6.5 percent rise in sales under the  During the year under review, a number of critical grid I wish to extend my sincere appreciation to all our  Domestic customer category as a result of enhanced expansion projects were completed. A total of 6 new shareholders, business partners, esteemed customers, connectivity, and improved system efficiency. Sales and 22 upgrade substations were completed enhancing my colleagues in the Board, the Executive Management from Industrial and Commercial customer category the transformation capacity by 638 MVA which is team and our employees for the unwavering support increased by 3.8 percent, corresponding with the adequate to serve over 200,000 standard households. and confidence in the Company. modest growth in the manufacturing sector which We also constructed additional high and medium expanded by 3.5 percent due to reduced cost voltage feeders totaling 5,565 kilometer in circuit of production and increased volume output in length to further enhance flexibility of the network, the year. ease load transfers and reduce technical losses. Hon. Kenneth Marende, EGH Revenue from electricity sales excluding foreign Chairman, Board of Directors Towards a resilient network exchange adjustment and fuel cost recoveries 19th October 2017 Best practice in power network operations and increased by 5.6 percent to Shs 91,952 million from management prescribe adequate preventive Shs 87,081 million realised the previous year. Power MANAGING DIRECTOR AND CEO’S STATEMENT maintenance, and prompt detection and resolution purchase costs, excluding fuel and foreign exchange of technical faults. Electricity systems, therefore, costs, decreased by Shs 784 million from Shs 51,400 require continual investments to keep them in optimal million the previous year, to Shs 50,616 million. Fuel operating condition to serve the business efficiently. cost increased by Shs 9,434 million from Shs 12,690 In the year under review, we spent Shs 41 billion on million the previous year to Shs 22,124 million due to system improvement projects that enhanced service increased usage of thermal sources during the year. delivery and contributed to improved revenue. Transmission and distribution costs increased by The network enhancement projects implemented 16.6 percent from Shs 28,651 million to Shs 33,417 contributed to remarkable improvements in quality million in the year. The rise was attributed to higher of power supply as demonstrated by a 28 percent operational and maintenance costs on the expanded reduction in the average number of outages per electricity network facilities, depreciation due to month from a high of 27,274 to 19,588 recorded during increased capital investment and the rising cost of the year. doing business. Our capital asset base grew by 11.6 percent from Shs 247,532 million the previous year, Expanding our footprint to Shs 276,367 million. This growth was associated In the year under review, a total of 1,357,539 customers with new capital investments in the period aimed at were connected growing our customer base by improving quality of power supply, network expansion 28.1 percent to 6,182,282, which raised the national and accelerated connection of new customers. electricity access rate to 70.3 percent. This growth was achieved by intensive implementation of various Net profit Kenneth Tarus, PhD connectivity strategies mainly through the Last Mile The Company recorded a net profit before tax of Shs  Managing Director and CEO Connectivity Project and the electrification project 10,912 million during the year compared to Shs 12,083 targeting informal settlements and low income million the previous year. The reduction was mainly I am glad for the opportunity to share with you the areas. We plan to sustain the rapid pace of electricity attributed to increase in transmission and distribution major highlights on our achievements, commitments connections in our quest to achieve a customer base costs by Shs 4,765 million and decreased finance and goals during the year, this being my first report of 9 million and attain universal access by the year income. to shareholders as the Managing Director and CEO. 2020. www.kplc.co.ke customercare@kplc.co.ke Kenya Power @kenyapower 95551 0703 070 707 • 0732 170 170 Abridged Report AD Full page 27.5x33cm Approved Artwork.indd 1 02/11/2017 15:58 THE KENYA POWER AND LIGHTING COMPANY LIMITED THE ABRIDGED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 Secure and grow revenue As part of our initiative towards securing the CONDENSED STATEMENT OF CASH FLOWS FOR THE YEAR Company’s long-term viability, we are adopting a ENDED 30 JUNE 2017 We recognise that among the greatest determining factors in securing future revenues in the dynamic reporting mechanism that will entrench sustainability 2017 2016 business environment is our ability to consolidate pillars in our business strategies and processes. In Restated effective metering and revenue protection measures. this regard, we are developing a comprehensive KShs. M KShs. M For this reason, we have adopted metering solutions sustainability framework that will provide guidelines Cash generated from operating that enhance customer convenience while protecting for the introduction, development and maintenance activities 27,360 25,677 our revenues. Since adoption of prepaid metering in of proactive financial, social and environmental Net cash used in investing activities (39,520) (48,843) Net Cash generated from financing activities 5,507 438 2009, our prepaid customer accounts had grown management processes and procedures. Our target is Decrease in cash and cash equivalents (6,653) (22,728) to 4,008,019 as at the end of the financial year, to publish the first sustainability report in the financial Cash and cash equivalents at representing 65 percent of the total customer year ending June 2018. beginning of year 5,503 28,231 accounts. In the last three years, we have migrated Cash and Cash equivalents at the end of (1,150) 5,503 our Large Power and Small and Medium Commercial n conclusion, I wish to thank the Board of Directors I the Year customers to the advanced and more versatile smart and all stakeholders for their support throughout the meters. By the end of the year, a total of 15,376 REPORT OF THE AUDITOR GENERAL ON KENYA POWER period under review. I also thank all our employees AND LIGHTING COMPANY LIMITED FOR THE YEAR ENDED smart meters had been installed in the two customer for the hard work and commitment in the mission to 30TH JUNE 2017 segments. We are also making every effort to ensure provide power for better lives. that our postpaid customers settle their bills on time as we provide diverse and convenient payment options. As such, our average monthly revenue collection rate for billed postpaid accounts stood at 98 percent in the year, one of the best performance in the region. Kenneth Tarus, Ph.D. Investing in our people Managing Director and CEO Our employees are the Company’s most precious 19th October 2017 resource and are key to the success of our business. It is therefore of paramount importance to continually invest in our human capital as an effective way of SUMMARY FINANCIAL STATEMENTS FOR THE promoting business growth. Our employee sourcing YEAR ENDED 30TH JUNE 2017 and retention strategy includes offering competitive CONDENSED STATEMENT OF COMPREHENSIVE INCOME remuneration packages, tailored skills development FOR THE YEAR ENDED 30 JUNE 2017 and capacity building, recognition and reward programmes, and improving work environment. 2017 2016 (Restated) KShs. KShs. Employee productivity progressively improved during Million Million the period under review. Our staff to customer ratio REVENUE improved from of 1:439 the previous the year to Electricity sales 91,952 87,081 1:547  by 30th June 2017 with a total workforce of Foreign exchange adjustment 6,682 8,782 11,295 serving 6,182,282 customers. Management Fuel cost charge 22,108 12,512 employees continued to be on the performance 120,742 108,375 POWER PURCHASES COSTS contracting regime in the period under review. Their Non- fuel costs 50,616 51,400 performance was reviewed periodically and measures Foreign exchange cost 6,199 6,175 put in place to enhance productivity. To promote Fuel costs 22,124 12,690 performance excellence, employees who delivered in 78,939 70,265 their performance contracts were recognised during GROSS PROFIT 41,803 38,110 the year. Other operating income 8,130 7,470 Transmission & distribution costs (33,416) (28,651) OPERATING PROFIT 16,517 16,929 Resource alignment for efficiency Interest income 46 965 In our endeavour to enhance service delivery to Finance costs (5,651) (5,811) customers and improve our bottom line, we adopted PROFIT BEFORE TAX 10,912 12,083 feeder based approach to network management. Income tax expense (3,646) (4,886) The strategy involves alignment and optimisation PROFIT AFTER TAX 7,266 7,197 Other Comprehensive Income/(Loss): (741) (169) of human and capital resources to enhance TOTAL COMPREHENSIVE INCOME FOR 6,525 7,028 accountability, efficiency and productivity. The THE YEAR feeder-based approach is anchored on the resource Basic and diluted earnings per share Shs. 3.72 Shs. 3.69 Dividend per share Shs.0.50 Shs.0.50 alignment theme in our corporate strategic plan. Further, this approach complements the devolved business structure at the regional and county level CONDENSED STATEMENT OF FINANCIAL POSITION AS AT designed to take our services closer to customers. 30 JUNE 2017 2017 2016 2015 Commitment to sustainable operations Restated Restated We are building on the successes in our core business  KShs. M KShs. M KShs. M areas in the recent past to align, grow and transform ASSETS our business for long-term sustainability, creating Property and equipment 264,721 235,599 196,433 value for our customers, shareholders and other Other Non-current assets 11,646 11,933 9,791 stakeholders. Current assets 65,286 50,010 66,062 341,653 297,542 272,286 EQUITY AND LIABILITIES Shareholders’ equity 69,962 64,022 57,970 Non-current liabilities 196,433 182,605 168,717 Current liabilities 75,258 50,915 45,599 341,653 297,542 272,286 www.kplc.co.ke customercare@kplc.co.ke Kenya Power @kenyapower 95551 0703 070 707 • 0732 170 170 Abridged Report AD Full page 27.5x33cm Approved Artwork.indd 2 02/11/2017 15:58 THE KENYA POWER AND LIGHTING COMPANY LIMITED THE ABRIDGED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 30TH JUNE 2017 7. Auditors: To note that the audit of the Company’s books of accounts will continue to be undertaken by the Auditor-General or an audit firm appointed by him in accordance with Section 23 of the Public Audit Act 2015. 8. To authorise the Directors to fix the Auditors’ remuneration. 9. To consider any other business for which due notice has been given. By Order of the Board NOTICE OF ANNUAL GENERAL MEETING NOTICE IS HEREBY GIVEN THAT THE NINETY-SIXTH ANNUAL GENERAL MEETING of Shareholders of the Beatrice Meso Company will be held at Safari Park Hotel, Thika Road, Company Secretary Nairobi, on Friday 1st December 2017 at 11.00 a.m. to 19th October 2017 transact the following business: 1. To read the Notice convening the Meeting and note the presence of a quorum. NOTE: A member entitled to attend and vote at the 1.  To receive, consider and adopt the Company’s 2.  above meeting may appoint one or more proxies Audited Financial Statements for the year ended to attend and, on a poll, to vote instead of her/ 30th June 2017, together with the Chairman’s, him. A proxy need not be a member of the Directors’ and Auditors’ reports thereon. Company. To be valid, the Form of Proxy must be duly completed and lodged at the office of To approve payment of a first and final dividend of 3.  the Company Secretary, Stima Plaza, Nairobi Shs 0.50 per ordinary share, subject to withholding or posted in time to be received not less than tax where applicable, in respect of the year ended forty-eight hours before the time appointed for 30th June 2017. holding the meeting. In accordance with Article 155 of the Company’s 2.  4. To elect Directors: Articles of Association, an abridged set of the Statement of Comprehensive Income, Statement (i) Mr. Adil Khawaja retires by rotation in accordance of Financial Position and Statement of Cash Flows with Article 120 of the Memorandum and for the year ended 30th June 2017 have been Articles of Association of the Company and, published in at least two daily newspapers with being eligible, offers himself for re-election. national circulation. A set of the entire Annual Report and Financial Statements including the Hon. Kenneth Marende retires by rotation (ii)  Form of Proxy is available on the Company’s in accordance with Article 120 of the website: www.kplc.co.ke. Memorandum and Articles of Association of the Company and, being eligible, offers himself Transport to the AGM venue will be available  between 7.00 a.m. to 8.30 a.m. from Electricity for re-election. House, Harambee Avenue, Nairobi. (iii)To elect one new director to fill the vacancy in the Board. In accordance with the provisions of Section 5.  CLOSURE OF REGISTERS ON 4% AND 7% 769 of the Companies Act 2015, the following directors being members of the Board Audit and CUMULATIVE PREFERENCE SHARES Risk Committee will be required to be elected to continue to serve as members of the said Notice is hereby given that the half-yearly Committee: dividends due on 31st December 2017 on the above shares will, subject to Withholding (i) Mr. Kairo Thuo Tax where applicable be paid on the due (ii) Mrs. Brenda Engomo date to shareholders registered in the books (iii) Mr. Wilson Mugung’ei of the Company at the close of business on (iv) Mrs. Beatrice Gathirwa Thursday, 30th November 2017. 6. To approve payment of fees to non-executive Directors for the year ended 30th June 2017. BEATRICE MESO COMPANY SECRETARY www.kplc.co.ke customercare@kplc.co.ke Kenya Power @kenyapower 95551 0703 070 707 • 0732 170 170 Abridged Report AD Full page 27.5x33cm Approved Artwork.indd 3 02/11/2017 15:58