REPUBLIC OF KENYA OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON THE FINANCIAL STATEMENTS OF KENYA POWER AND LIGHTING COMPANY LIMITED FOR THE YEAR ENDED 30 JUNE 2016 THE KENYA POWER & LIGHTING COMPANY LIMITED REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30 JUNE 2016 The Directors present their report together with the audited financial statements of the Kenya Power & Lighting Company Limited (the "Company") for the year ended 30 June 2016 which show the state of the Company's affairs. Principal activities The core business of the Company continues to be the transmission, distribution and retail of electricity purchased in bulk from Kenya Electricity Generating Company Limited (KenGen), Independent Power Producers (IPPs), Uganda Electricity Transmission Company Limited (UETCL) and Tanzania Electric Supply Company Limited (TANESCO). Results for the year 30 June 2016 30 June 2015 KShs'000 KShs'000 Profit before taxation 12,082,397 12,253,574 Taxation charge (4,526,234) (4,821,617) Profit for the year transferred to retained earnings 7,556,163 7,431,957 Dividends A dividend of KShs 1.93 million (2015 - KShs 1.93 million) is payable on the cumulative preference shares and has been recognised in the statement of profit or loss and other comprehensive income under finance costs. Subject to the approval of the shareholders, the directors recommend to members that in addition to the interim dividend of KShs 0.20 (2015 - KShs 0.20) per ordinary share, a final dividend of KShs 0.30 (2015 - KShs 0.30) per ordinary share be paid for the year ended 30 June 2016. Capital expenditure During the year, a total of KShs 48,815 million (2015 KShs 41,568 million) was spent on property and equipment. The capital work-in-progress as at 30 June 2016 amounted to KShs 66,087 million (2015- KShs 54,345 million). Directors The current Board of Directors are as shown on page 2. Mrs. Susan Chesfyna was elected as a director of the Company effective 22nd December 2015. Dr. Theodorah Malla-Kilukumi ceased to be a director with effect from 22nd December 2015. Auditors The Auditor General is responsible for the statutory audit of the Company's books of account in accordance with Section 35 of the Public Audit Act, 2015. Section 23(1) of the Act empowers the Auditor General to appoint other auditors to carry out the audit on his behalf. Accordingly, Deloitte & Touche were appointed to carry out the audit for the year ended 30 June 2016 and report to the Auditor General. By order of the Board Beatrice Meso Company Secretary Nairobi 28 October 2016 K tENY P \1R& - HTINGC \ ' STATEMENT OF DIRECTORS' RESPO\SIBILITIES The Ken, an Companies Act requires the directors to prepare financial statements for each financial year which give a true and fair view of the Company's state of affairs as at the end of the financial year and of its operating results for that year. It also requires the directors to ensure that the Company keeps proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company. They are also responsible for safeguarding the assets of the Company. The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and the requirements of the Kenyan Companies Act, and for such internal controls as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Company and of its operating results. The Directors further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as wvell as adequate systems of internal financial control. Nothing has come to the attention of the directors to indicate that the Company will not remain a going concern for at least the next twelve months from the date of this statement. Ct hrma Dire r Managing Director and CEO 28 October 2016 4 REPUBLIC OF KENYA lephone: +254-20-342330 P.O. Box 30084-00100 - +254-20-311482 NAIROBI -mail: oag@oagkcnya.go ke Xebsie: wwwkenao.go.ke OFFICE OF THE AUDITOR-GENERAL REPORT OF THE AUDITOR-GENERAL ON KENYA POWER AND LIGHTING COMPANY LIMITED FOR THE YEAR ENDED 30 JUNE 2016 REPORT ON THE FINANCIAL STATEMENTS The accompanying financial statements of Kenya Power and Lighting Company Limited set out on pages 7 to 80, which comprise the statement of financial position as at 30 June 2016, and the statement of profit or loss and other comprehensive income, statement of changes in equity, and a statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information, have been audited on my behalf by Deloitte, auditors appointed under Section 23 of the Public Audit Act, 2015. The auditors have duly reported to me the results of their audit and on the basis of their report, I am satisfied that all the information and explanations which, to the best of my knowledge and belief, were necessary for the purpose of the audit were obtained. Directors' Responsibility for the Financial Statements Directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for such internal control, as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatements, whether due to fraud or error. The directors are also responsible for the submission of the financial statements to the Auditor-General in accordance with the provisions of. Section 47 of the Public Audit Act, 2015. Auditor-General's Responsibility My responsibility is to express an opinion on these financial statements based on the audit and report in accordance with the provisions of Section 48 of the Public Audit Act, 2015 and submit the audit report in compliance with Article 229(7) of the Constitution. The audit was conducted in accordance with International Standards on Auditing. Those standards require compliance with ethical requirements and that the audit be planned and performed to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk Report ofthe Auditor-Generat on Kenya Power and Lighting Compan1 Limited for dhe year ended 30 June 2016 assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statements present fairly, in all material respects, the financial position of Kenya Power and Lighting Company Limited as at 30 June 2016 and of its financial performance and its cash flows for the year then ended, in accordance with International Financial Reporting Standards and comply with the Kenyan Companies Act. REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS As required by the Kenyan Companies Act, I report based on my audit, that; i[ I have obtained all the information and explanations which to the best of my knowledge and belief were necessary for the purpose of my audit; ii. in my opinion, proper books of account have been kept by the company, so far as appears from my examination of those books; and iii. the Company's statement of financial position and statement of profit or loss and other comprehensive income are in agreement with the books of account. FCPA Edward R.O. Ouko, CBS AUDITOR-GENERAL Nairobi 28 October 2016 Report ofthe Auditor-General on Kenya Power and Lighting Company Limited for the year ended 30 June .Tr 2)