Geothermal generation, Study Guides, Projects, Research of Mining Engineering

Download Geothermal generation and more Study Guides, Projects, Research Mining Engineering in PDF only on Docsity!

INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2016

Part of everyday life

Vision

To be the market leader in the provision of reliable, safe, quality and competitively priced electric energy in the Eastern Africa region.

Mission

To efficiently generate competitively priced electric energy using state of the art tech- nology, skilled and motivated human re- source to ensure financial success. We shall achieve market leadership by undertaking least cost and environmentally friendly capacity expansion. Consistent with our corporate culture, our core values will be adhered to in all operations.

Our Philosophy

We promise to create value for all our stakeholders cutting across our sharehold- ers, employees, communities neighbouring our plants and our fellow citizens. We will continue focusing in achieving sustainability in value creation from the “present gener- ation” of Kenyans to the “next and future generation” of Kenyans.

Our long-term commitment is to empower our people and our economy with relia- ble, safe and competitively-priced electric energy that is environmentally friendly and continue being a socially responsible Company.

Core Values

Professionalisim

Integrity

Safety Culture

Team Spirit

Our Value Statements

2 KENYA ELECTRICITY GENERATING COMPANY LIMITED Integrated Annual Report & Financial Statements for the Year Ended June 2016

Core Business

Kenya Electricity Generating Company Limited (KenGen) is the largest power producer in Kenya and East Africa. With an installed capacity of 1,630 MW the Company commands a market share of 69% and generated 80% of national energy consumption as at 30 June 2016.

Hydro

Ge

othermal

Thermal Wind

( 50 %)

(32 %)

( 16 %) ( 2 %)

253

533.

25.5 818

Integrated Annual Report & Financial Statements for the Year Ended June 2016 KENYA ELECTRICITY GENERATING COMPANY LIMITED^3

Significant Facts

Significant Facts

• Largest Geothermal Producer making Kenya the 7th in the World
• Developed the Single Largest Geothermal Project in the World (Olkaria 280 MW)
• Champion in the development of Geothermal Wellhead Technology
• Operationalised 83MW capacity of geothermal wellhead modular plants, the largest in the world
• Drilled the largest Geothermal Well in Africa: 30MW
• Executed the first Commercial Geothermal Drilling Contract
• Diversified Revenue Streams through geothermal consultancy works
• Commissioned a natural geothermal spa in Kenya
• ISO QMS 9001:2008 and EMS 14001:2004 certified
• The only company in Kenya to earn carbon asset funds under the Clean Development Mechanism

(CDM)

• Largest Wind Power Producer in East Africa

Awards

• Africa Power Utility Company of the Year 2015 by Africa Utility
• Africa Power Utility of the Year 2015 by East African Power Industry Convention (EAPIC) 2015
• Clean Energy Project of the Year by EAPIC 2015
• Best Practice in Board Diversity Award by NSE 2015
• Financial Reporting (Corporate Governance Category) by FiRe Awards 2015
• Financial Reporting (IFRS Public Sector Entities) by FiRe Awards 2015
• Financial Reporting (State Corporations & Semi-Autonomous Government Agencies Category) by FiRe

Awards 2015

Integrated Annual Report & Financial Statements for the Year Ended June 2016KENYA ELECTRICITY GENERATING COMPANY LIMITED^5

Our Milestones

2015

• Completed the Single Largest Geothermal Project in the World (Olkaria 280 MW)
• ISO QMS 9001:2008 and EMS 14001: recertified
• Commissioning of natural Geothermal Spa

2005 - 2014

• Ground breaking ceremony for the Single Largest Geothermal Project in the World (Olkaria 280 MW)
• Largest Wind Farm in Kenya Completed: Ngong 25.5MW
• Ambitious Resettlement Action Plan (RAP) for 150 households in Olkaria completed
• Innovative Wellhead Technology Project of 75MW Rolled Out
• Drilled the largest Geothermal 30MW Well in Africa
• Quickest Thermal Power Plant in East Africa commissioned in record 14 months: Kipevu III 120MW
• Largest Public Infrastructure Bond in Kenya; successfully raised over Kshs.26 billion
• Deepened Kenya’s Capital Markets through successful public listing with 336% subscription rate on the Nairobi Stock Exchange
• 60MW Sondu Miriu Hydro Power Plant a run-off the river plant with a 17km penstock tunnel commissioned
• Olkaria II 70MW commissioned
• Commissioned Sang’oro Hydro Power Plant 21.2MW
• Upgraded Kiambere Hydro Power Station from 144MW to 168MW
• Upgraded Kindaruma Hydro Power Station from 40MW to 72MW
• Upgraded Tana Hydro Power Station from 14.4MW to 20MW
• Commissioned Supervisory Control and Data Acquisition (SCADA) phase I system for all major hydro power plants.
• Decommissioned Nairobi south in bid to reduce on thermal generation
• Rehabilitation of MESCO Hydro Power Plant 0.45MW

6 KENYA ELECTRICITY GENERATING COMPANY LIMITED Integrated Annual Report & Financial Statements for the Year Ended June 2016

Who We Are

Kenya Electricity Generating Company (KenGen), a limited liability company incorporated under the laws of Kenya, is in the business of generating electricity through the development, management and operation of power plants. KenGen was incorporated in 1954 under the Companys’ Act of the Laws of Kenya as Kenya Power Company (KPC) with 100% government ownership. The shareholders of the company later contracted East Africa Power & Lighting Company (EAP&L) to manage KPC. EAP&L later changed to Kenya Power & Lighting Company (KPLC) in 1983.

In 1996, the government initiated major reforms in the energy sector. Generation of electricity was unbundled and the management of KPC was officially separated from Kenya Power and renamed KenGen in January 1998. KenGen took charge of all the public generating assets while KPLC maintained the transmission and distribution functions.

The government sold 30% of its stake in the Company and in 2006, KenGen was listed on the Nairobi Securities Exchange (NSE) through a successful Initial Public Offer (IPO). The company has always returned value to its shareholders and in 2016, gave the investors another opportunity to exercise their rights in a successful rights issue.

KenGen is the leading power generator in the country with a market share of 69%. In the year under review, the company generated 80% of the electric energy in the country

80 %

20%

IP

P’s

K

e

n

G

e

n

8 KENYA ELECTRICITY GENERATING COMPANY LIMITED Integrated Annual Report & Financial Statements for the Year Ended June 2016

1. Hydroelectric Energy

These power plants form part of the early generation capacity as indicated:

Plant Installed Capacity(MW) Effective Capacity (MW) Year of Commisioning Sagana 1.5 1.5 1955 Mesco* 0.45 0.45 1933 Wanjii 7.4 7.4 1952 Tana** 20 20 1952/ Masinga 40 40 1981 Kamburu 94.2 90 1974/ Gitaru 225 216 1978/ Kindaruma*** 72 72 1968/ Kiambere**** 168 164 2009/ Turkwel 106 105 1991 Sondu Miriu 60 60 2007 Sang’oro 21.2 20 2012 Gogo 2 1.7 1957 Sosiani 0.4 0.3 1952

*Mesco rehabilitated in year 2013 **Tana upgrade completion in 2010 *** Kindaruma upgrade completion in 2013 ****Kiambere upgraded 2009

2. Geothermal Energy

Geothermal power plants are seen as the key energy generators in the country. Geothermal energy is now the leading energy source in the country and supports the base load energy requirements. KenGen’s geothermal power plants are as below:

Plant Installed Capacity(MW) Effective Capacity (MW) Year of Commisioning Olkaria I 45 44 1981/1983/ Olkaria I AU 150.5 140 2014 Olkaria II 105 105 2003/2010* Olkaria IV 149.8 140 2014 Eburru 2.5 2.3 2012 Wellhead 71.1 66.5 2015

*Olkaria II Unit III was installed in 2010

Who We Are

Integrated Annual Report & Financial Statements for the Year Ended June 2016 KENYA ELECTRICITY GENERATING COMPANY LIMITED^9

3. Thermal Energy

KenGen has invested in medium speed diesel and gas turbine generators across the country. These power plants help to support peak loads and sustain voltages in the grid.

Plant Installed Capacity(MW) Effective Capacity (MW) Year of Commisioning Kipevu I 73.5 60 1999 Kipevu III 120 115 2011 Embakasi GT 30 27 1987/2013* Muhoroni GT 30 27 1987/2016**

Garissa 3.4 3.4 1993***

Lamu 2.7 1.8 1989***

*relocated from Kipevu to Embakasi in 2013 **relocated from Embakasi to Muhoroni in 2016 *** Lamu and Garissa were decommisioned in April amd May 2016 respectively

4. Wind Energy

The Company runs three wind power plants in Ngong Hills as indicated

Plant Installed Capacity(MW) Effective Capacity (MW) Year of Commisioning Ngong I Phase I 5.1 5.1 2010 Ngong I Phase II 6.8 6.8 2015 Ngong II 13.6 13.6 2015

5. How We Do It

The backbone of our successful business model is a committed and competent workforce. KenGen is proud to have a skilled workforce that is able to deliver new power projects while operating and maintaining existing assets to ensure sustained generation. The Company is committed to professional working relations with other players in the sector, taking cognizance of the fact that the country has one off-taker: Kenya Power. KenGen engages stakeholders and the regulators: Energy Regulatory Commission (ERC) and National Environmental Management Authority (NEMA) to ensure that the overall mandate of the sector is achieved.

Who We are

Integrated Annual Report & Financial Statements for the Year Ended June 2016KENYA ELECTRICITY GENERATING COMPANY LIMITED^11

7. How We Plan For The Future

KenGen developed a 10 year plan in 2007 known as Good-to-Great (G2G) Transformation Strategy of moving the Company from ‘Good’ to ‘Great’ through creation of sustainable value from “one generation” to the “next generation” of Kenyans. The thrust was to stabilize and create a sustainable power supply in the country. The strategy has since been revamped for the next 10 years with a medium-term focus to commission 721MW by 2020. Figure below illustrates our strategy horizons.

KenGen Strategy Horizons

Good

company

Great

company

Time

Horizon I

10 years+

Horizon III

Horizon II

Horizon II is being

revamped and

extended to 2025 to

address changes in the

operating environment and

achieve success

Delivered

375+MW

Original Revamped plan

Stabilize power

situation in Kenya

• Delivered 325+MW
• Increased RoE1 to

• Improved ROIC2 to

• Drilled 150+

geothermal wells

• Created regulatory

unit

Create sustainable power

growth in Kenya

• Deliver 2,500MW
• Create value for

shareholders

• Lower tariffs
• Diversify business

(KenGen C)

• Build capabilities for our

future

Explore expansion

opportunities

• Drive expansion beyond

Kenya

• Establish a strong African

footprint

• Leader in technology and

innovation

Current focus

Who We are

12 KENYA ELECTRICITY GENERATING COMPANY LIMITED Integrated Annual Report & Financial Statements for the Year Ended June 2016

Financial Highlights

2012 2013 2014 2015 2016

16,331 17,

18,

29,

38,

CAGR 18.78%

1,239 1,

1,617 1,

Installed capacity(MW)

CAGR 5.68% 1,

2012 2013 2014 2015 2016

Total revenue(Kshs.m)

2012 2013 2014 2015 2016

5,405 6,022^ 6,

7, CAGR 7.66% 7,

15,999 16,^

17,

25,

29,

Electricity revenue(Kshs.m)

2012 2013 2014 2015 2016

CAGR 13.05%

12,

22,

Operating Expenses(Kshs.m)

2012 2013 2014 2015 2016

10,266^ 10,

CAGR 18.82% 18,

14 KENYA ELECTRICITY GENERATING COMPANY LIMITED Integrated Annual Report & Financial Statements for the Year Ended June 2016

Corporate Information

Directors

Joshua Choge - Chairman Albert Mugo - Managing Director & CEO Henry Rotich - Cabinet Secretary, The National Treasury Joseph Njoroge - Principal Secretary, State Department for Energy Dorcas Kombo Ziporah Ndegwa Millicent Omanga Musa Arusei Kairu Bachia Joseph Sitati (Elected on 16 December 2015) Maurice Nduranu (Elected on 16 December 2015) Humphrey Muhu - Alternate Director to Henry Rotich William Mbaka - Alternate Director to Joseph Njoroge (Appointed on 4 October 2016) Hedrick Omanwa (Retired on 16 December 2015) Henry M’Narobi (Retired on 16 December 2015) Momata Gichana (Retired on 4 October 2016)

Secretary Rebecca Miano Certified Public Secretary (Kenya) KenGen Pension Plaza 2 Kolobot Road, Parklands P. O. Box 47936 - 00100 GPO Nairobi

Principal Auditor The Auditor-General Anniversary Towers P. O. Box 30084 - 00100 GPO Nairobi

Registrars Image Registrars Limited Barclays Plaza, 5th Floor Loita Street P. O. Box 9287 - 00100 GPO Nairobi

Delegated Auditors PricewaterhouseCoopers Kenya Certified Public Accountants (Kenya) PwC Tower, Waiyaki Way, Westlands P. O. Box 43963 - 00100 GPO Nairobi

Integrated Annual Report & Financial Statements for the Year Ended June 2016KENYA ELECTRICITY GENERATING COMPANY LIMITED^15

Corporate Information

Principal Bankers

Commercial Bank of Africa Limited Wabera Street P. O. Box 30437- 00100 GPO Nairobi

CfC Stanbic Bank Limited Kenyatta Avenue Branch P. O. Box 30552 - 00100 GPO Nairobi

Citibank NA Upper Hill P.O. Box 30711 - 00100 GPO Nairobi

Kenya Commercial Bank Limited Moi Avenue Branch P. O. Box 24030 - 00100 GPO Nairobi

NIC Bank Limited Masaba Road P. O. Box 48400 - 00100 GPO Nairobi

Standard Chartered Bank Kenya Limited Harambee Avenue P.O. Box 30003 - 00100 GPO Nairobi

Executive Management

Managing Director & Chief Executive Officer - Albert Mugo

Operations Director - Solomon Kariuki (appointed 1 August 2016)

Operations Director (Retired) - Richard Nderitu (retired 31 July 2016)

Company Secretary & Legal Affairs Director - Rebecca Miano, CPS (K)

Human Resources & Administration Director - Abraham Serem (appointed 1 March 2016)

Finance & ICT Director - John Mudany FCPA (K)

Regulatory & Corporate Affairs Director - Simon Ngure

Business Development Director - Moses Wekesa

Geothermal Development Director - Abel Rotich

Strategy & Business Performance Director - David Muthike

Supply Chain Director - Philip Yego

Integrated Annual Report & Financial Statements for the Year Ended June 2016KENYA ELECTRICITY GENERATING COMPANY LIMITED^17

The Directors submit their report together with the audited financial statements for the year ended 30 June 2016, which disclose the state of affairs of Kenya Electricity Generating Company Limited (the “Company”). The annual report and financial statements have been prepared in accordance with sections 147 to 163 of the repealed Companies Act - Cap 486, which remain in force under the transition rules contained in the Sixth Schedule, the Transitional and Saving Provisions of the Companies Act 2015.

PRINCIPAL ACTIVITIES

The principal activity of the Company is to generate and sell electricity to the authorised distributor, Kenya Power and Lighting Company Limited (Kenya Power).

RESULTS FOR THE YEAR

2016 2015 Shs’000 Shs’

Profit before tax (^) 11,264,044 8,690, Income tax (expense)/ credit (4,520,552) 2,827,

Profit for the year trans- ferred to retained earnings 6,743,492 11,517,

DIVIDENDS

The Directors do not recommend payment of dividends for the year ended 30 June 2016(2015: Shs 1.429 billion).

DIRECTORS

The present members of the Board of Directors are shown on page 1. Mr. Hedrick Omanwa and Mr. Henry M’Narobi retired on 16 December 2015. On the same day, Mr. Joseph Sitati and Mr. Maurice Nduranu were elected as Directors.

AUDITORS

The Auditor General is responsible for the statutory audit of the Company’s financial statements 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, PricewaterhouseCoopers were appointed to carry out the audit for the year ended 30 June 2016.

BY ORDER OF THE BOARD

Rebecca Miano Company Secretary

Nairobi

19 October 2016

REPORT OF THE DIRECTORS

 - Integrated Annual Report & Financial Statements for the Year Ended June 2016 KENYA ELECTRICITY GENERATING COMPANY LIMITED 

• Core Business
• Significant Facts
• Our Milestones 4-
• Who We Are 6-
• Financial Highlights 12-
• Corporate Information 14-
• Report of the Directors 16-
• Who Governs Us 18- 2. Leadership Overview
• Report of the Chairman 24-
• Ripoti ya Mwenyekiti 28-
• Who Leads Us 32-
• Managing Director & CEO’s Statement 36-
• Mkuu Mtendaji 40- Taarifa ya Mkurugenzi Mkuu na Afisa
• 3. Corporate Governance Statement 46-
• 4. Review of our Performance 60-
  • Our Plan 72- 5. Our Strategic Direction
  • Growing Our Business 75-
  • Powering from the Earth
  • Securing Our Future
  • Sustaining the Business 83-
  • Building Talent 86-
  • Getting Value for Our Money 91-
  • Sustainability Highlights 6. Sustainability
  • Social Sustainability 97-
  • Environment Sustainability 101-
  • Operational Management
  • Social Management 106-
  • Social Sustainability Investment 108-
  • Business Sustainability
  • Risk Management 112-
  • Statement of Directors’ Responsibilities 7. Financial Statements
  • Report of the Auditor General 120-
  • other Comprehensive Income Statement of Profit or Loss and
  • Statement of Financial Position 123-
  • Statement of Changes in Equity
  • Statement of Cash Flows
  • Notes to the Financial Statements 127- - Historical Performance 190- 8. Statistics - Installed Capacity - Units Sent Out 196- - Weighted Factors % 198- - Notice of the Annual General Meeting 202- 9. Shareholder Calendar - Ilani ya Mkutano Mkuu wa Kila Mwaka 204- - Proxy Form - Fomu ya Uwakilishi - Shareholder Notifications - Dematerialisation of Shares 209- - Bank Details - Unclaimed Dividends
• 18 KENYA ELECTRICITY GENERATING COMPANY LIMITED Integrated Annual Report & Financial Statements for the Year Ended June