g in Sustainable stin En e v er In gy INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Our Vision Our Core Values To be the market leader in the provision of reliable, safe, quality and competitively priced electric energy in the Eastern Africa region. Team Spirit Integrity Our Mission 8SIJ½GMIRXP]KIRIVEXIGSQTIXMXMZIP]TVMGIHIPIGXVMG energy using state of the art technology as well as skilled and motivated human resources to ensure ½RERGMEPWYGGIWW;IWLEPPEGLMIZIQEVOIXPIEHIVWLMT Safety Culture Professionalism by undertaking least cost and environmentally friendly capacity expansion. Consistent with our corporate culture, core values will be adhered to in all our operations. Our Corporate Theme Be present in our engagements Build relationship, resources, Brings out the best in KenGen with both internal capacity, leadership and health. a reputation worth greatness. and external stakeholders. Inside this Report OUR BUSINESS FINANCIALS About this Report 2 7XEXIQIRXSJ(MVIGXSVW´6IWTSRWMFMPMXMIW  2018 Performance Highlights 3 Directors’ Remuneration Report 117 About KenGen 4 Independent Auditor’s Report 120 7MKRM½GERX7XVMHIW  7XEXIQIRXSJ4VS½XSV0SWW 3XLIV'SQTVILIRWMZI-RGSQI  Awards 7 Statement of Financial Position 129 Corporate Information 8 Statement of Changes in Equity - Restated* 130 Report of the Directors 12 Statement of Cash Flows 132 'LEMVQER´W7XEXIQIRX  Notes to the Financial Statements 133 Managing Director & CEO’s Statement 22 STATISTICS CORPORATE GOVERNANCE Historical Financial Performance (Restated) 214 Who Governs Us 32 Installed vs Effective Capacity (MW) 219 Who Leads Us 38 Units Sent Out (Gwh) 220 2018 Corporate Governance Statement 43 Weighted Factors (%) 221 SUSTAINABILITY SHAREHOLDERS CALENDAR )GSRSQMG7YWXEMREFMPMX]  Notice of the Annual General Meeting 224 Social Sustainability 80 7LEVILSPHIV2SXM½GEXMSRW  Environmental Sustainability 100 Proxy Form 229 Bank Details 231 GOK PERFORMANCE REPORT Unclaimed Dividends 231 Business Performance Report 2018 110 Declaration of Dormancy on Inactive CDS Accounts 231 Notes 232 This report is also available online. For greater insight into the Company, visit our corporate website: www.kengen.co.ke KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 1 OUR BUSINESS About this Report This integrated report is KenGen’s primary communication to shareholders and stakeholders on our performance and prospects. The report provides a review of the material issues encountered by the organization, addressed based on OI]STIVEXMSREP½RERGMEPIGSRSQMGWSGMEPERHIRZMVSRQIRXEPEWTIGXW8LIVITSVXEPWSHIXEMPWLS[XLIWIMWWYIWEVIFIMRK managed through our governance, our engagements as well as the application of our risks and opportunities matrix. This is our value creation story. Scope and Boundary 3YVWXVEXIK]EW[IPPEWQEXIVMEPMWWYIWMHIRXM½IHJSVQXLIERGLSVSJXLIVITSVXERHHIXIVQMRIMXWGSRXIRX8LIVITSVX covers the period 1 July 2017 to 30 June 2018 and provides commentary, performance measures and prospects for strategic operations. The structure and layout of this report draws on the International Integrated Reporting Framework. 1EXIVMEPIZIRXWYTXSXLIHEXISJETTVSZEPLEZIFIIRMRGPYHIH*SVEGSQTVILIRWMZISZIVZMI[SJSYV½RERGMEP TIVJSVQERGIXLIMRXIKVEXIHVITSVXWLSYPHFIVIEHMRGSRNYRGXMSR[MXLSYVERRYEP½RERGMEPWXEXIQIRXW Assurance and Audit Approach The Company has put in place a robust governance oversight and risk management framework. Our combined assurance model takes a three-pronged approach comprising a review by management, supplemented by internal and external auditors. The Audit, Risk & Compliance Committee, as delegated by the Board, relies on the combined assurance in JSVQMRKXLIMVZMI[SJXLIEHIUYEG]SJSYVVMWOQEREKIQIRXERHMRXIVREPGSRXVSPW8LIERRYEP½RERGMEPWXEXIQIRXWEVI EYHMXIHF]XLI%YHMXSV+IRIVEP[LSLEWMWWYIHERYRUYEPM½IHSTMRMSR Financial and Non-Financial Information We apply International Financial Reporting Standards (IFRS) and comply with the listing requirements of the Capital Markets Authority (CMA), the Nairobi Securities Exchange (NSE), the Companies Act 2015 and the Code of Corporate Governance Practices for Issuers of Securities to the Public 2015. Board Responsibility and Approval The Board is accountable for the integrity and completeness of the integrated report and any additional Information. The Audit, Risk & Compliance Committee of the Board ensures the integrity of the report and has applied its collective mind to its preparation and presentation. Having considered the completeness of the material items dealt with and the reliability of information presented, based on the combined assurance process followed, the Board approved the annual ½RERGMEPWXEXIQIRXWSR3GXSFIV KENYA ELECTRICITY GENERATING COMPANY PLC 2 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 2018 Performance Highlights Energy Sold Revenue 7,989 GWhs KShs 45,290 Mn Ÿ6% Ÿ4.2% EBITDA PBT KShs 21,590 Mn KShs 11,746 Mn 5.3% Ÿ2.5% Ÿ Total Assets CAPEX KShs 379,353Mn KShs 15,311Mn Ÿ1% Ÿ13.3% Proposed PAT Dividend KShs 7,891 Mn KShs 2,638 Mn 12.4% Ÿ 33% pay-out EBITDA - Earnings before interest, tax, depreciation and amortization PBT - Profit before tax PAT - Profit after tax CAPEX - Capital expenditure KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 3 OUR BUSINESS About KenGen In 1954, Kenya Electricity Generating Company (KenGen) was incorporated under the Kenyan Companies Act as Kenya Power Company (KPC) with the mandate to generate electricity through the development, management and operation of power plants. The shareholders of the Company later contracted East Africa Power & Lighting Company (EAP&L) to manage KPC. EAP&L changed to Kenya Power & Lighting Company (KPLC) in 1983. -RXLI+SZIVRQIRXSJ/IR]EGSQQIRGIHVIWXVYGXYVMRKSJXLIIRIVK]WIGXSV[MXLXLIEMQSJEGLMIZMRKIJ½GMIRX use of resources dedicated towards generation, transmission and distribution of electricity. The management of KPC was SJ½GMEPP]WITEVEXIHJVSQ/40'ERHVIREQIH/IR+IRMR.ERYEV] -RXLIKSZIVRQIRXWSPH SJMXWWXEOIMRXLI'SQTER]XLVSYKLEWYGGIWWJYP-RMXMEP4YFPMG3JJIV -43 ERH/IR+IR was listed on the Nairobi Securities Exchange (NSE). The Company continues to maximize shareholder value through TVS½XEFMPMX]ERHQEMRXEMRMRKEWYWXEMREFPIKVS[XLTEXL-RTYVWYMXSJSYVWXVEXIKMGSFNIGXMZIWWLEVILSPHIVW[IVIKMZIR ERSXLIVSTTSVXYRMX]XSI\IVGMWIXLIMVVMKLXWMREWYGGIWWJYPVMKLXWMWWYIMR Our business is to deliver affordable clean energy and create wealth for shareholders while building a resilient and sustainable business through investment in various energy sources and revenue streams. With an installed capacity of 1;ERHEQEVOIXWLEVISJ SJREXMSREPIRIVK]GSRWYQTXMSR[ILEZI½VQP]GIQIRXIHSYVTSWMXMSREWXLI largest power producer in the country. We have strengths of scale and expertise, proven by an exceptional record of accomplishment and service. In pursuit of our vision, we are transforming the way we manage our operations to propel or business in the right direction. OUR GENERATION CAPACITY OUR FOOTPRINT NGONG 25.5MW GEOTHERMAL WIND WESTERN OLKARIA & 533.9MW 25.5MW EBURRU 249.4MW W 533.9MW KIPEVU UPPER TANA A 193.5MW HYDRO THERMAL 818.2MW 253.5MW 29.6MW 7 FORKS 599.2MW KENYA ELECTRICITY GENERATING COMPANY PLC 4 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Geothermal Plant,Olkaria KenGen’s footprint spans across six lower Tana River has been harnessed capacity at 32% of our installed operational areas: The geothermal to provide 599.2MW of electric capacity. Ngong wind plants are in the area consists of power plants & power to Kenya. The plants comprise 'IRXVEP3J½GIVIKMSR[MXLERMRWXEPPIH wellheads running as baseload energy Masinga. Gitaru, Kindaruma, Kiambere capacity of 25.5MW. During the year, sources in Olkaria and Eburru in the and Kamburu power stations. The the Gas Turbine was successfully Rift Valley. The area has an installed upper Tana River has been developed relocated to Muhoroni to provide capacity of 533.9MW. The Western XSTVSHYGI1;GSQTVMWMRK grid stability support to the western region consists of four hydro stations four power plants namely, Tana, region. and a thermal plant: Turkwel, Sondu Wanjii, Sagana and Mesco. Hydro is Miriu, Sangoro, Gogo and Muhoroni. the leading source, with an installed The Company has focused on renewable The area has a total installed capacity capacity of about 818.2MW, which energy development and has a target to of 249.4MW. Kipevu area has two is 50% of the Company’s installed install an additional capacity of 721MW thermal plants located in Mombasa capacity. Geothermal comes second of clean green and renewable energy by County with an installed capacity of [MXL1;SYXSJ[LMGL1; 8LMW[MPP½VQP]GVS[R/IR]EEWXLI 1;8LI7IZIR*SVOWLEW½ZI comes from the innovative wellheads only African country in the Geothermal power plants along the Tana River. The technology. This places geothermal Gigawatt Club. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 5 OUR BUSINESS 7MKRM½GERX7XVMHIW Landmark Achievements Power Generation • Largest Power Generation Company in East Africa • Pioneered Geothermal Wellhead Technology • Largest Geothermal Producer in Africa and 9th in the World • Drilled the largest Geothermal Well in Africa, 30MW Sustainability • First Kenyan Company to earn Carbon Asset Funds under the Clean Development Mechanism (CDM) • 'SQQMWWMSRIHXLI½VWXERHXLIFMKKIWX Geothermal Spa in Africa • Institutionalized innovation through the Company’s Annual G2G Innovation Seminar • Implemented a remarkable community Resettlement Action Plan (RAP) for 1,181 project affected persons in Olkaria • (MZIVWM½IH6IZIRYI7XVIEQWXLVSYKL geothermal consultancy works and commercial geothermal drilling contracts • ISO QMS 9001:2015 and EMS GIVXM½IH • 7mn Carbon Tonnes Offset since 2003 KENYA ELECTRICITY GENERATING COMPANY PLC 6 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Awards The Company received Accolades during the year 1. FKE Awards - Employer of the Year Awards (EYA): • Winner - Responsible Business Conduct • 1st Runners Up - Leadership & Governance • 2nd Runners Up - Employer of the Year 2. Fire Awards 2017 • IFRS - Winner State Corporation Category 3. Africa Public Service Awards • Runners Up - Rethinking Innovation in Manufacturing 2018 4. St John Ambulance Kenya First Aid Challenge • Best in Corporate First Aid KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 7 OUR BUSINESS Corporate Information Board of Directors Joshua K. Choge Chairman Rebecca Miano Managing Director & CEO (Appointed Acting MD & CEO on 26 August 2017) (Appointed MD & CEO on 30 October 2017) Albert Mugo Retired on 26 August 2017 Henry Rotich Cabinet Secretary, The National Treasury Joseph Njoroge Principal Secretary, Ministry of Energy Ziporah Ndegwa Musa Arusei Kairu Bachia Joseph Sitati Maurice Nduranu Phyllis Wakiaga Dorcas Kombo Retired on 22 November 2017 Reginalda Wanyonyi Appointed on 22 November 2017 Humphrey Muhu Alternate to Henry Rotich William Mbaka Alternate to Joseph Njoroge Secretary Paul K. Ndungi Appointed on 25 July 2018 'IVXM½IH4YFPMG7IGVIXEV] /IR]E /IR+IR4IRWMSR4PE^E /SPSFSX6SEH P. O. Box 47936 - 00100 GPO Nairobi David K. Mwangi Appointed Acting Secretary on 30 October 2017 Acting Secretary up to 25 July 2018 5HJLVWHUHG2I¼FH ,IEH3J½GI KenGen Pension Plaza 2 Kolobot Road, Parklands 43&S\+43 Nairobi, Kenya Registrars Image Registrars Limited Barclays Plaza, 5th Floor Loita Street P. O. Box 9287 - 00100 GPO Nairobi KENYA ELECTRICITY GENERATING COMPANY PLC 8 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Principal Auditor The Auditor General Anniversary Towers P. O. Box 30084 - 00100 GPO Nairobi Delegated Auditor PricewaterhouseCoopers 'IVXM½IH4YFPMG%GGSYRXERXW /IR]E  PwC Tower, Waiyaki Way/Chiromo Road, Westlands 43&S\+43 Nairobi Principal Bankers Commercial Bank of Africa Limited KCB Kenya Wabera Street Moi Avenue Branch P. O. Box 30437- 00100 GPO P. O. Box 24030 - 00100 GPO Nairobi Nairobi Co-operative Bank of Kenya NIC Bank Limited Stima Plaza NIC house 43&S\ Masaba Road, Upperhill Nairobi P. O. Box 44500 - 00100 GPO Nairobi Citibank NA Standard Chartered Bank Kenya Limited Upper Hill Harambee Avenue P. O. Box 30711 - 00100 GPO P. O. Box 30003 - 00100 GPO Nairobi Nairobi Stanbic Bank Limited Kenya Barclays Bank of Kenya Limited Kenyatta Avenue Branch Barclays Westend Building P. O Box 30552-00100 GPO, Off Waiyaki Way Nairobi Corporate Banking Center P. O. Box 30120 - 00100 Nairobi Equity Bank Limited Bank of Africa Limited Westlands Supreme Centre, Sameer Business Park P. O. Box 14253 – 00800 Unit C 1st Floor Nairobi 43&S\ Nairobi KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 9 OUR BUSINESS Corporate Information Management Team: Rebecca Miano Managing Director & CEO (Appointed Acting MD & CEO on 26 August 2017) (Appointed MD & CEO on 30 October 2017) Albert Mugo Retired on 26 August 2017 Divisional Directors: Solomon Kariuki Operations Director Paul K. Ndungi (CPSK) Company Secretary & Legal Affairs Director (Appointed on 25 July 2018) David K. Mwangi Appointed Acting Company Secretary & Legal Affairs Director on 30 October 2017 Acting Company Secretary & Legal Affairs Director up to 25 July 2018 Abraham Serem Human Resource & Administration Director John Mudany (FCPA) Finance & ICT Director Simon Ngure Corporate & Regulatory Services Director Moses Wekesa Business Development Director Abel Rotich Geothermal Development Director David Muthike Strategy & Innovation Director Philip Yego Supply Chain Director Board Committees: Audit, Risk & Compliance Committee Joseph Sitati - Chair Humphrey Muhu Kairu Bachia Ziporah Ndegwa Phyllis Wakiaga Human Resource & Nominations Committee Musa Arusei -Chair Rebecca Miano Kairu Bachia Phyllis Wakiaga Reginalda Wanyonyi KENYA ELECTRICITY GENERATING COMPANY PLC 10 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Strategy Committee Kairu Bachia- Chair Rebecca Miano Joseph Sitati William Mbaka Humphrey Muhu Procurement Oversight Committee Ziporah Ndegwa - Chair Rebecca Miano Musa Arusei Maurice Nduranu Reginalda Wanyonyi Finance Committee Maurice Nduranu - Chair Rebecca Miano Musa Arusei William Mbaka Humphrey Muhu KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 11 OUR BUSINESS Report of the Directors Statement of Directors 8LI(MVIGXSVWWYFQMXXLIMVVITSVXXSKIXLIV[MXLXLIEYHMXIH½RERGMEPWXEXIQIRXWJSVXLI]IEVIRHIH.YRI[LMGL disclose the state of affairs of Kenya Electricity Generating Company Plc (the “Company”). Principal Activities The principal activity of the Company is to generate and sell electricity to the authorised distributor, Kenya Power and Lighting Company (Kenya Power). Business Review (YVMRKXLI½VWXLEPJSJXLI]IEVYRHIVVIZMI[XLI'SYRXV]I\TIVMIRGIHETIVWMWXIRXHVSYKLX[LMGLEJJIGXIH[EXIVPIZIPW MRSYVVIWIVZSMVWPIEHMRKXSVIHYGIHHMWTEXGLJVSQSYVL]HVSKIRIVEXMSR8LIVI[EW KVS[XLMR)PIGXVMGMX]9RMXWWSPH due to step up of generation from Geothermal and Thermal to mitigate the hydrology risk. Electricity Unit Sales 2018 2017 Change Source GWh GWh % Hydro 3,187 3,339 -5% Geothermal  3,282 18% Thermal 888 872 2% Wind 47  -25% Total 7,989 7,556 6% Revenue Revenue improved from Kshs 43,432 million in the previous year to Kshs 45,290 million during the year under review. This is attributable to improved evacuation of geothermal and thermal power to mitigate low hydrology, leading to increase in revenue net of reimbursable expenses from Kshs 34,452 million to Kshs 35,884 million. This is despite an MRGVIEWIMRVIPEXIHVIMQFYVWEFPII\TIRWIWJVSQ/WLWQMPPMSRXS/WLWQMPPMSR Other income Other income declined compared to the previous year due to lower insurance compensation and non-receipt of Carbon Credit Funds. 3XLIVKEMRW PSWWIW VIPEXIWXSJSVIMKRI\GLERKIZEPYEXMSRWERHJEMVZEPYIQIEWYVIQIRXSJ½RERGMEPEWWIXW8LIHIGVIEWI HYVMRKXLITIVMSHMWEXXVMFYXEFPIXSJEMVZEPYIPSWWSRE½RERGMEPEWWIXXLVSYKLTVS½XSVPSWW Expenses 8S[EVHWXLIIRHSJXLIPEWX½RERGMEP]IEVXLI'SQTER]GETMXEPM^IH;IPPLIEHWWXIEQ;IPPWERHSXLIVTVSNIGXWEQSYRXMRK to Kshs 35,547 million. This resulted in increased full year depreciation and amortisation expenses in the current year by 10% from Kshs 9,244 million to Kshs 10,148 million. KENYA ELECTRICITY GENERATING COMPANY PLC 12 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Expenses (continued) )QTPS]IIGSWXWMRGVIEWIHF] JVSQ/WLWQMPPMSRXS/WLWQMPPMSR8LMW[EWHYIXSMQTPIQIRXEXMSRSJERI[ Collective Bargaining agreement (CBA), performance recognition, and cost of living adjustment. Steam costs increased due to higher dispatch from geothermal plants to mitigate low hydrology. The Company continued to institute measures to optimise operating expenses. The plant operation and maintenance expenses increased because of costs associated with operation of the thermal plants that increased their dispatch to mitigate low hydrology. Insurance expenses increased because of cover for completed Well heads, which become fully STIVEXMSRHYVMRKXLIPEWX½RERGMEP]IEV3XLIVI\TIRWIWHIGPMRIHFIGEYWIXLIEQSYRXVIGSVHIHMRXLITVIZMSYW]IEV included a provision for doubtful debts of Kshs 429 million. Finance Income/Expense Interest income increased from Kshs1,333 million in June 2017 to Kshs 3,341 million in June 2018 due to interest charged JSVSYXWXERHMRKIPIGXVMGMX]WEPIWMRZSMGIWERHJEMVZEPYIKEMRJVSQE½RERGMEPEWWIXXLVSYKLTVS½XSVPSWW-RXIVIWXI\TIRWIW recorded a decline from Kshs 3,417 million to Kshs 3,038 million due to declining Public Infrastructure Bond (PIBO) interest and strengthening of the shilling against major currencies (mainly the USD, which recorded a gain of 3% during the year). 3UR¼WDELOLW\ There was no major project planned for completion during the period. Therefore, tax expense increased from /WLWQMPPMSRXS/WLWQMPPMSRHYIXSPEGOSJGETMXEPMRZIWXQIRXEPPS[ERGIIRNS]IHMRXLITVIZMSYW½RERGMEP]IEV 'SRWIUYIRXP]4VS½XEJXIVXE\HIGPMRIHJVSQ/WLWQMPPMSRXS/WLWQMPPMSR Financial Position 8SXEPEWWIXWMRGVIEWIHJVSQ/WLWQMPPMSRXS/WLWQMPPMSR8LMW[EWQEMRP]EXXVMFYXEFPIXSMRZIWXQIRXWMR implementation of Olkaria V, rehabilitation of Kamburu power plant and drilling of additional wells to secure steam for the upcoming power plants. Cash Flows The cash and bank balances decreased from Kshs 7,831 million to Kshs 3,383 million. This was due to investments of funds in the ongoing implementation of Olkaria V, drilling of additional wells to secure steam for the upcoming power plants and Kamburu power plant rehabilitation. Dividends 7YFNIGXXSXLIETTVSZEPSJXLIWLEVILSPHIVWXLI(MVIGXSVWTVSTSWITE]QIRXSJE½VWXERH½REPHMZMHIRHSJ /WLWQMPPMSR 2MP JSVXLI]IEVVITVIWIRXMRK/WLW 2MP TIVMWWYIHSVHMREV]WLEVI Directors 8LI(MVIGXSVW[LSLIPHSJ½GIHYVMRKXLI]IEVERHXSXLIHEXISJXLMWVITSVXEVIHMWGPSWIHSRTEKI KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 13 OUR BUSINESS Report of the Directors Disclosures to the Auditor 8LI(MVIGXSVWGSR½VQXLEX[MXLVIWTIGXXSIEGL(MVIGXSVEXXLIXMQISJETTVSZEPSJXLMWVITSVX (a) There was, as far as each Director is aware, no relevant audit information of which the Company’s auditor is unaware and (b) Each Director had taken all steps that ought to have been taken as a Director so as to be aware of any relevant audit information and to establish that the Company’s auditor is aware of that information. Terms of appointment of Auditors 8LI%YHMXSV+IRIVEPMWVIWTSRWMFPIJSVXLIWXEXYXSV]EYHMXSJXLI'SQTER]´W½RERGMEPWXEXIQIRXWMREGGSVHERGI[MXL7IGXMSR 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 IRHIH.YRI4VMGI[EXIVLSYWI'SSTIVWGSRXMRYIMRSJ½GIMREGGSVHERGI[MXLXLI'SQTER]´W%VXMGPIWSJ%WWSGMEXMSR and section 721 of the Kenyan Companies Act, 2015. The Directors monitor the effectiveness, objectivity and independence of the auditor. This responsibility includes the approval of the audit engagement contract and the associated fees on behalf of the shareholders. By Order of the Board Secretary 25 October, 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 14 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 0DVLQJDZDWHURYHU½RZ KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 15 OUR BUSINESS Chairman’s Statement Joshua Choge, MBS Chairman of the Board KENYA ELECTRICITY GENERATING COMPANY PLC 16 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Dear Shareholder, Currently, Kenya has a national installed capacity of 2,370MW with renewable energy accounting for more The success of your Company has been consistent over than 70% of this total. the last ten years. Our performance has weathered global economic downturns, two electioneering cycles and a KenGen has been at the forefront of driving the Country’s ½RERGMEPWUYII^I/IR]E´WIGSRSQMGKVS[XLWPS[IHXS green energy agenda and has scaled up renewable sources 4.9% while the global economic growth accelerated at of energy. Currently, 80% of KenGen’s energy portfolio is  GSQTEVIHXS MR+PSFEPMR¾EXMSRVSWI green, mainly geothermal and hydro. This is expected to XS MRJVSQ MRTEVXP]EXXVMFYXEFPI MRGVIEWI[MXLXLIGSQQMWWMSRMRKSJXLI1;3POEVME to increases in oil prices. In Kenya, key macroeconomic V power plant which is currently under development. indicators largely remained stable and therefore supportive At the same time, we expect an exciting year ahead as of the modest growth in 2017. Total electricity generation key decisions will be made on the Company’s business, I\TERHIHF] XS+;LMR,S[IZIV]SYV IWTIGMEPP]SRXLIMWWYISJHMZIVWM½GEXMSRXSIREFPI/IR+IR Company’s contribution to national electricity generation venture into non-power generation businesses in order to KVI[F] XS+;L build resilience and sustainability. We will also continue to We have adopted the most prudent means to run focus on innovation as a means to creating more value for XLI'SQTER]XSIRWYVI[IQE\MQMWISYVTVS½XWERH you, our shareholder. safeguard long-term shareholder interests. Your continued The Company will continue to monitor and actively trust in the Board and Management of the Company has participate in shaping the regulatory environment with a ensured that we produced good results while meeting view to creating a conducive environment for its business the national objective of providing competitively priced to thrive. KenGen has been actively involved in the electricity for Kenyans. development of the Energy Bill, which is currently awaiting Presidential assent, and is working on a preparedness The Year Ahead strategy as it awaits direction on the Bill. In December 2017, H.E. The President Uhuru Kenyatta Stakeholder Relations unveiled the Big Four Agenda, focusing on creating 1.3 million manufacturing jobs by 2022, achieving 100 per Your Company is a responsible corporate social citizen and cent health coverage for every Kenyan, expanding food is alive to the fact that we operate in areas surrounded by production and building 500,000 affordable houses. GSQQYRMXMIW%W[ILEVRIWWIRIVK]VIWSYVGIWMRJEV¾YRK areas of our country, we simultaneously seek to improve For Kenya to realise the aspirations of the Big Four the living standards of host communities. Agenda and the Vision 2030 development blueprint, it To achieve its strategic aspirations, KenGen will continue requires affordable and reliable energy. This presents new to focus on its expansion plan by building strategic opportunities for KenGen to scale up its business and partnerships that create a win/win situation. We believe meet energy requirements to grow the manufacturing such partnerships will enable effective management sector, reduce the cost of production and make Kenya of mutual concerns. We have established stakeholder an attractive investment destination for multi-national coordination committees, bringing together KenGen, companies. community representatives, elected leaders as well as Globally, there has been a gradual shift towards the use national and county governments in order to enhance of clean, renewable sources of energy as a measure of dialogue and promote a collaborative approach to reducing the adverse effects of greenhouse gases on the resolving issues. environment. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 17 OUR BUSINESS Chairman’s Statement During the year under review, the Company set a It was a period of transition for KenGen as the Managing ½VQJSYRHEXMSRJSVFYMPHMRKWXVSRKVIPEXMSRWLMTW[MXL Director & CEO, Eng. Albert Mugo, who had served the communities and other stakeholders by benchmarking Company in this capacity since 2014, retired. We would ourselves against the best in the world and developing like to thank Eng. Mugo for passing on a strong legacy that vibrant strategies for creating and maintaining strong, LEWWIIRXLI'SQTER]VIQEMR½VQP]SRMXWKVS[XLTEXL QYXYEPP]FIRI½GMEPVIPEXMSRWLMTW It was the responsibility of the KenGen Board to appoint a Financial Results strong successor and Mrs. Rebecca Miano, the long-serving Financial sustainability is a key focus for our business Company Secretary and Legal Affairs Director, met the MRIRWYVMRK[ITVSZMHIWYJ½GMIRXIPIGXVMGMX]ERHQEOI criteria. I would therefore like to congratulate her on her investments to meet growing demand while remaining a ETTSMRXQIRXEWXLI½VWXIZIVJIQEPI1EREKMRK(MVIGXSV TVS½XEFPIFYWMRIWW*SVXLI]IEVYRHIVVIZMI[SYVVIZIRYI & CEO since the Company was established in 1954. I registered a 4% increase from Kshs 43,342 million in thank the Board and employees for their commitment 2017 to Kshs 45,290 million in 2018. This was largely due and dedication in ensuring a seamless transition, which has XSIRLERGIHKISXLIVQEPIRIVK]WEPIWXLEXWMKRM½GERXP] enabled the Company to continue achieving impressive SJJWIXHITVIWWIHL]HVSKIRIVEXMSRIWTIGMEPP]MRXLI½VWX performance. half of the year when the country experienced persistent Appreciation HVSYKLX4VS½XFIJSVIXE\MRGVIEWIHJVSQ/WLW QMPPMSRMRXS/WLWQMPPMSRVITSVXIHJSVXLI First and foremost, I would like to thank our shareholders year. for forgoing dividends for two consecutive years to enable us pursue our expansion program. Indeed, this is a high Dividends PIZIPSJWEGVM½GIERHGSQQMXQIRXXSXLIWYGGIWWSJXLI 8LI'SQTER]´WGSRXMRYIHTVS½XEFMPMX]XLMW]IEVLEW Company. enabled the Board to keep its promise to shareholders to At the same time, I would like to thank my fellow Board resume the pay-out of dividends. The Board recommends Members for their unwavering support and for applying a dividend of Kshs 0.40 per share which amounts to Kshs their highest professional standards in carrying out the QMPPMSR business of the Board and in decision making. If approved at this Annual General Meeting by shareholders, the dividend will be paid, less withholding I would also like to thank the Government of Kenya not tax where applicable, on or about Thursday, 7th February only for its continued support of KenGen’s development 2019. agenda but also for enabling us to access concessionary loans for power infrastructure development. I recognize Corporate Governance SYVHIZIPSTQIRXTEVXRIVWERH½RERGMIVW[LSGSRXMRYI We are operating in a business environment dominated XSWXVIRKXLIRSYVTEVXRIVWLMTWXLVSYKL½RERGMEPWYTTSVX by major governance issues which are affecting all facets which has ensured we have remained on course to deliver of the Kenyan public and private sector. I assure you our project pipeline and promise to Kenyans. that at KenGen, we have not taken for granted our responsibility in securing the future of the Company for coming generations and investors. The Board is strongly Thank you committed to practising the highest standards in corporate governance and practising ethical leadership. I believe XLIKSZIVRERGIWXVYGXYVIW[ILEZIMRTPEGIEVIWYJ½GMIRX XSIREFPIXLI'SQTER]GSRXMRYIXS¾SYVMWLMRXLIWI tumultuous times. KENYA ELECTRICITY GENERATING COMPANY PLC 18 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Ujumbe kutoka kwa Mwenyekiti Mpendwa Mwenyehisa, kutumika kama kipimo cha kupunguza athari mbaya za gesi za kuchafua mazingira. Kwa sasa, Kenya ina uwezo wa Mafanikio ya Kampuni hii yako yamezidi kuwa thabiti zaidi kitaifa uliowekwa wa Megawati 2,370 huku nishati mbadala katika miaka kumi iliyopita. Utendaji wetu umestahimili ikichangia zaidi ya asilimia 70 ya jumla hii. kudorora kwa uchumi duniani, mizunguko miwili ya uchaguzi na hali ngumu ya kifedha. Ukuaji wa uchumi wa KenGen imekuwa mstari wa mbele katika kuendeleza Kenya ulipungua na kushuka hadi asilimia 4.9 ilihali ukuaji ajenda ya nishati ya Nchi na imeongeza vyanzo vya nishati [EYGLYQM[EOMQEXEMJEYOMSRKI^IEOEWMO[EEWMPMQME mbadala. Hivi sasa, asilimia 80 ya itifaki ya nishati ya KenGen MOMPMRKERMWL[EREEWMPMQMEOEXMOE1JYQYOS[E RMWE½MWMSGLEJYEQE^MRKMVELEWE]EYQIQIYXSOERES bei ulimwenguni uliongezeka hadi asilimia 3.1 katika 2017 na mvuke na maji. Hii inatarajiwa kuongezeka baada ya OYXSOEEWMPMQME]EO[EOMEWMOMOYF[EMOMLYWMWL[E kuanzishwa kwa mradi wa kiwanda cha Olkaria V Megawati na ongezeko la bei ya mafuta. Hapa Kenya, viashiria vya EQFEGLSWEWEOMREIRHIPIEOYWXE[MWL[E uchumi muhimu vilibakia imara na hivyo kuunga mkono Wakati huo huo, tunatarajia mwaka ujao uwe wa kusisimua ukuaji kadirifu wa mwaka 2017. Jumla ya uzalishaji wa wakati maamuzi muhimu yatafanyika kuhusu biashara umeme uliongezeka kwa asilimia 3.0 hadi Masaa ya ya kampuni,hii hususan juu ya suala la utofautishaji, ili +MKE[EXMOEXMOE,EXELMZ]SQGLERKS[E kuwezesha KenGen kujiingiza katika biashara zisizo za Kampuni yako katika uzalishaji umeme kwa taifa ilikuwa uzalishaji umeme, ili kustawisha ujasiri na uendelevu. O[EEWMPMQMELEHM1EWEE]E+MKE[EXM Tutaendelea pia kupatia kipaumbele ubunifu kama njia ya Tumeamua kufuata njia ya busara zaidi ya usimamizi kuongeza thamani zaidi kwako, mwanahisa wetu. wa Shirika ili kuhakikisha tunazalisha faida ya kutosha Kampuni itazidi kufuatilia na kushiriki kikamilifu katika na kulinda maslahi ya muda mrefu ya mmilikihisa wetu. uundaji mazingira ya udhibiti kanuni kukiwa na mtazamo wa Uaminifu wako unaoendelea kwa Bodi na Usimamizi wa kubuni mazingira mazuri kwa biashara yake ili ipate kustawi. Kampuni hii umehakikisha kuwa tumezalisha matokeo KenGen imekuwa ikishiriki kikamilifu katika ustawishaji wa mazuri wakati tunapojitahidi kukidhi lengo la kitaifa la kutoa Sheria ya Nishati, ambayo kwa sasa inasubiri kuidhinishwa umeme kwa bei nafuu kwa Wakenya. na Rais, na inashughulikia mkakati wa kujiandaa wakati Mwaka ujao tunapongojea mwelekeo kuhusu Sheria hii. Mnamo Desemba 2017, Mtukufu Rais Uhuru Kenyatta Mahusiano na Wadau alizindua Ajenda Nne Kuu, akitilia mkazo kubuniwa Kampuni yako ni raia mwema katika jamii na inatambua O[EREJEWM^EOE^MQMPMSRM^EZM[ERHEM½OETS kuwa tunafanya kazi katika maeneo yaliyozungukwa na kufanikisha kuenea kwa asilimia 100 kwa matibabu kwa kila jumuiya. Tunapounganisha rasilimali za nishati katika maeneo Mkenya, kupanua uwezo wa uzalishaji chakula na ujenzi wa mbali mbali ya nchi yetu, wakati huo huo sisi tunajitahidi nyumba 500,000 za gharama nafuu. kuboresha viwango vya maisha ya jumuiya wenyeji wetu. -PM/IR]EOY[I^EOY½OMEQEXEVENMS]E%NIRHE2RI/YYRE -PMOY½OMEQEXEVENMS]EOI]EOMQOEOEXM/IR+IRMXEIRHIPIE ruwaza ya Maendeleo ya 2030, inahitaji nishati ya gharama kuzingatia mpango wake wa upanuzi kwa kujenga nafuu na ya kutegemewa. Hii inatoa fursa mpya kwa ushirikiano wa kimkakati ambao unaleta kuwepo kwa hali KenGen kuimarisha biashara yake na kutimiza mahitaji ya ya ushindi kwa wote. Tunaamini ushirikiano huo utawezesha nishati ya kukuza sekta ya viwanda, kupunguza gharama usimamizi bora wa matarajio ya pamoja. Tumeanzisha za uzalishaji na kufanya Kenya eneo hitajika la uwekezaji la kamati za ushirikiano wa wadau, unaojumuisha KenGen, kuvutia makampuni mbalimbali ya kimataifa. wawakilishi wa jamii, viongozi waliochaguliwa na serikali ya Ulimwenguni, hatua kwa hatua kumekuwa na mabadiliko kitaifa na za kaunti ili kuendeleza mazungumzo na kukuza OYIPIOIEQEXYQM^M]EZ]ER^SZ]ERMWLEXMWE½ZMREZ]S[I^E mbinu shirikishi za kutatua masuala. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 19 OUR BUSINESS Ujumbe kutoka kwa Mwenyekiti Katika mwaka tunaoukariria, kampuni hii iliweka misingi na kutekeleza uongozi kwa maadili. Ninaamini vigezo vya imara wa kujenga mahusiano mazuri na jumuiya na usimamizi tulivyonavyo vinatosha kuwezesha Kampuni hii wadau wengine kwa kujiwekea vigezo bora sambamba kuendelea kustawi katika nyakati hizi za kutatanisha. . dhidi ya vilivyo bora zaidi duniani na kuendeleza Ulikuwa muda wa mpito kwa KenGen kwa vile Mkurugenzi mikakati imara ya kujenga na kudumisha mahusiano 1OYYRE%½WEQOYYQXIRHENM%PFIVX1YKSEPM]ILYHYQME thabiti, yenye manufaa.kwa wahisika wote. kampuni tangu mwaka wa 2014, alistaafu. Tungependa Matokeo ya Kifedha kumshukuru Mhandisi. Mugo kwa kupokeza urithi thabiti ambao umesababisha kampuni kuwa imara katika ufuatiliji Uimarishaji wa hali ya kifedha ni lengo kuu la biashara wa ukuaji wake. yetu katika kuhakikisha tunatoa umeme wa kutosha na kufanya uwekezaji wa kukidhi mahitaji ya ukuaji huku Ilikuwa ni wajibu wa Bodi ya KenGen kumteua mrithi tukiendelea kuwa biashara inayozalisha faida. Katika mwenye nguvu na Bibi Rebecca Miano, Katibu wa Kampuni mwaka tunaoutazama, faida yetu iliongezea kwa kima na Mkurugenzi wa Mambo ya Kisheria kwa muda mrefu, cha asilimia 4 kutoka shilingi milioni 43,342 katika 2017 EPMJEYPYOY½OMEZMKI^SZMPMZ]S[IO[E/[ELM]SRMRKITIRHE hadi shilingi milioni 45,290 katika 2018. Hii ilitokana kumshukuru kwa kuteuliwa kwake kwa mara ya kwanza hasa zaidi na mauzo ya nishati ya kioevu ambayo kabisa kama Mkurugenzi Mtendaji mwanamke na ilisaidia kukabili uzalishaji uliodorora wa kutumia maji Mkurugenzi Mkuu tangu kuanzishwa kampuni hii katika hasa katika nusu ya kwanza ya mwaka ambapo nchi hii mwaka 1954. Ninashukuru Bodi na wafanyakazi wote ilikabiliwa na ukame wa kudumu. Faida kabla ya kodi kwa kujitolea kwao na kujituma ili kuhakikisha mabadiliko MPMSRKI^IOEOYXSOEWLMPMRKMQMPMSRMOEXMOE yanaenda sawa, ambayo yamefanya kampuni kuendelea LEHMWLMPMRKMQMPMSRMMPM]SVMTSXM[EQ[EOERM OY½OMEYXIRHENMQ^YVM Mgao Shukrani Kuendelea kwa Kampuni kuzalisha faida mwaka huu, Kwanza kabisa, ningependa kuwashukuru wanahisa wetu kumewezesha Bodi kuweka ahadi yake kwa wanahisa kwa kuhiari kuacha mgao wao kwa miaka miwili mfululizo kutoa malipo ya mgao. Bodi inapendekeza mgao wa ili kutuwezesha kutekeleza programu zetu za upanuzi. shilingi 0.40 kwa kila hisa ambayo ni sawa na shilingi Hakika, hiki ni kiwango cha juu cha wema wao na kujitolea QMPMSRM-[ETSMXEMHLMRMWL[EOEXMOE1OYXERS kwa mafanikio ya kampuni hii. Wakati huo huo, ningependa Mkuu wa Mwaka huu na wamilikihisa, mgao huo kuwashukuru Wanabodi wenzangu kwa msaada wao utalipwa, ikiondolewa kodi pale inapohitajika, mnamo usitikisika na kwa kutumia viwango vyao vya juu vya Alhamisi, tarehe 7 Februari 2019. kitaaluma katika kutekeleza shughuli za Bodi na kufanya maamuzi. Usimamizi wa Shirika Napenda pia kutoa shukrani kwa Serikali ya Kenya si tu Tunafanya kazi katika mazingira ya biashara kwa msaada wake endelevu wa ajenda ya maendeleo ya yanayoongozwa na masuala makubwa ya utawala KenGen lakini pia kwa kutuwezesha kupata mikopo kwa ambayo yanaathiri nyanja zote za sekta ya umma ajili ya maendeleo ya miundombinu ya nguvu za umeme. na binafsi ya Kenya. Ninawahakikishia kuwa katika Ningependa kuwatambua washirika wetu wa maendeleo KenGen, hatujachukuliwa kwa wepesi nafasi yetu na wafadhili ambao wanaendelea kuimarisha ushirikiano ya kupata hatima ya Kampuni kwa vizazi vijavyo na wetu kwa kupitia msaada wa kifedha, ambao umehakikisha wawekezaji wetu. Bodi ina msimamo mara kabisa wa kuwa tumebakia wakati wa kutoa mpango wa mradi wetu kutekeleza viwango vya juu katika usimamizi wa shirika na ahadi kwa Wakenya. KENYA ELECTRICITY GENERATING COMPANY PLC 20 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Joshua Choge, MBS Mwenyekiti wa Bodi KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 21 OUR BUSINESS Managing Director & CEO’s Statement KenGen is committed to implementing the planned projects pipeline in order to meet future electricity demand for the nation, while enhancing value for our shareholders. Dear Shareholder, I am delighted to report that this year, we have made excellent progress in achieving our key strategic priorities in capacity development, operational excellence, regulatory management and organizational health. This was made possible because of dedicated employees as well as strengthened relationships with energy sector peers, investors, policymakers and leaders at the community, county and national levels. While each of our stakeholders has a different set of issues they care about, they all want to know what we are doing to address the cost and reliability of the power we generate. They want to know the Company’s sustainability strategy: they ask questions that quickly get to the heart of their concerns and interests. KENYA ELECTRICITY GENERATING COMPANY PLC 22 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 As the largest power generation utility in East Africa, we Building on our strength as the leading African Geothermal have a unique responsibility to leverage our strengths and Consultant, our long-term growth strategy entails expertise to develop sustainable solutions that address the developing strong regional partnerships. During the year, complex issues raised by our stakeholders. GoK signed a Memorandum of Understanding with the Government of Djibouti within which framework KenGen The convergence of stakeholder demands requires that [SYPHIQTPS]MXWI\TIVXMWIXSHIZIPSTKISXLIVQEP½IPHW we remain committed to generating affordable power that Through our Geothermal Center of Excellence at Olkaria, enables achievement of the Big Four agenda, delivering we have also trained African participants in geothermal ½RERGMEPVIWYPXWXLEXKYEVERXIIELIEPXL]VIXYVRSR technology. Our role in capacity building was recognized investment to our shareholders and developing a robust internationally and, through the World Bank, we have been community engagement strategy. able to obtain a commitment for funding to strengthen 8LI'SQTER]´WGSVTSVEXIXLIQI±&YMPH²VI¾IGXW our Geothermal Centre of Excellence. Our expertise has our commitment to sustainability. We are investing in also attracted interest from geothermal licensees who building our capacity to create value for our shareholders, intend to collaborate with KenGen in their geothermal deepening relationships and seizing new opportunities that concession areas, thereby enhancing our revenue streams. address stakeholder concerns. Building Financial Strength Building Affordable Capacity ;IEVIGSQQMXXIHXSQEMRXEMRMRKMRZIWXSVGSR½HIRGI Our Generation-to-Generation Transformation Strategy in our long-cycle, capital intensive business. We remained is centered on affordability and value creation. Our cash generative at the operating level despite continued medium term goal is to add 721MW by year 2025 from investment over the last year in capacity expansion, which Geothermal, Solar, Wind and Hydro, which are green was mainly focused on geothermal. It is this investment sources abundantly available in our Country. These that will underpin further rapid growth going forward, developments tie in with the Least Cost Development with an overall objective of a steady return for our Plan addressing the affordability goal. shareholders. The root of affordability starts from the source of energy. During the year, our generation dispatch increased by We are committed to ensuring the power we generate is  JVSQ+;LMRXS+;LJSVXLI affordable. Indeed, during the year, we greatly progressed year ended 30 June 2018. This increase was recorded XLIGSRWXVYGXMSRSJE1;KISXLIVQEPTS[IVTPERX despite a persistent drought which affected water levels at Olkaria V which is expected to feed the grid in July [MXLMRSYVVIWIVZSMVWMRXLI½VWXLEPJSJXLI½RERGMEP 2019. Commitments for the addition of 124.34MW of ]IEV(MZIVWM½GEXMSRSJSYVIRIVK]WSYVGIWTEMHSJJEW innovative geothermal wellhead power to the grid are also geothermal generation catered for the hydro generation on track. HI½GMX In progression of our geothermal development agenda, we Overall, we delivered good results under a very challenging obtained the Eburru Geothermal Concession License and environment. These results provide vital information about we intend to undertake further exploration and appraisal SYV½RERGMEPLIEPXLJYXYVITVSNIGXMSRWERHSYXPSSO8LI] HVMPPMRKMRXLI½IPH EPWSKMZIYWERSTTSVXYRMX]XSVI¾IGXERHGLEVXSYV[E] As KenGen we endeavor to tap into the capability of our forward in terms of our overall strategic direction, aimed engineers, scientists and other professionals to develop at increasing shareholder value by growing our business. home-grown solutions. To this end, we are setting up an ;IQEHIE MRGVIEWIMRTVIXE\TVS½XJSVXLI]IEV in-house Innovation Research & Development Lab and IRHIH.YRI[LMGLXVERWPEXIWXS/WLW Calibration Center to provide a platform for developing QMPPMSR-R[IQEHIETVS½XSJ/WLWQMPPMSR and testing technological solutions. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 23 OUR BUSINESS Managing Director & CEO’s Statement 8LIMQTVSZIHTIVJSVQERGI[EWEVIWYPXSJRIX½RERGI (YVMRKXLI]IEV[IVIZMI[IHSYV¾IIXVIPMEFMPMX] income. Our Company’s total revenue increased by 4%, up maintenance strategy to enhance effectiveness and from Kshs 43,432 million in 2017 to Kshs 45,290 million. IJ½GMIRG] This was driven by a 20% growth in steam revenue, which Our Future Outlook MRGVIEWIHJVSQ/WLWQMPPMSRMRXS/WLW million in 2018. KenGen is committed to implementing the planned projects pipeline in order to meet future electricity At the same time, the revenue we generated from demand for the nation while enhancing value for our KISXLIVQEPTS[IVTPERXWMRGVIEWIHJVSQ/WLW shareholders. million in 2017 to Kshs17,112 million in 2018, a growth of  8LMWVIMRJSVGIWSYVWXVEXIKMGTPER[LMGLJSGYWIWSRXLI In line with our current revamped Horizon II strategy, we production of geothermal energy. plan to increase our generation capacity on a continuous basis. In the coming year, we are committed to delivering During the period under review, we had no plants planned XLI1;3POEVME:KISXLIVQEPTVSNIGX8LI½VWX JSVGSQQMWWMSRMRKERHXLIVIJSVIHMHRSXFIRI½XJVSQ unit of 82.7 MW is scheduled for commissioning in April tax credits which are normally given when a new plant is 2019 and the second unit in July 2019. We also expect GSQQMWWMSRIH8LIVIJSVIXLITVS½XEJXIVXE\MW/WLW XSWXEVXMQTPIQIRXEXMSRJSV3POEVME-9RMX 1; MR QMPPMSRGSQTEVIHXS/WLWQMPPMSRPEWX]IEV XLMWGSQMRK½RERGMEP]IEV[MXLETPERRIHGSQQMWWMSRMRK Building Operational Excellence in January 2021. Other projects in the pipeline, for a total of 472 MW, are at various stages of preparation and cut Safety is one of our core values ingrained in how we across the renewable sources of geothermal, wind, solar operate the Company. In 2017, we lowered the total and hydro. These are projects planned for implementation reportable injuries by over 30% by investing in staff safety in the medium-term period spanning 2019 to 2022. programs. Our goal is for everyone to return home safely each day. As a Company, we are truly living in exciting times, where we have become the reference point for operational Our geothermal power plants achieved a combined excellence in the industry. The Rural Electricity Authority capacity factor of 94% in 2018. During the critical months has approached KenGen to run the 50MW Solar Plant in of November 2017 through April 2018, when low-cost Garissa and negotiations are ongoing to establish the terms power was needed most to mitigate low hydrology, the of the Operations and Maintenance Contract. ¾IIXGETEGMX]JEGXSV[EW 7M\  SJXLIKISXLIVQEP power stations continuously operated without shutdown We are proud of this development as it means we are during the year, a record achievement. not only making the right decisions and choices for the Company, but are totally on-track and in-sync with our In May 2018, we had favourable weather conditions vision of being the leaders in power generation in the characterized by high rainfall which led to increased water Eastern Africa Region. MR¾S[WMRXSSYVL]HVSHEQW[MXL1EWMRKETIEOMRKEX 1,057.75m, the highest in 20 years. This greatly enhanced To be able to further build and cement our reputation our hydro generation availability and downscaled the and bring out our best, our staff have already undergone thermal energy requirement. training in readiness for this new exciting and challenging opportunity. Our thermal plants performed well, achieving a forced outage rate of only 5% in 2018. Due to favorable The Company continues to explore partnerships with hydrology and good dispatch from our geothermal plants, KISXLIVQEPGSRGIWWMSREPPMGIRWILSPHIVWSJRI[½IPHWWS our dispatch from these plants was depressed at only 40% as to assist the harnessing of this magical green resource in load factor in 2018. We are aligned to the Government’s pursuit of our capacity expansion agenda and for greater agenda to reduce the cost of power. national good. KENYA ELECTRICITY GENERATING COMPANY PLC 24 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 This also serves to mitigate climate change while furthering We cannot afford to rest on our laurels and we shall our care for the environment and promoting our position therefore pursue current programs while continually as a good corporate citizen. reviewing and bringing on board new targeted initiatives to sustain the leadership funnel, smooth out succession We initiated review of our organization structure to at KenGen and ensure lasting value-creation for our ensure continued agility and remain responsive to the shareholders. changing business circumstances. We expect the process to result in enhanced focus on community engagement Gratitude MWWYIWXSTVSQSXIQYXYEPP]FIRI½GMEPGSI\MWXIRGI[MXL I sincerely thank the Board of Directors and the entire the communities living around our power installations. KenGen family for their dedication and zeal to drive the The review will also be expected to bring to the fore how Company’s agenda. STIVEXMSREPIJ½GMIRG]EGVSWWXLIFYWMRIWWGERFIMQTVSZIH I am proud of what we do and grateful for your %WXLI1( ')3SJXLMWKVIEX'SQTER]-EQ½VQP] commitment. cognizant of the fact that good leadership is the bedrock of our success. I am therefore determined and keen to invest in leadership development at all levels across the business in order to build leaders empowered and motivated to continue our great journey to greater heights Rebecca Miano (MRS.) OGW of achievement. Managing Director & CEO KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 25 OUR BUSINESS 9NYQFIOYXSOEO[E1OYVYKIR^M1OYYRE%½WE1XIRHENM KenGen ina nia ya kutekeleza bomba la miradi iliyopangwa LOLNX¼NLDPDKLWDML\D umeme ya baadaye kwa taifa, huku ikiboresha thamani kwa wanahisa wetu. Mpendwa Mwenyehisa, 2MREJYVELEOY[EVMTSXMEOY[EQ[EOELYYXYQIXMQM^EQEIRHIPISQE^YVMOEXMOEOY½OMEZMTEYQFIPIQYLMQYZ]EOMQOEOEXM katika ustawishaji wa uwezo, ufanisi wa uendeshaji, udhibiti wa kanuni na uthibiti wa hali ya Usimamizi. Hii iliwezekana kwa sababu ya kujitolea kwa wafanyakazi pamoja na pia kuimarishwa kwa mahusiano na wadau wengine katika sekta ya nishati, wawekezaji, watoaji sera na viongozi katika jamii, kaunti na ngazi za kitaifa. Wakati kila mmoja wa wadau wetu wakiwa na masuala mbalimbali wanayoyajali, wote wanataka kujua nini tunachofanya katika kushughulikia gharama na uaminifu wa nguvu za nishati tunayozalisha. Wangependa kufahamu mkakati endelevu wa /EQTYRM[EREYPM^EQEW[EPMEQFE]S]ERE½OMEYTIWMOMMRMGLEWLEYOYREQEWPELM]ES KENYA ELECTRICITY GENERATING COMPANY PLC 26 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Sisi kama shirika kubwa la uzalishaji umeme katika Afrika Sisi kama KenGen tunajitahidi kutumia uwezo na ujuzi Mashariki, tuna jukumu la kipekee la kuimarisha uwezo wa wahandisi wetu, wanasayansi na wataalamu wengine na utaalamu wetu wa kuendeleza ufumbuzi endelevu OYIRHIPI^EYJYQFY^M[ELYQYO[IXYRHERM-PMOY½OME unaoweza kushughulikia matarajio magumu yaliyotolewa na LEXMQELMMXYREER^MWLEOMXYSGLE9XE½XMRE9JYQFY^M wadau wetu. na kituo cha Ukadriaji ili kutoa jukwaa la kuendeleza na kupima ufumbuzi wa teknolojia. Kupokewa kwa mahitaji kutoka kwa wadau kunatufanya tudumishe nia ya kuzalisha nguvu za umeme za bei Kujenga juu ya uwezo wetu kama Mshauri mkuu wa REJYY^EOYJERMOMWLENMXMLEHE^EOY½OME%NIRHE2RI/YY Nishati ya Kioevu barani Afrika, mkakati wetu wa ukuaji wa kuwasilisha matokeo ya kifedha ambayo yanahakikisha muda mrefu unajumuisha kuendeleza ushirika wa kikanda. upataji faida imara kutokana na uwekezaji wetu na Katika mwaka tunaouzungumzia, Serikali ya Kenya ilisaini kuendeleza mkakati wa ushiriki wetu katika jamii. Mkataba wa Maelewano na Serikali ya Djibouti ambapo ndani ya mfumo wake KenGen itaweza kutumia utaalamu Mandhari ya Kampuni ya 2018, “Kujenga”, yanaonyesha wake kustawisha maeneo ya uzalishaji kioevu. Kupitia Kituo ahadi yetu ya uendelevu. Tunawekeza katika ujenzi uwezo chetu cha Ustawishaji Utendakazi bora wa kioevu kilichoko wetu wa kubuni thamani kwa wanahisa wetu, kuimarisha Olkaria, tumetoa mafunzo kwa washiriki kutoka nchi za mahusiano na kuwania fursa mpya za kushughulikia Kiafrika katika nyanja ya teknolojia ya kioevu. matatizo ya wadau. Jukumu letu katika kujenga uwezo lilitambuliwa kimataifa Kujenga Uwezo wa Bei Nafuu na, kupitia Benki ya Dunia, tumeweza kupata ahadi ya Mkakati wetu wa mageuzi wa Uzalishaji hadi Uzalishaji kupatiwa fedha za kuimarisha Kituo cha Utendakazi bora umeasisiwa juu ya uwezo na uundaji wa thamani. Lengo wa kioevu. Utaalamu wetu pia umeweza kuwavutia watoaji yetu katika kipindi cha muda mrefu ni kuongeza megawati leseni za uzalishaji wa nishati ya kioevu ambao wanataka OY½OMEQ[EOE[E]EOYXSOERERE/MSIZY2KYZY kushirikiana na KenGen katika maeneo yao ya ufumbuzi wa za jua, Upepo na Maji, ambavyo ni vyanzo vya kimazingira kioevu na hivyo basi kuimarisha nyenzo zetu za mapato. WE½ZMREZ]STEXMOEREO[E[MRKMOEXMOE2GLM]IXY1EIRHIPIS Kujenga Uwezo wa Kifedha haya yameunganishwa na Mpango wa Maendeleo ya Gharama Nafuu wa kushughulikia malengo ya uwezekano Tunajitolea kudumisha ujasiri wa uwekezaji katika duara wa unafuu. letu la muda mrefu, biashara ya mtaji mkubwa. Tulizidisha ari yetu ya kuzalisha fedha katika kiwango cha uendeshaji Kiini cha unafuu kinatokana na chanzo cha nishati. Sisi licha ya kuwepo uwekezaji ulioendelea zaidi mwaka jana tunajitolea katika kuhakikisha nguvu tunayozalisha ni ya bei katika upanuzi wa uwezo, ambao ulikuwa unazingatia nafuu. Kwa hakika, mwakani, tuliendeleza sana ujenzi wa nyanja ya kioevu. Ni uwekezaji huu ambao utaimarisha OM[ERHEGLEYXSENMYQIQI[EQIKE[EXM[E3POEVME ukuaji wa kasi, na lengo la jumla la kuleta faida ya :EQFESYREXEVENM[EOY½HMEKVMHMOEXMOEQ[I^M.YPEM kutegemewa kwa wanahisa wetu. Kujitolea katika kuongeza megawati124.34 za nguvu za umeme wa upepo kwa gridi ya taifa pia ziko sawa katika Katika kipindi cha mwaka huu, uzalishaji na utoaji nishati mpango wetu. YPMSRKI^IOEO[EEWMPMQMEOYXSOE1EWEE]E+MKE[EXM mwaka 2017 hadi Masaa ya Gigawati 7,989 kwa mwaka Katika kutekeleza ajenda yetu ya maendeleo ya nishati ya uliomalizikia tarehe 30 Juni 2018. Ukuaji huu ulipatikana kioevu, tulipata Leseni ya Makubaliano ya Kioevu ya Eburru licha ya kuwepo kwa hali ya ukame unaoendelea ambao na tunatarajia kufanya uchunguzi zaidi na utathmini wa uliathiri viwango vya maji ndani ya mabwawa yetu katika uchunguzi huo katika maeneo. nusu ya kwanza ya mwaka wa fedha . Utofautishaji wa vianzo vyetu vya nishati ulileta natija nzuri kwa vile uzalishaji kupitia kioevu palipokuwa na upungufu wa uzalishaji kupitia maji. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 27 OUR BUSINESS 9NYQFIOYXSOEO[E1OYVYKIR^M1OYYRE%½WE1XIRHENM /[EYNYQPEXYPM½OMEQEXSOISQE^YVMPMGLE]EOY[ITS upungufu wa haidrolojia, sababu ya uwezo wa ujazo mazingira magumu sana. Matokeo haya yanatoa taarifa YPMSPMOY[E[EOMQEGLEEWMPMQME7MXE  QMSRKSRMQ[E muhimu kuhusu hali yetu ya kifedha, makadirio ya baadaye vituo vya umeme wa kioevu viliendelea kuendeshwa bila ya na mtazamo katika mstakabala wetu. Pia yanatupa fursa kusita katika kipindi cha mwaka huo, ikiwa ni mafanikio ya ya kutafakari na kupanga mwelekeo wa kusonga mbele kutambulika. kwa mujibu wa mtazamo wetu wa kimkakati, unaolenga Mnamo Mei 2018, tulikuwa na mazingira mazuri ya hali ya kuongeza thamani bora ya wanahisa kwa kukuza biashara hewa ambayo yaliyosababishwa na mvua kubwa ambayo hii yetu. ilifanya kuongezeka kwa maji katika mabwawa yetu ya maji, Tulipata ongezeko la asilimia 2 la faida kabla ya kulipa kodi na bwawa la Masinga likipanda hadi mita 1,057.75, ikiwa katika mwaka uliomalizikia Juni 30, 2018, ambao ikimaanisha ni juu zaidi katika kipindi cha miaka 20. Hii iliimarisha mno OMEWMGLEWLMPMRKMQMPMSRM/EXMOEXYPMTEXE uwezo wetu wa kuzalisha na kupungua kwa mahitaji ya JEMHE]EWLMPMRKMQMPMSRM9XIRHENMLYYYPMSMQEVMOE nishati ya joto. ulisababishwa na mapato kamili ya kifedha. Mapato ya jumla Viwanda vyetu vya utoaji nishati ya joto vilitekeleza kazi ya kampuni yetu yaliongezeka kwa asilimia 4, kutoka shilingi nzuri, kukiwa na upungufu wa nguvu wa asilimia 5 pekee milioni 43,432 mwaka wa 2017 hadi shilingi milioni 45,290. katika 2018. Kwa sababu ya hidrolojia nzuri na uhamisho Hii ilichochewa na ukuaji wa asilimia 20 uingizaji mapato, mzuri kutoka viwanda vyetu vya kioevu, uhawilisho wetu ambayo yaliongezeka kutoka shilingi milioni 5,189 katika OYXSOEO[EZM[ERHELMZMOYPMLE½½OEO[EWEFEFYY[I^S[E LEHMWLMPMRKMQMPMSRMOEXMOE asilimia 40 tu mwaka wa 2018. Tuko sawa katika kutekeleza Wakati huo huo, mapato tuliyozalisha kutokana na uzalishaji ajenda ya Serikali ili kupunguza gharama za nishati. nguvu za umeme wa uoevu yaliongezeka kutoka milioni Katika kipindi cha mwaka tunaoukariria makakati wa OEXMOELEHMQMPMSRMQ[EOE[E utegemeo wa matengenezo ya mitambo yetu ili kuongeza YOM[ERMYOYENM[EEWMPMQME,MMMREMQEVMWLEQTERKS[IXY ufanisi na utendakazi bora uliimarika. wa kimkakati unaozingatia uzalishaji wa nishati inayotokana na kioevu. Mtazamo wetu wa Siku za Baadaye Wakati wa kipindi hicho tunachoangazia, hatukua na KenGen inajotolea kutekeleza miradi yake iliyopangiwa mipango ya kuzindua viwanda vya uzalishaji nishati na MPMOY½OMEQELMXENM]EYQIQI]EFEEHE]I]EXEMJELMPMLYOY hivyo basi hatukufaidika na sahali ya kodi ambayo hutolewa ikiimarisha thamani bora kwa wanahisa wetu. kwa kawaida wakati kiwanda kipya kinapozinduliwa. Kwa Kwa mujibu wa mkakati wetu wa sasa wa Horizon II hiyo, faida baada ya kulipa kodi ni shilingi milioni 7,891 strategy, tunapanga kuongeza uwezo wetu wa uzalishaji MOMPMRKERMWL[EREWLMPMRKMQMPMSRM^EQ[EOENERE endelevu kimsingi. Katika mwaka ujao, tunanuia kutekeleza Kujenga Ufanisi wa Uendeshaji mradi wa uzalishaji nishati wa Olkaria V wa megawati /MXIRKSGLEO[ER^EGLEQIKE[EXMOMRETERK[E Usalama ni moja ya maadili yetu ya msingi yaliyoingizwa kuzinduliwa mwezi wa Aprili 2019 na kitengo cha pili katika jinsi tunavyoendesha shughuli za kampuni hii. Katika mwezi wa Julai 2019. Tunatarajia kuanza utekelezaji wa mwaka wa 2017, tulipunguza majeruhi yaliyoripotiwa kwa 3POEVME-9RMX QIKE[EXM OEXMOEQ[EOE[EOMJIHLE jumla ya zaidi ya asilimia 30 kwa kuwekeza katika mipango ujao, na kuzinduliwa kama ilivyopangwa katika mwezi ya usalama wa wafanyakazi. Lengo letu ni kutarajia kila mtu Januari 2021. Miradi mingine iliyo mpangoni, kwa jumla ya arudi nyumbani akiwa salama kila siku. megawati 472, ni katika hatua mbalimbali za maandalizi na /M[ERHEGLIXYGLEY^EPMWLENMRKYZY]EOMSIZYMPM½OMEY[I^S zinazoenea kote katika vyanzo vinavyoweza kurejeshwa wa pamoja wa asilimia 94 mwaka wa 2018. Katika miezi kama vile upepo wa mvua, upepo, nishati ya jua na maji. Hii muhimu ya Novemba 2017 hadi Aprili 2018, wakati nguvu ni miradi iliyopangiwa kutekelezwa katika kipindi cha muda za umeme za gharama nafuu zilihitajika zaidi ili kukabili mrefu kati ya 2019 hadi 2022. KENYA ELECTRICITY GENERATING COMPANY PLC 28 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Kama Kampuni, kwa hakika tunaishi katika nyakati za /EQE1OYVYKIR^M1OYYRE%½WE1OYY1XIRHENM[E kusisimua, ambapo tumekuwa kigezo cha kumbukumbu ya Kampuni hii adhimu, ninatambua kwa dhati ukweli kwamba ubora wa uendeshaji katika sekta hii. Mamlaka ya Umeme uongozi mzuri ndio chanzo cha mafanikio yetu. Kwa hiyo ya Vijijini imewasilian na KenGen ikitaka wasimamie ninanuia na niko makini kuwekeza katika maendeleo ya uendeshaji wa Kiwanda cha nguvu za umeme mjini ya Solar uongozi kwenye hatamu za ngazi zote katika shirika hili ili megawati 50 huko Garissa na majadiliano yanaendelea ili kubuni viongozi wenye nguvu na motisha ya kuendelea na kuweka vigezo vya Mkataba wa Uendeshaji na Usimamizi. safari yetu kubwa ya masafa marefu ya mafanikio. Tunajivunia maendeleo haya kwani inamaanisha kuwa Hatuwezi kumudu kupumzika hata kamwe na hivyo WMWMLEXYE½OMMXYQEEQY^MWELMLMREGLEKY^MQYEJEOEO[E basi tutafuatilia mipango ya sasa huku tunapoendelea kampuni, bali pia tuko sambamba katika kufuatilia na kuchunguza na kuingiza mipango mipya iliyopangwa ili kusawazisha maono yetu ya kuwa viongozi katika uzalishaji kuendeleza mfumo wa uongozi, upokezi nyadhifa mzuri wa nishati katika Eneo hili la Afrika Mashariki. katika KenGen na kuhakikisha kuwa thamani bora ya kudumu inapatikana kwa wanahisa wetu. Ili kuwa na uwezo wa kuendelea kujenga na kuimarisha sifa zetu na kudhihirisha uwezo wetu uliyo bora zaidi, Shukrani wafanyakazi wetu tayari wamepata mafunzo ili kuwa tayari Natoa shukrani zangu za dhati kwa Halmashauri ya kwa fursa hii mpya ya kusisimua na yenye changamoto. Wakurugenzi na familia yote ya KenGen kwa kujitolea Kampuni inaendelea kuchunguza ushirikiano na washikilizi kwao na jitihada zao za kufanikisha ajenda ya Shirika hili. leseni ya makubaliano ya udhamini wa maeneo mapya ili Ninajivunia kazi nzuri tunayofanya hapa na nawashukuruni OYWEMHMEOYYRKERMWLEVEWMPMQEPMLMMWE½MWMHLYVYQE^MRKMVE kwa kujitolea kwenu. kwa kufuata ajenda ya upanuzi wa uwezo na kwa manufaa zaidi ya kitaifa. Hii pia hutumikia kupunguza mabadiliko ya hali ya hewa huku tukiendeleza huduma zetu kwa mazingira na kukuza Rebecca Miano (MRS.) OGW msimamo wetu kama shirika raia mwema 1OYVYKIR^M1OYYRE%½WE1XIRHENM Tulianzisha mapitio ya muundo wetu wa shirika ili kuhakikisha ustawi unaoendelea unabaki na kuzidi kukabiliana hali ya biashara inayobadilika kila kukicha. Tunatarajia mchakato huo utasababisha kuzingatia zaidi kwenye masuala ya ushirikishwaji wa jumuiya ili kukuza kuwepo kwa ushirikiano kwa manufaa na jamii zinazoishi karibu na mitambo yetu ya uzalishaji nguvu. Tathamini hii pia uinatarajiwa kudhihirisha jinsi ufanisi wa uendeshaji biashara hii unaweza kuboreshwa. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 29 CORPORATE GOVERNANCE CORPORATE GOVERNANCE KENYA ELECTRICITY GENERATING COMPANY PLC 30 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Who Governs Us 32 Who Leads Us 38 2018 Corporate Governance Statement 43 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 31 CORPORATE GOVERNANCE Who Governs Us Mr. Choge, Chairman of the KenGen Board of Directors, born in 1958, holds a Bachelor of Science degree in Mathematics and Statistics. Mr Choge has a Master’s degree in Management and Leadership from the Management University of Africa and is currently pursuing a PhD in Leadership and Management. He is a trained accountant from Strathmore College and has been trained by the Chartered Institute of Purchasing and 7YTTP]9/SR4VSGYVIQIRX1EREKIQIRX1V'LSKILEWSZIV½JXIIR]IEVW´I\TIVMIRGI in the public sector in various positions including as Purchasing Manager and the Deputy Chief Internal Auditor at East African Portland Cement. He is fully conversant with corporate governance matters, having attended the critically acclaimed Corporate Governance Training for Directors, organised by the Centre for Corporate Governance. He has served as a Director at the Agricultural Finance Corporation where he was the Deputy Chairman of the Board and the Chairman of the Finance and Business Committee of the Board. He is an experienced businessman and a board member of several schools. He is also the Chairman of the Board of the African Inland Church, Kapsabet Bible College in Nandi County. Currently, he is the CEO of Talent Foundation International (TFI), a non- KSZIVRQIRXEPSVKERMWEXMSRXLEXMHIRXM½IWERHHIZIPSTWXEPIRXEQSRKRIIH]GLMPHVIR,I Joshua Choge, MBS is also a member of the Institute of Directors (Kenya). 1VW1MERSFSVRMRLSPHWE&EGLIPSVSJ0E[W 00& HIKVII[MXL,SRSYVWE diploma in Law and a Post-graduate studies in Comparative Law. In 2010, she completed the Advanced Management Programme from Strathmore Business School. She is a VIKMWXIVIH'IVXM½IH4YFPMG7IGVIXEV]SJ/IR]EERHMWEQIQFIVSJXLI-RWXMXYXISJ 'IVXM½IH7IGVIXEVMIW -'7 ERHXLI0E[7SGMIX]SJ/IR]E 07/ 7LIMWEQIQFIVSJXLI Institute of Directors (Kenya). Mrs. Miano was awarded the Company Secretary of the Year award in 2010 under the auspices of the ICPSK Champions of Governance. Mrs. Miano has attended various executive trainings including Management of Power Utilities (Sweden) and Program on Negotiation (Harvard Business School) 7LI[EWETTSMRXIHEWXLI1EREKMRK(MVIGXSV 'LMIJ)\IGYXMZI3J½GIVSRXL3GXSFIV 2017. She is a respected lawyer with a wide spanning career in the Energy Sector. She has been responsible for driving the corporate governance agenda in the Company, providing guidance and support to the Board and was the Secretary to the Board and all its Committees between 2008 and 2017. Rebecca Miano, OGW KENYA ELECTRICITY GENERATING COMPANY PLC 32 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 1V6SXMGLMWXLI'EFMRIX7IGVIXEV]JSV2EXMSREP8VIEWYV]&SVRMRLILSPHWE1EWXIV´W(IKVIIMR Economics and a Bachelor’s Degree in Economics (First Class Honours), both from the University of Nairobi. He also holds a Master’s Degree in Public Administration (MPA) from the Harvard Kennedy School, Harvard University. Prior to his appointment as Cabinet Secretary, he was the Head of Macroeconomics at the Treasury from 1EVGL9RHIVXLMWGETEGMX]LI[EWMRZSPZIHMRJSVQYPEXMSRSJQEGVSIGSRSQMGTSPMGMIWXLEXIRWYVIH IJ½GMIRXERHWYWXEMREFPITYFPMGWTIRHMRKEMQIHEXEGLMIZMRKXLI+SZIVRQIRX´WHIZIPSTQIRXTVMSVMXMIW-R addition, he was also involved in the preparation of key documents including budget statements, as well as TVSZMHMRKWXVEXIKMGGSSVHMREXMSRSJWXVYGXYVEPVIJSVQWMR½WGEPERH½RERGMEPWIGXSVW Prior to joining the Ministry of Finance, Mr. Rotich worked in the Research Department of the Central Bank of Kenya from 1994. Between 2001 and 2004, he was attached to the International Monetary Fund (IMF) Henry Rotich, EGH PSGEPSJ½GIMR2EMVSFMEWERIGSRSQMWX,IMWEPWSEHMVIGXSVMRWIZIVEPFSEVHWSJ7XEXI'SVTSVEXMSRWMRGPYHMRK -RWYVERGI6IKYPEXSV]&SEVH-RHYWXVMEP(IZIPSTQIRX&ERO'SQQYRMGEXMSR'SQQMWWMSRSJ/IR]EERHXLI Kenya National Bureau of Statistics. Dr. Eng. Njoroge, the Principal Secretary, State Department for Energy, was born in 1958. He holds a First- Class Honours degree in Electrical Engineering, Master of Business Administration with a major in strategic management and a Doctor of philosophy (PhD). He is a Chartered Electrical Engineer, a member of the Institution of Engineering and Technology UK, a registered consulting engineer, and is also a fellow of the Institution of Engineers of Kenya. Dr. Eng. Njoroge joined Kenya Power in 1980 and rose through the ranks to become the Managing Director from June 2007 until his current appointment to the position of Principal Secretary in the Ministry of Energy and Petroleum in May 2013. He then became the Principal Secretary in the State Department for Energy following reorganisation of the government structure. He is a distinguished electrical engineer with a career spanning three decades and has wide experience in power engineering and management. Joseph Njoroge, CBS 1VW2HIK[EFSVRMRLSPHWE&EGLIPSVSJ0E[W 00& HIKVIIERHE(MTPSQEMR0IKEP4VEGXMGIJVSQXLI Kenya School of Law. She is a member of the Law Society of Kenya and Christian Lawyers Fellowship. She has been a practising lawyer since 1988 when she was admitted to the bar. Mrs. Ndegwa previously served as a State counsel in the Law Reform Commission before entering private TVEGXMGI7LILEWFIIRETVMRGMTEPTEVXRIVMR1EMVE 2HIK[E%HZSGEXIWWMRGIHYVMRK[LMGLWLILEW engaged in civil, commercial and criminal litigation. She is also a member of the Institute of Directors (Kenya). Ziporah Ndegwa KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 33 CORPORATE GOVERNANCE Who Governs Us Dr. Arusei, born in 1957, holds a Bachelor of Science degree (Geology) from the University of Nairobi, Master of Science (Geochemistry) from the University of Leeds, UK and a Doctor of Philosophy (Geochemistry) from Moi University. He is formerly a senior lecturer, Department of Chemistry and Biochemistry at the University of Eldoret. Dr. Arusei supervises and marks thesis for doctorate and master’s students. He has attended various local and MRXIVREXMSREPGSRJIVIRGIWSRVIWIEVGLERHMRXLIKISGLIQMWXV]½IPH,ILEWEPWSTYFPMWLIHWIZIVEPVIWIEVGL publications and reports on geochemistry and geothermal studies. Dr. Arusei has previously worked as a lecturer and assistant lecturer at the Department of Chemistry and Biochemistry at the University of Eldoret. He has also worked as a geochemist in KenGen and the Ministry of Energy. He is also a member of the Institute of Directors (Kenya). Musa Arusei Mr. Bachia, born in 1959, holds a Bachelor of Arts degree in Building Economics from the University of Nairobi and a Global Executive MBA (GEMBA) from United States International University–Africa. As part of continuous professional education and personal development, he has attended amongst many other courses, the Owner Manager Program (OMP) at Strathmore Business School. He is a Registered Quantity Surveyor with the Board of Registration of Architects and Quantity Surveyors (BORAQS), a corporate member of the %VGLMXIGXYVEP%WWSGMEXMSRSJ/IR]E %%/ ERH-RWXMXYXISJ5YERXMX]7YVZI]SVWSJ/IR]E -57/ EQIQFIV SJXLI'LEVXIVIH-RWXMXYXISJ%VFMXVEXSVW '-%VF EQIQFIVSJXLI-RWXMXYXISJ(MVIGXSVW /IR]E ERHMWE 'IVXM½IH4VSJIWWMSREP1IHMEXSV,IMWEREGXMZI%VFMXVEXSVERHGSRWYPXERXMRXLIEVIEWSJ(MWTYXI6IWSPYXMSR and Construction Contract Management. Mr. Bachia who has previously worked as a quantity surveyor in both the public and private sectors, is currently the Team Leader and Quality Control Director of Masterbill Integrated Projects and MIP Project Kairu Bachia Management Ltd. ,IMWXLIGLEMVQERXLI.SMRX&YMPHMRK'SYRGMPETEWXGLEMVQERSJXLI%VGLMXIGXYVEP%WWSGMEXMSRSJ/IR]EE TEWXGLEMVQERERHGETXEMRSJ1YXLEMKE+SPJ'PYF 1+' ERHETEWXWIGVIXEV]SJXLI/IR]E4VSJIWWMSREP Boxing Commission (KPBC). He has also served as a Council Member of the management of Professional Centre for the Association of Professional Societies of East Africa and is a committee member in the Ethics and Practice Committee of BORAQS. KENYA ELECTRICITY GENERATING COMPANY PLC 34 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Mr. Sitati, born in 1973, holds a Bachelor of Science (Mechanical Engineering) from the University of Nairobi. ,IMWE*IPPS[SJXLI%WWSGMEXMSRSJ'LEVXIVIH'IVXM½IH%GGSYRXERXWERHMWETPEXMRYQQIQFIVSJXLI Information System Audit and Control Association. He has attended various professional development training programs. ,ILEWTVIZMSYWP]FIIRXLI'LMIJ*MRERGIERH%HQMRMWXVEXMSR3J½GIVEX(IEGSRW)EWX%JVMGE40' Commercial Finance Manager – Central East & West Africa Business Unit at the Coca-Cola Company, Nairobi, Group Finance Director at Old Mutual Group, Nairobi, and Finance Manager at Shell BP Kenya Limited amongst other positions. He is also a member of the Institute of Directors (Kenya). Joseph Sitati Mr. Nduranu was born in 1974 and holds a BSc (Business Administration-concentration in Finance, Real Estate and Law) magna cum laude from California State Polytechnic University and Master of Financial Engineering from the University of California Berkeley. He is the Principal (director and shareholder) of Black Gold Investments Ltd, a bespoke transaction advisory JSVTVMZEXIIUYMX]JYRHMRK,ILEWTVIZMSYWP]IRKEKIHMR½RERGMEPXVERWEGXMSREHZMWSV][SVOMRERMRHMZMHYEP capacity, has been the East Africa Portfolio Manager at Acumen Fund and Property and Fixed Income Portfolio Manager at African Alliance Kenya Management Company amongst other positions. He is also a member of the Institute of Directors (Kenya). Maurice Nduranu Mrs. Wakiaga, born in 1981, holds a Bachelor of Law from the University of Nairobi, Diploma in Law from Kenya School of Law, Masters in Business Administration from Jomo Kenyatta University of Agriculture and Technology, and Masters in International Trade and Investment Law from University of Nairobi. She also holds a Higher Diploma in Human Resources Management from the Institute of Human Resource Management. She is an advocate of the High Court and a member of Law Society of Kenya. She is also an associate member of the Institute of Human Resource Management. She has also attended various professional legal, leadership and strategy training programs. 1VW;EOMEKEMWTVIWIRXP]XLI'LMIJ)\IGYXMZI3J½GIVSJ/IR]E%WWSGMEXMSRSJ1ERYJEGXYVIVW7LIMWE member of the Governing Council of the Management University of Africa and the United Nations Global Compact Network Representative in Kenya. She is also a member of the Institute of Directors (Kenya). Phyllis Wakiaga KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 35 CORPORATE GOVERNANCE Who Governs Us (V6IKMREPHE;ER]SR]MFSVRMRLSPHWEFEGLIPSV´WHIKVIIMRIHYGEXMSR IGSRSQMGWERHFYWMRIWW studies) from Kenyatta University, She holds a doctor of Philosophy degree and a master’s degree in environmental studies from Moi University. She has served at Moi University as a Head of department, lecturer, senior administrator and a member of the University Integrity service Committee (V;ER]SR]MMWXLI½VWX[SQERQIQFIVSJTEVPMEQIRXJSV&YRKSQE'SYRX]  7LI[EWMRXIKVEP to the initiation and passing of key legislation including The Water Act and The Forest Act. Dr. Wanyonyi is a lead expert with the National Environment Management Authority (NEMA). She is a member of the Kenya Institute of Environment and The Kenya Institute of Directors She has held directorship positions at the Jomo Kenyatta Foundation (JKF) and New Partnership for Africa’s Development (NEPAD). She has been on the forefront in the drive to promote education that has seen her heavily engaged in the distribution of books and school equipment to many schools in Kenya. She has been a board member at Lugulu Girls High School and many other schools. She is the recipient of the African Women Inspirational Leadership award 2018 by the Mandela Legacy Reginalda Wanyonyi Center for Leadership and Development in recognition of her efforts and inspiration towards improving the social, economic and political status of women in her community. Dr. Wanyonyi is a family woman and a Christian who is a recognized Jerusalem Pilgrim. She has been a trustee at leading NGOs such as Sacred Africa and Inter-Christian Fellowship Mission (ICFEM). 1V1YLY[EWFSVRMRERHLSPHWE&7G 1EXLIQEXMGW 7XEXMWXMGW JVSQ/IR]EXXE9RMZIVWMX]&4LMP (Economics) and an MA in Economics from the University of Nairobi. He also holds a Diploma in Financial Management from KCA University. He is the alternate director to the Cabinet Secretary, National Treasury. Mr. Muhu is an Economist with over 20 years of experience in various government ministries and departments. Humphrey Muhu 1V1FEOE[LS[EWFSVRMRLSPHWE&EGLIPSVSJ)HYGEXMSR &YWMRIWW7XYHMIW JVSQ/IR]EXXE9RMZIVWMX] and Master of Business Administration from Birmingham University, UK. He is an Association of Chartered 'IVXM½IH%GGSYRXERX %''% ,ILEWEXXIRHIHWIZIVEPGSYVWIWSRPIEHIVWLMTTYFPMGTSPMG]QEREKIQIRX ½RERGMEPQEREKIQIRXERHPIEHIVWLMTEXZEVMSYWMRWXMXYXMSRWFSXLPSGEPP]ERHEFVSEH He is the alternate director to the Principal Secretary, Ministry of Energy (MoE) and is currently the Senior (ITYX](MVIGXSV&YHKIXEX1S)1V1FEOELEWSZIV]IEVW´I\TIVMIRGIMR½RERGMEPQEREKIQIRXMRXLI Government of Kenya. William Mbaka KENYA ELECTRICITY GENERATING COMPANY PLC 36 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Our BOARD OF DIRECTORS Our MANAGEMENT TEAM KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 37 CORPORATE GOVERNANCE Who Leads Us Executive Committee (ExCo) The team is headed by the Managing Director & CEO and comprises of all the Divisional Directors. This Committee serves as a link between the Board and Management. ExCo has a mandate and responsibility to ensure compliance with the statutory and regulatory framework, guidelines and adherence to Company policy and procedures. It convenes its meetings on a weekly basis or as the FYWMRIWWQE]HMGXEXIXSHMWGYWWWXVEXIK]JSVQYPEXMSRERHMQTPIQIRXEXMSRTSPMG]QEXXIVWERH½RERGMEPTIVJSVQERGI Mrs. Rebecca Miano holds a Bachelor of Laws (LLB) degree with Honours, a diploma in Law and a Post-graduate studies in Comparative Law. In 2010, she completed the Advanced Management Programme from Strathmore University. She is a registered 'IVXM½IH7IGVIXEV]SJ/IR]EERHMWEQIQFIVSJXLI-RWXMXYXISJ'IVXM½IH7IGVIXEVMIW (ICS) and the Law Society of Kenya (LSK). 1VW6IFIGGE1MERS[EWETTSMRXIHXLI1EREKMRK(MVIGXSV 'LMIJ)\IGYXMZI3J½GIVSJ KenGen with effect from 30th October 2017. She has been the Company Secretary and Legal Affairs Director of the Company since 2008. She is a respected lawyer with a wide spanning career in law and corporate governance. Mrs. Miano is responsible for the operational running of the Company to ensure that XLIQMWWMSRMWEGLMIZIHERHIJ½GEG]SJXLIFYWMRIWWMWSTXMQM^IH8LI')3MWEGGSYRXEFPI for the Company’s actions, security of resources as well as ensuring execution of the MHIRXM½IHGSVTSVEXIWXVEXIK]JSVPSRKXIVQGSQTIXMXMZIRIWW-REHHMXMSRXSVITVIWIRXMRK the management position on the Board, the MD & CEO chairs and supervises the Executive Committee (ExCo) comprising nine divisional directors. Rebecca Miano Managing Director & Departments (additional direct reports): Internal Audit and Security & Integrity. 'LMIJ)\IGYXMZI3J½GIV Eng. Solomon Kariuki, holds a Bachelor of Science Degree in Electrical and Electronics Engineering and a Master’s degree in Business Administration (Operations) both from the University of Nairobi. He boasts an illustrious career in the energy power sector spanning over 28 years. 4VMSVXSXLIETTSMRXQIRXEW3TIVEXMSRW(MVIGXSVSRWX%YKYWXLI[EWXLI Technical Services Manager. He joined Kenya Power and Lighting Company as a Trainee Engineer 28 years ago and served KenGen in various capacities, ultimately growing through the ranks to the current position of Operations Director. Key responsibilities comprise overseeing Operations and maintenance of power plants and availability at optimized costs, rehabilitation and upgrade of plants through uptake of latest technology to improve operation and extend effective plant life as well as continuous improvement and automation of systems to align with best practice. Departments: Eastern Region, Thermal, Upper Tana, Technical Services, Western Region and Operations Dispatch. Eng. Solomon Kariuki Operations Director KENYA ELECTRICITY GENERATING COMPANY PLC 38 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 CS Paul Ndungi holds a Bachelor of Laws (LLB) degree with Honours from University of Nairobi, and a Diploma in Law from the Kenya School of Law. He is an Advocate of the High 'SYVXSJ/IR]E'SQQMWWMSRIVJSV3EXLW2SXEV]4YFPMGEW[IPPEWEVIKMWXIVIH'IVXM½IH 7IGVIXEV],IMWEQIQFIVSJXLI-RWXMXYXISJ'IVXM½IH7IGVIXEVMIW -'7 ERHXLI0E[7SGMIX] of Kenya (LSK). He is currently pursuing a Master of Laws – Dual LL.M in U.S. Law and International Corporate Law at the Washington University - St. Louis School of Law. He joined KenGen as the Company Secretary and Legal Affairs Director on July 25, 2018. Prior to joining KenGen, he served as the Company Secretary and Senior Legal Counsel at Barclays Bank of Kenya Limited. He has also previously served in various legal and governance capacities at Ecobank Kenya Limited, I&M Bank Limited, First American Bank of Kenya Limited and M/s TripleOKLaw Advocates. As the Company Secretary and Legal Affairs Director, he is responsible for, among other things, driving the Corporate Governance agenda of the Company, providing legal guidance and support to the Board and Management as well as supervising the Property and Insurance Departments. His stewardship has led to international recognition, including selection in 2015 and again CS Paul K. Ndungi in 2017 by The Legal 500, an international in-house lawyer resource organization, to their Company Secretary & Legal Affairs Director General Counsel Powerlist: Africa. Departments Legal, Shares & Board Services, Property and Insurance. Mr. Abraham Serem is a seasoned human resource practitioner with vast experience both in Kenya and East Africa. He holds a Bachelor of Arts degree from the University of Nairobi. ,MWSXLIVTVSJIWWMSREPUYEPM½GEXMSRWMRGPYHI,MKLIV2EXMSREP(MTPSQEMR,YQER6IWSYVGI Management and a Diploma in Intermediate Executive Coaching from the Academy of Executive Coaching. He is a member of the Institute of Human Resource Management. Prior experience includes: Heineken East Africa Ltd where he held the position of HR Director, East Africa Breweries Ltd, Nampak East Africa and Reckitt Benckiser East Africa, where he held various senior managerial positions. Mr. Serem joined KenGen management team on 1EVGLWXEWXLI,YQER6IWSYVGIERH%HQMRMWXVEXMSR(MVIGXSV,IMWVIWTSRWMFPI for human capital planning, recruitment, development, performance management, reward and wellness. He is also in charge of employee relations, as well as management of all the Company’s transport and logistics. Departments: Administration, Human Resource Services, Human Resource Development and Talent. Abraham Serem Human Resources & Administration Director KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 39 CORPORATE GOVERNANCE Who Leads Us 1V.SLR1YHER]MWE^IEPSYW½RERGMEPQEREKIQIRXI\TIVX[MXLSZIV]IEVWI\XIRWMZI experience in business transformation, strategy, marketing, and operational leadership. He holds Master of International Business Administration (USIU, San Diego, California, USA), Master of Business Administration (USIU, San Diego, California, USA) and Bachelor of Commerce (University of Nairobi). He is a member of the Kenya Institute of Management /-1 ERH*IPPS[SJXLI-RWXMXYXISJ'IVXM½IH4YFPMG%GGSYRXERXWSJ/IR]E -'4%/  1V1YHER]MWEGXMZIP]MRZSPZIHMRXLIHIZIPSTQIRX½RERGMRKERHI\IGYXMSRSJ:MWMSR ¾EKWLMT)RIVK]4VSNIGXW,ITEVXMGMTEXIHMRXLIHIZIPSTQIRXSJXLI)RIVK]4SPMG]ERH Energy bill 2012. Before joining KenGen in November 2008, Mr. Mudany worked at Coca Cola (Finance and Performance Manager), Orbit Distributors (MD & CEO), Kenya Airways (Head of Finance), World Vision International and PriceWaterhouseCoopers. Mr Mudany joined KenGen in November 2008 as the Finance and ICT Director. His key VIWTSRWMFMPMXMIWMRGPYHI'ETMXEPVEMWMRKQEREKIQIRXSJ½RERGIWERHFEROMRKVIPEXMSRW ½RERGMEPVITSVXMRKFYHKIXWTVSGIWWQEREKIQIRXERHGSRXVSPFEPERGIWLIIXVIWXVYGXYVMRK and cost saving mechanisms. He is also responsible for development of Cutting-Edge John Mudany, CPA(K) Finance & ICT Director Information Technology infrastructure. ,ILEWYRHIVXEOIRXVEMRMRKW[MXLZEVMSYWYRMZIVWMXMIWWSQISJ[LMGLMRGPYHI%HZERGIH Management Program at IESE Business School (Spain) and Pan Africa University – Lagos Business School, The Effective Director at Strathmore Business School, Leadership and Strategic Planning at London Business School. Departments: Corporate Finance, Finance and Information Communication & Technology. Eng. Simon Ngure is a versatile engineer with vast experience in the energy sector management and stakeholder relations. He holds a Bachelor of Science degree in Mechanical Engineering, Diploma in Geothermal Technology, a Diploma in Project Management as well as a Diploma in Executive Coaching from the Academy of Executive 'SEGLMRK,IMWE'IVXM½IH)RIVK]1EREKIVERHE6IKMWXIVIH)RKMRIIV,IMWEQIQFIV of the Institute of Engineers of Kenya, the Association of Energy Engineers of Atlanta, USA and the current President of the Association of Energy Professionals of Eastern Africa. He has 34 years’ experience in the power sector. He joined Kenya Power in September ERHWIVZIHMR/IR+IRYTXSLMWETTSMRXQIRXEW6IKYPEXSV]ERH'SVTSVEXI%JJEMVW Director in 2008. He is responsible for drafting, negotiating and managing power purchase agreements (PPAs). He is also in charge of environmental and social licensing and management processes as well as maintenance of ISO Quality and Environmental System, Safety, Clean Development Mechanism and carbon credit sales and maximizing brand value through effective corporate affairs management. Departments: Regulatory Affairs, Quality & Safety, Environment & CDM, Communication Eng. Simon Ngure Corporate & Regulatory Services and Community Relations. Director KENYA ELECTRICITY GENERATING COMPANY PLC 40 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Mr. Moses Wekesa is a seasoned project manager with diverse experience spanning over ]IEVWMRZEVMSYWIGSRSQMGWIGXSVWMR)YVSTI%WMEXLI4EGM½GERH%JVMGE He is a registered Project Manager with the Project Manager’s Chapter of the Architectural Association of Kenya. He holds a Bachelor of Science degree in Mechanical Engineering (Hons) from Jomo Kenyatta University of Agriculture and Technology (JKUAT), Master of Science degree in Mechanical Engineering (Applied Mechanics) from the 9RMZIVWMX]SJ2EMVSFMERHETSWXKVEHYEXIGIVXM½GEXIMRTVSNIGXTPERRMRKTVSNIGXETTVEMWEP ERH½RERGMRKJVSQ9RMZIVWMX]SJ&VEHJSVH9/,ILEWYRHIVKSRIZEVMSYWPIEHIVWLMT development programmes and is a graduate of Advance Management Programme from Strathmore Business School. He was appointed as the Business Development Director in 2014 and is responsible for driving the Company’s core business of capacity expansion through planning and execution of projects and development of non-power generation revenue sources through new business. His previous experience includes management of projects in the wide infrastructure sector. Mr. Moses Wekesa Business Development Director Departments: Project Execution, Capital Planning & PPP and New Business. Eng. Abel Rotich has been serving as the Geothermal Development Director since September 2014. Abel is a seasoned power sector engineer and manager with a wealth of experience in power generation ranging from Thermal, Gas, Wind, Hydro to Geothermal. He holds a Bachelor of Science degree in Mechanical Engineering and is currently pursuing his Master’s in Business Administration. He holds several project management GIVXM½GEXMSRWERHMWEKVEHYEXISJ%HZERGIH1EREKIQIRX4VSKVEQJVSQXLITVIWXMKMSYW Strathmore University. He joined Kenya Power Company Limited more than thirty years ago and rose through XLIVEROWERHVI½RIQIRXWXSXLITSWMXMSRSJ+ISXLIVQEP(IZIPSTQIRX(MVIGXSVMR KenGen in September 2014, having previously served as a manager in, Thermal, Gas, Wind and Hydro power plants. He is the current Chairman of the Geothermal Association of Kenya, a former Branch Chairman of The Institution of Engineers of Kenya and a member of the Geological Society of Kenya. He is a registered engineer and a member of the Institution of Engineers of Kenya (IEK). Eng. Abel Rotich Geothermal Development Director He is responsible for geothermal resource development and geothermal plant operations ERHQEMRXIRERGI,IXLIVIJSVISZIVWIIWKISXLIVQEPTPERRMRKWGMIRXM½G[SVOW environmental and social impact management, infrastructure development, geothermal deep drilling, steam establishment for power generation and operation of electricity power plants with an installed capacity of 533.9 MW within the geothermal area. Geothermal power is the baseload source of power to the national grid and thus demands critical management to ensure the high availabilities and best returns for the organization. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 41 CORPORATE GOVERNANCE Who Leads Us Mr. David Muthike is a distinguished business strategist with tested experience in power sector strategy-formulation and implementation. He holds a Bachelor of Science degree in Electrical and Electronic Engineering, Master of Business Administration in Strategy, Post- +VEHYEXIHMTPSQEMR4VSNIGX%TTVEMWEPERH1EREKIQIRXERHEGIVXM½GEXIMR%HZERGIH Management and Leadership Programme. He is a graduate Engineer with Institution of Engineers of Kenya (IEK) and a member of Kenya Institute of Management (KIM). He joined KenGen in 1998 and was appointed to the Company’s Strategy and Business Performance Division in September 2014. A major role of this function is to support the Company in maintaining “thought leadership” in power generation and related services. His responsibilities include: development and management of the Company’s strategy by MHIRXMJ]MRKERHHVMZMRKI\IGYXMSRSJWXVEXIKMGMRMXMEXMZIWERHKVS[XLSTTSVXYRMXMIWHVMZMRK XLIMRRSZEXMSRTVSGIWWXLEXHIZIPSTWRI[[E]WSJQIIXMRKXLI'SQTER]´WKSEPWPIEHMRK and managing the Company’s result-based performance and accountability system and driving knowledge harvesting and transfer across the business. He previously worked in various divisions and departments within the Company, including: Managing Director’s David Muthike 3J½GI'SVTSVEXI4PERRMRK8IGLRMGEP%YHMXERH-RWXMXYXMSREP7XVIRKXLIRMRK Strategy & Innovation Director Departments: Strategy and Innovation. Mr. Philip Yego is a Supply Chain Management expert with a wealth of experience in the Supply Chain industry. He holds a Bachelor of Arts degree in Economics, Master of Business Administration in Finance, diploma in Purchasing and Supplies from the Chartered Institute of Purchasing and Supply (UK) and a diploma in Purchasing and Supplies Management from Kenya Institute of Management. He is a member of the Kenya Institute of Supplies Management (KISM), Kenya Institute of Management (KIM) and the Chartered Institute of Purchasing and Supplies (MCIPS). He joined KenGen in October 2014 and is responsible for providing oversight in the IJ½GMIRXERHIJJIGXMZISTIVEXMSRWSJXLIWYTTP]GLEMRJYRGXMSRSJXLI'SQTER][LMGL includes the management of Tenders & Contract, Inventory and Logistic and Supplier Relationship. He is responsible for tenders, contracts, compliance, fuel & general purchases, spares and commodities, planning and inventory. Prior to joining KenGen, he worked in senior management positions in various institutions which include the Kenya Agricultural Research Institute (KARI), University of Nairobi Enterprises and Services (UNES), Uchumi, Postbank and Kenya Commercial Bank (KCB). Beyond the practitioner world, Mr. Yego Philip Yego has added the unique technical skills in the academic sector. He also worked at Kenyatta Supply Chain Director 9RMZIVWMX]EWE0IGXYVIVMRXLIWEQI½IPH Departments: Tenders, Contracts, Inventory & Logistics. KENYA ELECTRICITY GENERATING COMPANY PLC 42 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 2018 Corporate Governance Statement 'SVTSVEXIKSZIVRERGIMWXLIW]WXIQSJVYPIWTVEGXMGIWERHTVSGIWWIWF][LMGLE½VQMWHMVIGXIHERHGSRXVSPPIH Corporate governance involves balancing the interests of a company's many stakeholders, such as shareholders, QEREKIQIRXGYWXSQIVWWYTTPMIVW½RERGMIVWKSZIVRQIRXERHXLIGSQQYRMX]%X/IR+IRGSVTSVEXIKSZIVRERGI provides the framework for attaining a company's objectives, it encompasses practically every sphere of management, from action plans and internal controls to performance measurement and corporate disclosure. Policies and Board of Directors Procedures and Committees n Mi sio ss Vi io n Corporate art Goals Transparency and Legal and Governance Accountability Regulatory Framework Strat Sm egy s Objective Monitoring and Organisational internal Control Hierarchy Organisations should consider having an effective and independent internal audit function that has the respect, GSR½HIRGIERHGSSTIVEXMSRSJFSXLXLIFSEVHERHXLIQEREKIQIRX8LIFSEVHWLSYPHIWXEFPMWLJSVQEPERHXVERWTEVIRX arrangements to appoint and maintain an appropriate relationship with the organisation’s auditors. The Board of KenGen is responsible for the overall management of the Company and is committed to ensuring that its business and operations are conducted with integrity and in compliance with the law, internationally accepted principles and best practice in corporate governance. This is key to the enhancement of business growth and stakeholder wealth creation. Our corporate values and ethics are entrenched in our strategic and business objectives, which focus on accelerating value creation for our stakeholders. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 43 CORPORATE GOVERNANCE 2018 Corporate Governance Statement Separation of the Powers & Duties of Board Charter Statement of Compliance the Chairman and MD & CEO The KenGen Board and Management adheres to its continuing obligations as a listed Company in compliance with Capital Markets Delegated Authority (CMA) Regulations, the CMA Policies & Code of Corporate Governance Practices The Power of Procedures Boards Committees for Issuers of Securities to the Public (2015) Board and the ethical standards as prescribed in the Company’s Code of Conduct and Ethics. The Board is committed to the principles of Engagement Regulatory with good governance as stipulated in 1[SRKS^S Framework Shareholders The Code of Governance for State Corporations, which is aligned to the CMA code of Director corporate governance. Responsibilities The following are some of the Acts and regulations KenGen complies with: COMPLIANCE Companies Constitution Act 2015 CMA Act Public The of Kenya Finance Energy Act Management 2006 Act Public Procurement & Asset Disposal Act 2015 Occupational Safety & Health Act 2007 Environmental Management & Employment Coordination Act Act State Geothermal NSE Corporations Resources Act Act KENYA ELECTRICITY GENERATING COMPANY PLC 44 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KenGen complies with ISO 9001:2015 in Quality 'H¼QLWLRQRIDQ,QGHSHQGHQW'LUHFWRU Management System and ISO 14001:2015 Environmental The Code of Corporate Governance Practices for Issuers of Management System. This demonstrates our unending Securities to the Public, 2015, issued by the Capital Markets pursuit for excellence in the organisation’s operations. Authority for application by listed public companies, CMA has put in place a Capital Markets Master Plan HI½RIWERMRHITIRHIRXHMVIGXSVEWEQIQFIVSJEFSEVH (CMMP) which sets out the strategic direction for the who: Kenyan capital markets for the next ten years. KenGen • does not have a material or pecuniary relationship with has been an active player in the deepening of Kenya’s local XLIGSQTER]SVVIPEXIHTIVWSRW capital markets. In recognition of this role, the Company was appointed a member of the Working Group One ˆ MWGSQTIRWEXIHXLVSYKLWMXXMRKJIIWSVEPPS[ERGIW Committee of the Capital Markets Master Plan of the • hasn’t been employed by the company in an executive CMMP. The Committee has a mandate of tackling the GETEGMX][MXLMRXLIPEWXXLVII]IEVW national funding gap. ˆ S[RWRSQSVIXLER½ZITIVGIRXSJXLIWLEVIWSJXLI Board Charter GSQTER]ERH The Charter is a critical corporate governance tool of • has not been in service for nine continuous years. the Board which documents the composition, roles and responsibilities of the Board. This ensures effectiveness A continuing independent director ceases to be one and of each Director’s contribution in the governance of the assumes the position of non-executive director if he/she Company by facilitating independent judgement, decision fails to meet the requirements. making and professional competencies. Board Composition The Charter provides guidelines to the Board in the 8LI/IR+IR&SEVHGSQTVMWIWSJIPIZIR  QIQFIVWER exercise of its mandate of: independent and non-executive Chairman, one executive • appointment, induction, skills requirement, gender mix Managing Director & CEO, the Cabinet Secretary-The ERHGETEGMX]HIZIPSTQIRXJSVXLIHMVIGXSVW National Treasury, Principal Secretary-Ministry of Energy, plus seven independent and non-executive directors. • articulation of, and commitment to, respect of the The Board composition is outlined in the Articles of VMKLXWSJWLEVILSPHIVW Association of the Company. • separation of roles and responsibilities of the boards During the last Annual General Meeting and as per MRHMZMHYEPHMVIGXSV the Company’s Articles of Association on Rotation of ˆ GSRHYGXSJFSEVHERHGSQQMXXIIQIIXMRKW (MVIGXSVWXLVII&SEVHQIQFIVWVIXMVIHX[SSJ[LSQ were re-elected. Dr. Reginalda Wanyonyi was elected, ˆ HMVIGXSVWGSHISJGSRHYGXERH replacing Mrs. Dorcas Kombo who retired on attaining her • terms of reference for all board members. allowable board term. The Charter does not replace or supersede any statutory On 25 July 2018, the Board appointed Mr. Paul K. Ndungi laws and regulations that govern the Company. as the Company Secretary & Legal Affairs Director after a competitive recruitment process. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 45 CORPORATE GOVERNANCE 2018 Corporate Governance Statement Board Diversity Board Effectiveness The Board comprises of members with diverse skills Separation of Powers & Duties including Procurement Specialist, Economists, Geochemist, The Boards oversight role is secured through the Environment Scientists, Engineer, Accountant, Lawyers, separation of functions of the Chairman and the Managing Construction Contracts Management and Financial Director & CEO, ensuring independence of the Board and Engineer. Management. This gives a clear-cut distinction between non-executive and executive roles. This also leads to a KenGen continues to comply with the 1/3 gender parity FEPERGISJTS[IVMRGVIEWIHEGGSYRXEFMPMX]GPIEVHI½RMXMSR rule as outlined: of responsibilities and improved decision making. Role of the Board Female The Board offers strategic guidance, leadership and GSRXVSPSJXLI'SQTER]F]HI½RMRKMXWWXVEXIKMGMRXIRXMXW objectives and values. To this end the Board: 36% Male • reviews strategic direction and adopts business plans TVSTSWIHF]QEREKIQIRX Board Composition 64% • monitors management’s implementation of the plans ERHWXVEXIKMIW • ensures ethical behaviour and compliance with relevant laws & regulations, audit and accounting principles, corporate policies & procedures and the code of IXLMGW • evaluates management performance against targets and TVEGXMGIW The biographies of the Directors are published on pages  • considers and approves the company’s overall budget ERHWTIGM½GTVSTSWEPWJSVGETMXEPI\TIRHMXYVI  acquisitions • reviews succession planning for the management team and approves senior executive appointments, SVKERMWEXMSREPGLERKIWERHVIQYRIVEXMSR • constitutes and reviews composition of board committees and approves reports and performance of each board committee. ˆ ETTVSZIWXLIUYEVXIVP]MRXIVMQERHTVIPMQMREV]½RERGMEP statements, annual report & accounts, quarterly management accounts, operational report from the Managing Director & CEO and public announcements of a material nature. KENYA ELECTRICITY GENERATING COMPANY PLC 46 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Directors Responsibilities Board Meetings The Articles of Association of the Company and the The Board meets quarterly or more often, in accordance Board Charter enumerate the responsibilities of the with the requirements of the business. Directors. Execution of the mandate of the Board requires The Board work plan and calendar are prepared at the each Director to observe a code of conduct aligned to beginning of the year and adequate notice is given for all their duties and responsibilities to the Company and meetings. The agenda and board papers are circulated WLEVILSPHIVWERHEGX[MXLMRPMQMXEXMSRWEWHI½RIHMR within the stipulated timelines. the Charter while in observance to principles of good corporate governance. The Directors undertake to: Following the election of one new member at the last AGM, the Committees of the Board were reconstituted in • act in good faith and subscribe to uphold and promote January 2018. effective and responsible use of Company resources with care and prudence in the best interest of the The main Board held eight (8) meetings attended as 'SQTER] follows: • familiarize themselves with the relevant regulations and Name Attendance statutes, the Memorandum and Articles of Association of the Company, the Board’s operating norms and 1. Mr. Joshua Choge 8 procedures, and any other issues necessary for the 2. Mrs. Rebecca Miano 8 HMWGLEVKISJXLIMVHYXMIW 3. Mrs. Ziporah Ndegwa 7 ˆ [LMPIGSRWMHIVMRKXLI½RERGMEPMQTEGXSJXLIMV decisions, consider the consequences for sustainable 4. Dr. Musa Arusei 8 development, effect on relations with stakeholders and 5. Mr. Kairu Bachia 8 MRXIVIWXSJXLIWSGMIX]MRKIRIVEPERH  Mr. Joseph Sitati 8 • be fully aware that they are individually and collectively 7. Mr. Maurice Nduranu 7 responsible for deciding the Company’s vision, mission and values, its strategic objectives, ensuring 8. Mrs. Phyllis Wakiaga  establishment of the organizational structure, as well 9. Mr. Humphrey Muhu  as ensuring effective control over the Company and accounting to shareholders. 10. Mr. William Mbaka 8 The Company Secretary 11. Dr. Reginalda Wanyonyi 3 The Company Secretary is a member of the Institute of 12. Dorcas Kombo 5 'IVXM½IH7IGVIXEVMIW -'7 %WXLI7IGVIXEV]XSXLI&SEVH 13. Albert Mugo 4 and all its Committees, the Company Secretary guides the Board on governance and statutory matters and is the Dr. Reginalda Wanyonyi - Appointed on 22 November 2017 custodian of corporate governance in the Company. (SVGEW/SQFS6IXMVIHSR2SZIQFIV Albert Mugo - Retired as MD & CEO on 26 August 2017 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 47 CORPORATE GOVERNANCE 2018 Corporate Governance Statement Individual Directors Shareholding The Directors’ remuneration rates are as outlined in the State Corporations Act and by the Salaries and No Board member holds in his or her personal capacity Remuneration Commission. The Directors’ fees are paid more than 1% of the Company’s total shareholding. The upon shareholder approval at the Annual General Meeting. breakdown of the Directors personal shareholding in the It is proposed that each Director receive a fee of Kshs Company as at 30 June 2018 is as follows: TIVERRYQJSVXLI½RERGMEP]IEVIRHIH.YRI NUMBER OF % 2018. NAME SHARES HOLDING KenGen does not grant personal loans or guarantees to its Mr. Joshua Choge 14,700 0.000223 Directors. Mrs. Rebecca Miano 111,048  Directors’ Remuneration Report is on page 117 - 119. Mr. Henry Rotich - - &RQ½LFWRI,QWHUHVWDQG'HFODUDWLRQRI,QWHUHVW Dr. Eng. Joseph Njoroge  0.001522 The Board members have a statutory duty not to have MRXIVIWXWXLEXGSR¾MGX[MXLXLSWISJXLI'SQTER]%PP Mr. Kairu Bachia 213,300 0.003235 business transactions with all directors or their related Mr. Maurice Nduranu 100,900 0.001530 parties are carried out at arms’ length. Mr. Joseph Sitati 10,000 0.000152 At all meetings of the Board, an agenda item exists which Mrs. Phyllis Wakiaga  0.000005 requires members to make a declaration of any interest they may have in the business under discussion. Board Mrs. Ziporah Ndegwa 1,400 0.000021 Members are mandated to disclose any real or potential Dr. Musa Arusei - - GSR¾MGXSJMRXIVIWX Dr. Reginalda Wanyonyi - - *SVER]GSR¾MGXSJMRXIVIWXE(MVIGXSVMWSFPMKEXIHXS declare the same and exclude himself/herself from any Mr. Humphrey Muhu discussion or decision over the subject matter. (Alternate to Mr. Henry  0.000011 Rotich) Business transactions with the Directors or their related Mr. William Mbaka parties are disclosed on pages 170. (Alternate to Dr. Eng. - - Joseph Njoroge) Board Remuneration The Board establishes and approves formal and transparent remuneration policies to attract and retain both executive and non-executive Board members. These policies clearly stipulate remuneration elements such as directors’ fees, taxable sitting allowances for meetings attended, travel and accommodation allowance while on Company duty as well as the monthly honorarium for the Chairman. KENYA ELECTRICITY GENERATING COMPANY PLC 48 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Board Committees The Board Committees are established with written terms of reference detailing their respective mandate. Following is the list of all Board Committee members. Audit, Risk & Strategy Human Resource Procurement Finance Committee Compliance Committee & Nomination Oversight Committee Committee Committee Mr. Joseph Sitati Mr. Kairu Bachia Dr. Musa Arusei Mrs. Ziporah Ndegwa Mr. Maurice Nduranu (Chair) (Chair) (Chair) (Chair) (Chair) Mr. Humphrey Muhu Mr. Humphrey Muhu Mrs. Phyllis Wakiaga Mr. Maurice Nduranu Mr. William Mbaka Dr. Reginalda Mrs. Phyllis Wakiaga Mr. Joseph Sitati Mr. Kairu Bachia Dr. Musa Arusei Wanyonyi Dr. Reginalda Mrs. Ziporah Ndegwa Mr. William Mbaka Dr. Musa Arusei Mr. Humphrey Muhu Wanyonyi Mr. Kairu Bachia Mrs. Rebecca Miano Mrs. Rebecca Miano Mrs. Rebecca Miano Mrs. Rebecca Miano Report from the Chairperson of the Audit, Risk & Compliance Committee Mandate The Committee’s mandate include: ˆ QSRMXSVERHVIZMI[XLIMRXIKVMX]SJXLI'SQTER]´W½RERGMEPWXEXIQIRXW MRXIVREP½RERGMEPGSRXVSPERHVMWOQEREKIQIRXW]WXIQW • monitor and review the effectiveness of the Company’s internal audit JYRGXMSR • monitor and review the External Auditors’ (appointed by the Controller and Auditor-General in accordance with Section 2 of the State 'SVTSVEXMSRW%GX  ˆ VIZMI[EYHMXMWWYIWVEMWIHF]FSXLXLI-RXIVREPERH)\XIVREP%YHMXSVWERH • receive, review and evaluate technical, compliance, performance and ½RERGMEPEYHMXVITSVXW Joseph Sitati Chairperson Membership 8LMW'SQQMXXIIGSRWMWXWSJYTXS½ZI  RSRI\IGYXMZI(MVIGXSVW Appointment to this Committee is for a period of three years, which may be extended for two further three-year periods provided the Director remains independent. Currently the Companies Act, 2015 requires that members of this Committee are approved by shareholders every year during the Annual General Meeting. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 49 CORPORATE GOVERNANCE 2018 Corporate Governance Statement The Internal Audit Manager is the Secretary to this committee. A representative of the External Auditors is always invited when the Committee is reviewing the audited results. Attendance The Committee held nine (9) meetings which were attended as follows: Name Attendance 1. Joseph Sitati 9 2. Humphrey Muhu (Alternate to Henry Rotich) 8 3. Ziporah Ndegwa 3 4. Phyllis Wakiaga 2 5. Kairu Bachia 9  Dorcas Kombo 5 (SVGEW/SQFS[EWEQIQFIVSJXLI'SQQMXXIIYRXMPLIVVIXMVIQIRXMR2SZIQFIV>MTSVEL2HIK[EERH4L]PPMW Wakiaga joined the Committee when it was reconstituted in January 2018) Report from the Chairperson of the Strategy Committee Mandate The Strategy Committee is constituted by the Board with the objective of assisting the Board in discharging its oversight duties with respect to the overall strategic direction of the Company, operational performance and organizational health. The Committee’s mandate include: • Developing or reviewing the Company’s Strategy and investment policies and making appropriate recommendations to the Board on issues of strategy adjustment. • Developing or reviewing the progress of the Company’s Strategy execution TPERWXLVSYKLEQSRKSXLIVWMHIRXM½GEXMSRSJTVMSVMX]EVIEW • Evaluating and approving business cases for all categories of investment projects and new ventures, including strategic partnerships within its delegated authority. Kairu Bachia Chairperson • Approving the capital and expenditure budget plans of the Company and any other subsequent budget reviews. • Overseeing the government performance contracting regime of the Company. Membership 8LI'SQQMXXIIGSQTVMWIWSJ½ZI  QIQFIVWSJXLI&SEVH KENYA ELECTRICITY GENERATING COMPANY PLC 50 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Attendance 8LI'SQQMXXIILIPH½ZI  QIIXMRKW[LMGL[IVIEXXIRHIHEWJSPPS[W Name Attendance 1. Kairu Bachia 5 2. Humphrey Muhu (Alternate to Henry Rotich) 5 3. Joseph Sitati 2 4. William Mbaka 3 5. Rebecca Miano 4  Dorcas Kombo 7. Albert Mugo (SVGEW/SQFS[EWEQIQFIVSJXLI'SQQMXXIIYRXMPLIVVIXMVIQIRXMR2SZIQFIV1YWE%VYWIM[EWEQIQFIVYRXMP the Committee was reconstituted in January 2018. Albert Mugo - Retired as MD & CEO on 26 August 2017) Report from the Chairperson of the Human Resource & Nomination Committee Mandate The Committee monitors and advises Management on matters that affect the Human Resource Strategy and employees. The Committee’s mandate include: ˆ GSRXMRYEPP]I\EQMRIXLI'SQTER]´WWXVYGXYVIERHIWXEFPMWLQIRXW ˆ IRKEKIQIRXSJWIRMSVQEREKIQIRXWXEJJ ˆ RSQMREXMSRERHVIQYRIVEXMSRSJ(MVIGXSVW • examine policy and procedures affecting employee life cycle employment ERHWXEJJTVSQSXMSR • review the Collective Bargaining Agreement proposals and make VIGSQQIRHEXMSRWERH • propose innovative ideas for transformation of the Company into a world- Musa Arusei class enterprise and employer. Chairperson The Committee monitors the policies and practices of KenGen in relation to human resources, offers advice and recommendations on the Company’s LYQERVIWSYVGIWXVEXIKMIWMRMXMEXMZIWERHTSPMGMIWERHXLI2SQMREXMSRERH Remuneration of Directors and Senior Management respectively. The Committee’s duties are based on three broad functions namely the Human Resources, Nominating and Remuneration functions. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 51 CORPORATE GOVERNANCE 2018 Corporate Governance Statement Human Resources function The Committee continually reviews the organizational structure, core functions & optimum establishment, policies and procedures on staff recruitment and selection, staff training and development, the performance and reward system as well as the terms and conditions of service in line with the organisation’s strategy. Further, the Committee reviews the Company’s Human Resource Policies and recommends any amendments to the Board for approval. Nominating function The Committee supports and advises the Board on the appropriate size and composition that will enable it to discharge its responsibilities and ensures transparent procedures for selecting new directors for appointment and re-selection to the Board. This includes the evaluation of the performance of the Board, the various committees and individual Directors. Remuneration function The Committee reviews the Company’s remuneration, recruitment, retention, incentive and termination policies and TVSGIHYVIWJSV)\IGYXMZI(MVIGXSVWERH7IRMSV1EREKIVWXLIMVFEWMGWEPEV] XLIGVMXIVMEJSVTE]QIRXSJFSRYWIWXSEPP staff. The Committee also considers any recommendations of the Chairman or Managing Director/CEO of the Company regarding payment of bonuses or performance related remuneration. Membership 8LI'SQQMXXIIGSQTVMWIWSJ½ZI  QIQFIVWSJXLI&SEVH Attendance The Committee held twelve (12) meetings which were attended as follows: Name Attendance 1. Musa Arusei 12 2. Kairu Bachia 4 3. Phyllis Wakiaga 10 4. Reginalda Wanyonyi 4 5. Ziporah Ndegwa 1  William Mbaka 1 7. Rebecca Miano 11 8. Albert Mugo 1 >MTSVEL2HIK[EERH;MPPMEQ1FEOE[IVIQIQFIVWSJXLI'SQQMXXIIYRXMP.ERYEV][LIRXLI'SQQMXXII[EW VIGSRWXMXYXIH/EMVY&EGLMEERH6IKMREPHE;ER]SR]MNSMRIHXLI'SQQMXXIIMR.ERYEV]%PFIVX1YKS6IXMVIHEW1(  CEO on 26 August 2017) KENYA ELECTRICITY GENERATING COMPANY PLC 52 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Report from the Chairperson of the Procurement Oversight Committee Mandate The Committee’s mandate include: • to consider and oversee all the annual procurement plans for submission to XLI&SEVH • to oversee proposals for major procurement works which have a strategic MQTEGXSRXLI'SQTER]ERH • oversight role to ensure compliance with The Public Procurement and Asset Disposal Act 2015. Membership 8LI4VSGYVIQIRX3ZIVWMKLX'SQQMXXIIWLEPPGSQTVMWISJ½ZI  QIQFIVWSJ the Board. Ziporah Ndegwa Its membership consists of four (4) non-executive directors. Chairperson Attendance The Committee meets as and when strategic procurements need to be reviewed. The Committee held eight (8) meetings which were attended as follows: Name Attendance 1. Ziporah Ndegwa 8 2. Musa Arusei 8 3. Maurice Nduranu  4. Reginalda Wanyonyi 4 5. Rebecca Miano   Albert Mugo 2 (Reginalda Wanyonyi joined the Committee in January 2018. Albert Mugo - Retired as MD & CEO on 26 August 2017) KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 53 CORPORATE GOVERNANCE 2018 Corporate Governance Statement Report from the Chairperson of the Finance Committee Mandate 8LMW'SQQMXXIISZIVWIIWXLIGSVTSVEXI½RERGIQEXXIVWSJXLI'SQTER]MR particular. The Committee’s mandate include: • Overseeing the implementation of the overall investment plan for the PIBO funds, as per the Information Memorandum, Ministerial approvals and asset EPPSGEXMSRWJSVGEWLERHGEWLIUYMZEPIRXW[MXLVIWTIGXXS½\IHMRGSQI securities, and equities. ˆ 1SRMXSVMRKSREUYEVXIVP]FEWMWXLI'SQTER]´WOI]½RERGMEPVEXMSW ˆ 3ZIVWIIMRKXLIFEPERGIVIWXVYGXYVMRKEGXMZMXMIWSJXLI'SQTER] • Overseeing the activities of any Financial Arranger and Advisor in particular, EHLIVIRGIXSXLIXIVQWSJVIJIVIRGISJXLIGSRXVEGX ˆ 6IZMI[MRKWXVEXIKMG½RERGIQEXXIVWERH Maurice Nduranu Chairperson ˆ 6IZMI[MRKTSPMGMIWXSHS[MXL½RERGIQEXXIVWWYGLEWXVIEWYV]TSPMGMIWERH JSVI\TSPMGMIW Membership 8LI*MRERGI'SQQMXXIIGSQTVMWISJ½ZI  RSRI\IGYXMZIQIQFIVWSJXLI&SEVH Attendance 8LI'SQQMXXIILIPHWM\  QIIXMRKW[LMGL[IVIEXXIRHIHEWJSPPS[W Name Attendance 1. Maurice Nduranu 4 2. Humphrey Muhu (Alternate to Henry Rotich) 5 3. Musa Arusei 2 4. William Mbaka  5. Joseph Sitati 1  Rebecca Miano 4 7. Albert Mugo 1 (Joseph Sitati was a member of the Committee until January 2018 when the Committee was reconstituted. Albert Mugo - Retired as MD & CEO on 26 August 2017) KENYA ELECTRICITY GENERATING COMPANY PLC 54 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Internal Controls & Risk Management To achieve corporate goals, employees are expected to observe the highest standards of professionalism. 8LI&SEVHGSR½VQWMXWVIWTSRWMFMPMX]JSVXLI'SQTER]´W Employees have a responsibility to contribute to the good W]WXIQSJMRXIVREP½RERGMEPGSRXVSPMRGPYHMRKXEOMRK governance of the Company and to maintain its reputation reasonable steps to ensure that adequate systems are for integrity both within and outside the workplace. The being maintained. Effective internal control systems have code of conduct provides fundamental principles and been operationalized to assess and mitigate any risks the guidelines that govern the ethical and legal obligations of all Company may be exposed to. employees at all levels. A comprehensive policy on the risk management All employees are bound by the provisions of the Public framework to identify, measure and manage all key risks 3J½GIVW)XLMGW%GXXLI'SQTER]'SHISJ'SRHYGX has been put in place by the Board and integrated into and any other statutory regulations issued from time the overall management reporting structure. These risks to time. In this regard, all employees signed the code of are further demarcated onto the Strategic Corporate Risk GSRHYGX[MXLMRXLI½VWXUYEVXIVSJXLMW]IEV Matrix which is closely monitored by the Board. The Audit, Risk & Compliance Committee of the Board, through its At all times, employees will treat colleagues and other delegated mandate from the Board, regularly reviews the stakeholders with fairness, courtesy and sensitivity with effectiveness of the internal control system. The Head of respect to their rights and dignity. Employees are expected the Internal Audit & Risk Department reports directly to to have respect for diversity. the Board’s Audit, Risk & Compliance Committee. Going Concern Code of Conduct and Ethics 8LI&SEVHGSR½VQWXLEXXLI'SQTER]LEWEHIUYEXI At KenGen, good corporate governance is engrained resources to continue in business for the foreseeable as a valuable contributor to the long-term success of future. For this reason, it continues to adopt the going the Company through creation of the right culture GSRGIVRFEWMW[LIRTVITEVMRKXLI½RERGMEPWXEXIQIRXW throughout the organisation. The core values of integrity, Engagement with Shareholders professionalism, team spirit and emphasis on safety steer our Company’s organizational health and decision-making The Board is committed to provision of regular and processes. Owing to the dynamic business environment, timely information to the shareholders. In accordance the Company periodically conducts reviews such as the with Article 137 of the Articles of Association of the culture baseline survey, to review and further improve the Company, the Annual Report & Accounts is posted onto existing culture in the organisation. our website at www.kengen.co.ke at least 21 days before the Annual General Meeting (AGM) to ensure that all the The Company conducts its business in compliance with shareholders are well informed at the AGM. The interim relevant legal principles and high ethical standards of and annual results are always published in the local daily business practice. The Board, Management and employees newspapers. Further, the Company’s website offers a are required to observe the code and high standards of platform for shareholders to quickly access corporate integrity. Further, these standards are applied in all dealings information. with customers, suppliers and other stakeholders. All Directors attended the last AGM held on 22 November 2017 and were available to answer questions from shareholders. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 55 CORPORATE GOVERNANCE 2018 Corporate Governance Statement Shareholders Tour KenGen organises annual Shareholders Tours to expose shareholders to operations of the Company with a view to empowering them to make meaningful contributions during the AGM. The 2017 Shareholder Tour was held on 9 November 2017 at the Kipevu Power Plant in Mombasa. Shareholding In line with the Continuing Obligations for listed companies as prescribed by the Capital Markets Authority and Nairobi 7IGYVMXMIW)\GLERKI/IR+IR½PIW-RZIWXSVW´6IXYVRWSREQSRXLP]FEWMW Top 10 Shareholders as at 30th June 2018 Names Number of Shares % Shareholding 1. Cabinet Secretary - The National Treasury   2. Stanbic Nominees Limited 495,348,189 7.51% 3. Stanbic Nominees Limited  3.00% 4. Standard Chartered Nominees Resd A/C Ke11443  0.99% 5. Standard Chartered Nominees Resd A/C Ke11450  0.98%  Standard Chartered Nominees Resd A/C Ke11401  0.90% 7. Kenya Commercial Bank Nominees Limited A/C 915a 55,252,921 0.84% 8. Standard Chartered Nominees Ltd A/C Ke002339 50,000,000  9. Standard Chartered Nominees Non -Resd. A/C 9287p.   10. Equity Nominees Limited A/C 00099  0.39% Others  14.08% Grand Total 6,594,522,339 100.00% KENYA ELECTRICITY GENERATING COMPANY PLC 56 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Distribution of Shareholders Range No. of Shareholders No. of Shares % Shareholding 1 to 500 81,427  0.30% 501 to 1,000 34,777  0.42% 1,001 to 5,000 49,807   5,001 to 10,000  114,298,744 1.73% 10,001 to 50,000   2.02% 50,001 to 100,000  48,392,252 0.74% 100,001 to 500,000  93,845,990 1.42% 500,001 to 1,000,000 79  0.85% Above 1,000,000 102  90.84% Total 191,013 6,594,522,339 100.00% Investor Pools Range No. of Shareholders No. of Shares % Shareholding Local Institutions 8,078  78.47% Foreign Investors 980 845,109,089 12.82% Local Individuals 181,955  8.71% Total 191,013 6,594,522,339 100.00% KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 57 SUSTAINABILITY SUSTAINABILITY KENYA ELECTRICITY GENERATING COMPANY PLC 58 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Economic Sustainability 60 Social Sustainability 80 Environmental Sustainability 100 Olkaria Power Station in operation at night KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 59 SUSTAINABILITY Economic Sustainability Specific standard disclosures Financial Sustainability Innovative Financing Initiatives Financial sustainability is a key focus for our business in To progress the Government’s intent for accelerated IRWYVMRKXLEX[ITVSZMHIWYJ½GMIRXIPIGXVMGMX]ERHQEOI investment in geothermal power generation (that offers investments to meet growing demand while remaining a base load operation at one of the lowest costs among TVS½XEFPIFYWMRIWW8LITVMQEV]VIZIRYIWJSVXLIFYWMRIWW the generation sources), the Company is working in close come from power generation. collaboration with the National Treasury to develop a 1;+ISXLIVQEPTS[IVTPERXMR3POEVMEXLVSYKL Funding Activities a Public Private Partnership (PPP) arrangement. A KenGen is currently implementing several projects towards transaction advisor has been engaged and is currently additional capacity by the year 2025. Over USD 5 billion of ½REPM^MRKXLIJIEWMFMPMX]WXYH] TSXIRXMEPJYRHMRKWSYVGIWLEWFIIRMHIRXM½IHERHTPERWEVI being pursued to secure the rest of the required funding. KENYA ELECTRICITY GENERATING COMPANY PLC 60 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Value Added Statement (YVMRKXLI]IEVYRHIVVIZMI[XLI'SQTER]GSRXMRYIHXSQEOIEWMKRM½GERXGSRXVMFYXMSRXSXLIIGSRSQ]ERHWSGMIX] as it carried out its business responsibly and engaged in corporate social investment activities. Our value addition is a demonstration of our achievements. Below is our value chain model Our inputs Our resource usage Our contribution to economy Our strength Financial • Revenue • Payments – suppliers, business • Sound corporate governance • Borrowings Partners • Ethical business conduct • Risk management • Investments • Employer of choice ˆ 4VS½XW • Quality assurance • Taxes ˆ 3TIVEXMSREPIJ½GMIRG] • Dividends • Sustainable use of resources • Retained earnings • Research and innovation Human Capital • Employees welfare • Remuneration, Staff training & • Employee development and growth development and Employee welfare • Experience • Diversity Power Generation • Operation of power plants ˆ )J½GMIRXIPIGXVMGMX]KIRIVEXMSR • Construction of new plants and related • Additional megawatts to the infrastructure National Grid Innovation • Technology and Systems • Reliable, Safe and affordable • Operating procedures and processes electricity • Research and development • Improved operations ˆ (MZIVWM½GEXMSR • Technology & technical capacity Social & Relationship • Social investment • Social investment • Social licence • Affordable power • Best business practices Natural Resources • Fuels • Sustainable usage • Steam • Carbon Credit Development • Electricity and Water Management Wealth Creation and Distribution (Kshs) Shareholders Customers Human Capital Government • Proposed dividends Financiers • Remuneration • Revenue • Employee welfare (taxes) 2,638M • Interest 47,856M 4,188M 3,037M 6,132M Investments Communities & Social Relations • New power plants • Empowerment of youth, women and persons Suppliers • Payments to suppliers 15,311M with disabilities 1,544M 15,006M KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 61 SUSTAINABILITY Economic Sustainability Horizon II Strategy 8LI++WXVEXIK][EWXSFIMQTPIQIRXIHEGVSWWXLVIILSVM^SRWXLI½VWXSRIPEWXMRKJVSQXS[MXLXLI objective to stabilise the power situation in Kenya. Horizon II was launched in 2013. However, as a response to the changes in the external operating environment, it was revamped in 2015 with the aim of creating sustainable power growth in Kenya for the next ten years. Horizon III, past 2025, will explore expansion opportunities to drive growth beyond Kenya, establish a strong African footprint, and become a regional leader in electricity generation technology. Horizon I Horizon II Horizon III Original Revamped plan 10 years+ Great 2013-15 2016-25 company Explore expansion opportunities 2008-12 • Drive expansion Create sustainable beyond Kenya Delivered power growth in Kenya • Establish a strong 375+MW • Deliver 721MW African footprint Stabilise power • Create value for situation in Kenya • Leader in technology shareholders • Delivered 325+MW and innovation • Lower tariffs • Drilled 150+ • Diversify business Horizon II is being geothermal wells (KenGen C) revamped and • Created extended to 2025 • Build capabilities regulatory unit to address changes in for our future the operating environment Good and achieve success company Time Current focus KenGen adapted the pillars of the Good 2 Great strategy in response to the changing environment. These changes focus SRXLIVIKYPEXSV]QEREKIQIRXTMPPEV [LMGL[EWIRPEVKIHMRWGSTIXSMRGPYHI½RERGMRK ERHXLIWXVEXIK]´WJSYRHEXMSRSJ organisational health (which now incorporates the impact of the aspired growth trajectory on the organization). KENYA ELECTRICITY GENERATING COMPANY PLC 62 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Kenya’s Power Sector Objectives The Government’s Power Sector Objectives are to grow power supply to support Kenya’s growth, lower cost of electricity and increase renewable energy sources. KenGen’s aspirations are aligned with and support these Government objectives under the President’s Big4 agenda. To spur Industrialization, KenGen plans to increase capacity – most of which is in geothermal – by 721MW in the medium term (with the aspiration to remain the most relevant player in the market at 50+% share), supplying affordable renewable electricity and creating value for shareholders. Power Sector Objectives and KenGen Aspirations Government power sector objectives Our Horizon II aspirations • Grow power supply Capacity • Increase capacity by 721MW to to support Kenya’s demand remain relevant player increase growth in the market (50+% share) • Achieve lower cost • Provide an adequate return of electricity Value to shareholders • Increase renewable creation energy sources Lower • PrS½XEFly supply cheaper renewable electricity tariffs to the country Key Achievements of the Revamped G2G Horizon II 7MRGIMXWEHSTXMSRMRXLIVIZEQTIH++,SVM^SR--WXVEXIK]LEWPIHXSWMKRM½GERXEGLMIZIQIRXW-RXLIGETMXEP TPERRMRKERHI\IGYXMSRTMPPEVW/IR+IRHIPMZIVIH1;SJRI[KIRIVEXMSRGETEGMX]JVSQ[IPPLIEHWHVMPPIH geothermal wells versus the target of 20, and advanced over 500MW of projects past feasibility study phase to construction and commissioning by 2022. In line with the focus on organisation health, the Company has launched a robust program to train its leaders on coaching and mentoring in a bid to improve its leadership health. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 63 SUSTAINABILITY Economic Sustainability Capacity Development Progress Electricity Demand Growth Kenya’s electricity demand has been on an upward trend, increasing from 1,044MW in 2008 to 1,802MW in 2018.This VITVIWIRXWERERRYEPEZIVEKIMRGVIEWISJ HVMZIRF]MRGVIEWIHGYWXSQIVGSRRIGXMZMX]HIQSKVETL]ERH+(4KVS[XL KenGen forecasts an additional capacity of 721MW to meet the growing electricity demand by 2025. Project Funnel The Company has a detailed project development process that begins with an analysis of conceptual ideas. Thereafter a preliminary evaluation of concepts known as a pre-feasibility study lays out and selects the best project options, both XIGLRMGEPP]ERH½RERGMEPP]%HIXEMPIHWXYH]SRXLIWIPIGXIHTVSNIGXWMWXLIRYRHIVXEOIRXSHIXIVQMRIXLIXIGLRMGEP½RERGMEP ERHIRZMVSRQIRXEPJIEWMFMPMX]8LIJIEWMFMPMX]WXYH]HIXIVQMRIW[LIXLIVSVRSXXLITVSNIGXWLSYPHFIEHZERGIHXSFI½REP engineering and construction stage and is a “go/no-go” decision point. *MRERGMEPETTVEMWEPMWGEVVMIHSYXJSVTVSNIGXW[MXLTSWMXMZIJIEWMFMPMX]SYXGSQIW(YVMRKETTVEMWEPJYRHMRK½RERGMEP structuring and detailed environmental and social impact assessment (ESIA) of the project is undertaken to engage the relevant stakeholders. 4VSNIGXHIZIPSTQIRXMWXLIPEWXWXEKI[LIVI[IGSRGPYHIXLIPSRKXIVQTS[IVTYVGLEWIEKVIIQIRX½RERGMEPGPSWYVI contracting and commencement of construction works. A summary of our project funnel at various stages of evaluation and development is as follows: The KenGen Project Funnel Financial Development Concept Prefeasibility Feasibility Appraisal New hydro sites 350 Kipevu III upgrade 25 80 Meru 140 to combined cycle Olkaria 158 Wind 1 Pumped storage hydro u ru Eburru IX Power 50 Olkaria Generation Olkaria VI V from Brine 140 51 Olkaria I New wind rehab sites Floating solar PV 83 Olkaria 60 Gogo I Unit 6 Concentrated Redevelopment 40 solar PV 140 Olkaria PPP 42.5 90 Karura Masinga Olkaria IAU & V Hydro 7 Forks Dam wall topping/uprating solar raising 40 New Waste to 58 Hybrid 320 54 Geothermal Energy Geothermal total cooling towers sites ½RZSroject Wellhead Meru wind Wellhead leasing II II 140 modular Solar-hydro 495 40 hybridization New Gas Olk k i VII Olkaria VIII 10 Ngong ph III Ngong ph III power Kipevu III plants conversion to gas 895MW 576.5MW KENYA ELECTRICITY GENERATING COMPANY PLC 64 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Ngong Wind Farm Capacity Expansion Mix The Company’s mission is to develop reliable, affordable, safe, quality and competitively priced electricity. To achieve this, the Company has strategically focussed on renewable energy sources readily available within our borders. Geothermal, with a potential of about 10,000MW, is the central focus of our expansion strategy. Wind, solar, and hydro diversify our generation mix to ensure we provide competitively priced renewable energy without reliance on expensive imported fossil fuel. During the year, the Company progressed eighteen projects which are at various stages of development. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 65 SUSTAINABILITY Economic Sustainability Powering from the Earth Global Geothermal Development Ranking Geothermal is a rare treasure gifted to very few countries 3,591 in the world. This great treasure is mapped out worldwide EWXLIVMRKSJ½VI 1,868 1,809 #9 WORLDWIDE 1,100 980 951 944 710 676 542 United Philipines indonesia Turkey New Mexico Italy Iceland Kenya Japan States Zealand Capacity 3,591 1,868 1,809 1,100 980 951 944 710 676 542 Among our greatest achievements is the delivery of a 1;[IPP[LMGLWMKRM½GERXP]HVMZIWMQTVSZIQIRXMR margins through savings from cost of drilling more wells for WXIEQEW[IPPEWXLIWXIEQ½IPHGSRRIGXMSRGSWXW Geothermal energy is a unique renewable source of energy For all our geothermal projects, we have targeted the because of its high reliability that enables it to be a perfect optimum steam status to ensure delivery of the Projects. source of baseload energy. We have more of the proven steam status for the project pipeline. KenGen has therefore embarked on a strategic plan to develop geothermal energy to be Kenya’s main source of Our Geothermal Centre of Excellence established electricity. WMKRM½GERXQMPIWXSRIWMRGSRHYGXMRKEGGVIHMXIHXVEMRMRK programs for international students to grow capacity. In Geothermal energy development is all about tapping the recognition of our capacity, the World Bank, through the LSX¾YMHJVSQSYVHIITVIWIVZSMVEXEHITXLSJ1XS Ministry of Education, gave us a grant to foster our center 3,500M and channeling it to our geothermal power houses of excellence. XSXYVRWXIEQXYVFMRIWERHKIRIVEXI½VQIPIGXVMGMX]XSXLI grid network for consumption. This year was marked by a grand international partnership between Kenya and Djibouti to commercially develop To guide our elaborate and ambitious plan, KenGen has Djibouti’s geothermal resource, courtesy of Kenya’s appointed a group of experienced professionals, cutting unmatched geothermal development expertise. As we EGVSWWZEVMSYW½IPHWSJKISXLIVQEPIRIVK]HIZIPSTQIRXXS set out to a new year, the momentum is on our side and review and guide our processes as per best practice. we believe the traction we have employed will foster our Our development framework has successfully built our geothermal development agenda to earn us a position in capacity and positioned KenGen as the leading African the coveted Geothermal Gigawatt Club. Geothermal consultant and Kenya as a top geothermal producer worldwide. KENYA ELECTRICITY GENERATING COMPANY PLC 66 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Operational Excellence Our leadership development programs develop leaders across the business to effectively addresses succession %X/IR+IR[IHI½RI3TIVEXMSREP)\GIPPIRGIEWHSMRK challenges. Optimizing operations and maintenance costs XLIVMKLXXLMRKXLIVMKLX[E]½VWXXMQI8LI'SQTER] achieves positive operational results across all functions has a dedicated diverse team steering the continued with the outward manifestation of outstanding corporate implementation of this strategy. ½RERGMEPTIVJSVQERGISJXLI'SQTER] In KenGen, Operational Excellence is building a sustainable We continue to invest in operational excellence out of a competitive advantage through company wide operations realization that it is a journey not a destination, a journey management which focuses on having the best work that calls for constant nurturing and sustained attention to practices and business processes. This ensures proper and global Best Practices. consistent application of standard procedures and systems to guarantee safe, quality and reliable outcomes. We are Performance of the Generation Fleet committed to supplying competitively priced electric /IR+IR´WQSHIWSJKIRIVEXMSREVIL]HVSKISXLIVQEP energy to the nation and therefore value the business [MRHERHXLIVQEP3YVQENSVTS[IVTPERXW[MXL½VQ advantage arising from running the organization in an primary resources, operate under a capacity-based operationally excellent manner. power purchase agreement in which some of the key As the leading power producer in the country, we are alive performance indicators comprise of Plant Availability to competition and the ever-changing market dynamics. and Operations and Maintenance Costs. Capacity power To maintain market leadership and continue to contribute purchase regimes guarantee returns based on plant to the noble goal of electrifying the economy and Kenyan availability, irrespective of actual plant dispatch. Plants homes, we are dedicated to operational excellence as without dispatchable resources, small Hydros, Well-Head a key business strategy. This is a strategy that continues Geothermal Plants and Olkaria I operate under energy- to serve us well by enhancing corporate reputation, based power purchase agreements, in which revenues optimizing project capital outlay and minimizing operational are mainly dependent on Dispatch. Plant load factor is & maintenance costs, thus ensuring the continuing therefore an effective measure of performance for energy- competitiveness and affordability of the power that we so based power plants. proudly provide to the nation. During the year, the plant performance improved as The weighted load factor increased year-on-year from evidenced by higher availabilities compared to the  XS JSV+ISXLIVQEP4PERXW[MXLXLIJEGXSV preceding year, with the percentage average availability for Hydro Plants remaining steady due to poor hydrology. JSVQENSV+ISXLIVQEP4PERXWVMWMRKJVSQXS The positive operational performance partly attributable to Hydro Plants remained steady due to the impact of poor XLMWWXVEXIK]TVSZMHIWXLIRIGIWWEV]½RERGIWJSVSRKSMRK hydrology. This is a testament to the continuing adequacy and future investments in renewable projects to meet and suitability of our operational excellence strategy. Key future demand. highlights of this robust strategy are the good maintenance and operation policies and procedures for our generation We continually update performance indicators to ensure ¾IIX setting of metrics that reveal true business performance ERHGSVVIGXP]VI¾IGXWXLIGSRXVMFYXMSRWERHIJJSVXWSJ teams. This way, the Company rewards individual efforts fairly and institutes programs to address any skills gaps MHIRXM½IH KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 67 SUSTAINABILITY Economic Sustainability Major elements that continue to contribute immensely to Maintenance & Operations Strategy XLIKSSHSTIVEXMSREPVIWYPXWXLEXYPXMQEXIP]HVMZI½RERGMEP The Company continues to innovate and adopt modern performance include the following: maintenance practices and supporting systems and • Annual Operation and Maintenance programs tools targeting optimizing availability of its generation • Preventive Maintenance Planning (Annual maintenance ¾IIX'YVVIRXP][IEVIYXMPM^MRKX[SQENSVQEMRXIRERGI Plans/Calendar) practices comprising reliability centered maintenance (RCM) and total productive maintenance strategies. • Dam level and Cascade Management • Plant Operations and Dispatch Planning The shift and broadening of condition-based to RCM approach is a deliberate choice informed by realization • Accurate and prompt plant capacity declarations SJXLII\TIGXIHEHHMXMSREPFIRI½XW'SRHMXMSRFEWIH • Performance Measurement and Evaluations strategy is all about real-time monitoring and predictive (Performance Boards, Performance Dialogues) maintenance while reliability centered maintenance entails • Review of Key Performance Metrics and Indicators real-time monitoring, preventive, predictive and pro-active • Corrective Maintenance Strategies for timely plant maintenance. restoration Total productive maintenance (TPM) strategy is designed • Reliability Centered Maintenance to enhance plant availability, reliability and performance • Process Flow Diagrams across the business. TPM has enabled the Company • Root Cause Analysis (Lean Sigma) to focus on continued utilization of pertinent problem solving and improvement tools, systematic approach, total • Spares Management, Contract Framework & employee participation from top to bottom in plant and Agreements equipment optimization and leveraging best practices for • Staff Professional and Personal Development hastened team development to drive total organizational • Internal Training Programs for knowledge transfer value. among staff Maintenance Systems and Tools • Employing global best practices gained through initiatives such as partnerships KenGen runs three maintenance systems and tools to guarantee high plant availabilities: Implementation of open and home-grown innovative solutions have continued to positively contribute to • Workplace organization (5S) optimal performance of all our plants. • Pre-outage preparation (SMED) • Root Cause Analysis (Lean Sigma) Single-Minute-Exchange of Die (SMED) is a system that entails proper planning to ensure availability of spares, tools, teams, and completion of pre-outage tasks prior to shutting down the plant for maintenance. During the year, continued implementation of the workplace organization methodology has eased access of tools, improved storage of maintenance equipment, TVSQSXIHIJ½GMIRXWSVXMRKERHWXSVEKISJWTEVIWEW[IPP as contributed to safer work environments. This has led to KVIEXIVIJ½GMIRG]EGVSWWXLIIRXMVIFYWMRIWWWTIGXVYQ KENYA ELECTRICITY GENERATING COMPANY PLC 68 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 We continue to implement a structured root-cause Safety continues to be one of our core values and a key analysis approach to generation of long-term solutions to tenet of our operational excellence strategy. We are our challenges and issues. Lean Sigma has been adopted cognizant of the fact that safe, healthy and motivated staff as the root-cause tool resulting in alignment of thought are the key drivers of this strategy and hence the safety of process and bringing certainty to resolution of issues our staff, visitors and stakeholders is a primary concern. At assuring consistency of results. This has reinforced our KenGen, we believe that safety begins with the individual. /IR+IR[E]SJHSMRKMXVMKLXXLIVMKLX[E]½VWXXMQI As such, we continue to invest in staff training to upscale the safety consciousness within the entire Company. Support Management Systems Occupational Safety and Health The Company’s operational excellence agenda is built and based on systems to ensure consistency of approach and • Promotion of safety culture activities continued during results. We have therefore established and continue to the year. These included a safety week in Eastern Hydro maintain the following management systems to facilitate held from 24 to 28 July 2017 as well as a safety week in the embedment of this culture: Olkaria held from 11 to 15 December 2017 E  5YEPMX]1EREKIQIRX7]WXIQ -73'IVXM½IH • KenGen has initiated a partnership with St. John F  )RZMVSRQIRXEP1EREKIQIRX -73'IVXM½IH Ambulance services to enable training and improved c) Safety Management competency and skill development for the Company d) Energy Management ½VWXEMHIVW e) Procurement Strategy (Total Cost of Ownership & Contract Agreement) The quality management system continues to reinforce the inculcation and embedment of the positive culture of working around shared vision and strategy, shared strategic policies and goals and alignment of objectives from top to bottom and across functions to enable the varied Company disciplines work in sync and synergize. Our power plants are sited and spread all over the country in areas with sensitive environmental concerns. The continued maintenance and implementation of the environmental management system galvanizes our efforts in promoting our sustainability agenda by ensuring that we LEVRIWWVIWSYVGIWERHSTIVEXITPERXWMRERIJ½GMIRXERH environmentally acceptable manner with due respect and 8VEMRMRKXLITYFPMGSR½VI½KLXMRKEX7SRHYHYVMRKEWEJIX] regard for future generations. week on 9 April 2018 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 69 SUSTAINABILITY Economic Sustainability Safety Risk Management KenGen continues to undertake risk assessment of its business in order to strengthen the controls and prevent business disruptions. This entails undertaking job analysis, MHIRXM½GEXMSRSJLE^EVHWERHVMWOWEWWSGMEXIH[MXLXLI[SVO and developing measures to prevent an incident. A risk register is maintained and regularly reviewed for relevance, as the conditions of our workplaces are dynamic. Where an incident occurs, KenGen focuses on protection of life and has put measures to safeguard life and property. These include adherence to safety designs of our plants, strengthening barriers that reduce spread of harm and continual training and awareness of staff with skills to detect and appropriately respond to emergency situations. 4YPPMRKXSKIXLIVGIRXVEPSJ½GIWEJIX][IIO KenGen has gone further to put measures for business KenGen participated in the national celebrations of the recovery and continuity planning to enable the business World Day for Safety and Health at Work (SafeDay) as resumption of critical services as fast as possible. This is in well as the World Day against Child Labour (WDACL) by recognition of our critical role to provide reliable energy to releasing our staff to make presentations at the Machakos the nation and delivery of the government agenda. county venue where the celebrations were held. Procurement Strategy 3YV½VWXEMHIVWJVSQ/MTIZY[IVIMRZMXIHXSTIVJSVQEJXIV Total cost of ownership (TCO) concept in procurement being the best in the country in St Johns Ambulance First and management of assets is a facet of excellence that Aid competitions. Other milestones were: the Company continues to cherish. This concept has a) Conducted initial partnership meeting with St. John shaped our approach to procurement of plants, resulting Ambulance to develop a roadmap for the partnership in evaluation of life-cycle costs rather than only upfront that will entail training and improved competency and costs (which may be deceptively lower). To mitigate long WOMPPHIZIPSTQIRXJSVXLI'SQTER]½VWXEMHIVW procurement lead times and danger of non-genuine critical F  'SRHYGXIHTVIPMQMREV]½VIWYVZI]EX3POEVME-%9MR spares, the Company continues to embrace the practice of SVHIVXSEWWIWWXLIGYVVIRX½VIWEJIX]TVITEVIHRIWW contract frameworks and agreements. This has resulted in level and to develop an assessment tool to be used substantial improvement in plant availability, as evidenced 'SQTER][MHIHYVMRKTPERRIHMRXIVREP½VIWYVZI]W by improved availability for the Kipevu Power Plants. G  7XEXYXSV]MRWTIGXMSRWSJPMJXWPMJXMRKIUYMTQIRXERH½VI Energy Management equipment, and health & safety audits were completed /IR+IRMWTVSYHSJMXWVIGSVHMRIRIVK]IJ½GMIRG]ERH for Eastern Hydros. management issues. Initiatives such as the energy back- d) Workplace registration ongoing for Geothermal and feed project to minimize back-feed energy is ongoing Eastern Hydros. in our power plants. Solar lighting projects have already e) Safety induction conducted for new cleaning service been implemented in several stations and the Kipevu solar TVSZMHIVWEXGIRXVEPSJ½GI project to provide power for plant auxiliary consumption is ongoing. KENYA ELECTRICITY GENERATING COMPANY PLC 70 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Energy audits are conducted regularly in all our This initiative, together with plant improvement measures, installations and the recommendations are implemented, have boosted the availability and load factors of the Well- VIWYPXMRKMRIRLERGIHIJ½GMIRG]SJW]WXIQWERHMQTVSZIH Head Units, resulting in improved operational performance. effectiveness in utilization of resources. The Geographical spread of the Olkaria Geothermal Business Automations and Visibility Well-head Plants is quite wide, resulting in administrative and operational challenges that mitigate against high During the year, the Company continued to invest plant availabilities. During the year, the Company initiated in scaling up of the capability and functionality of the a centralization program to enhance visibility and enterprise resource planning system to enhance business controllability of the Units, with a view to optimizing costs visibility and address the interfaces between the different of operating and maintaining these plants. functions in the Company. With this increased capability, virtually all Company business is conducted on the same The SCADA-based control system to provide remote platform, which is able to capture the interdependencies control and monitoring capability is being reviewed FIX[IIRXLIZEVMIHJYRGXMSRW8LI¾S[SJFYWMRIWWMW internally to enhance the Company’s capacity to engage in therefore transparent to all and the necessary facilitation external commercial consultancies. required to address any arising bottlenecks is provided in a Partnerships, Staff Development & Best Practices timely manner by the correct stakeholders. We recognize that operational excellence is a journey This upgrade is a shot in the arm for the drive for not a destination, but we have come this far on this road excellence across the whole Company, since it eases the because of the commitment and dedication of staff guided management of interfaces between functions. With this by our core values of team spirit, integrity, professionalism transparency, it is now possible for all staff to appreciate and safety. the contributions of colleagues and innovate collectively around problems KenGen values teams, as we appreciate that strategy or technology may no longer necessarily be the ultimate Generating Plant Controls Upgrade and Re-Engineering competitive advantage but rather the power of teamwork The Company is committed to modernization of control and building effective relationships with stakeholders. The and protection systems for existing plants to enhance launching of service charters outlining service-delivery reliability, ease spares accessibility and optimize operating commitments, complete with timelines and measurable and maintenance costs. The modernization of the control metrics of performance, is expected to promote systems for Sang’oro Power Plant is ongoing. transparency and improve customer satisfaction leading to better performance. During the year, we took advantage of the relocation of the Embakasi Gas Turbine Plant from Nairobi to Muhoroni KenGen continues to invest in several staff development to initiate the ongoing upgrade of the Turbine Governor programs to scale-up their skills, competencies and controls, Generator Excitation controls and the switchgear leadership readiness. Staff have been provided the platform to assure enhanced plant availability. and the latitude to express themselves to their fullest potential in addressing challenges, innovating around During the year, the Geothermal Well-head generator problems and providing home-grown solutions that will excitation controls were re-engineered, using local spur the Company to scale higher heights to success. expertise, to provide the capability of running and loading the Units with automatic voltage control mode. This mode, as opposed to alternative modes, provides improved stability, allowing the plant to ride through system faults. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 71 SUSTAINABILITY Economic Sustainability We continue to deliberately build effective relationships c) Project Portfolio Management (PPM) with stakeholders both internally and externally to unlock During the year, KenGen launched Portfolio and Project opportunities in our continued pursuit of excellent Management (PPM), which is a centralized project operational results. repository that helps the Company to manage the We are broadening our horizons by developing full project lifecycle, gain real-time insights into project partnerships with best practice companies in plant progress and cost performance across all locations. The operations and maintenance to scale-up our knowledge tool shall support KenGen in prioritization of projects in readiness for emerging challenges. During the year, a and optimization of the entire project portfolio. team of our engineers visited a best-practice Canadian d) Mobility on FIORI ½VQORS[REW1ERMXSFEXSI\GLERKIMRRSZEXMZIMHIEW ICT has incorporated Enterprise Applications on SAP and appreciate best practices. KenGen intends to enter Fiori and SAP Work Manager to align with the mobility MRXSETEVXRIVWLMT[MXLXLMW½VQXSJEGMPMXEXIIREGXQIRX XVIRHWMRGVIEWIYWIV¾I\MFMPMX] IJJIGXMZIRIWWERH of exchange programs, whereby our engineers will be enhance operation excellence. SAP Fiori offers KenGen attached at their plants for capacity building and skills decision makers with a new user experience via use of transfer. The lessons learned will then be analyzed for a set of applications used in regular business functions suitability prior to adoption and sharing across the business. PMOI[SVOETTVSZEPW½RERGMEPETTWWIPJWIVZMGIETTW Automation of Our Processes currently available on tablets and smartphones. e) Work Manager One of the key focus areas of our strategy is to leverage on information technology to enhance operational Work Manager is a comprehensive mobile solution excellence. During the year, we implemented a number of for KenGen Maintenance and Operations processes system upgrades geared at enhancing turnaround time. XEVKIXMRKQEMRXIRERGIERHXLI½IPHWIVZMGIIQTPS]IIW It will ease use of the SAP Plant Maintenance (PM) 1. Project Mwangaza (SAP upgrade) F]TVSZMHMRKERSRPMRIERHSJ¾MRIEGGIWWEPPS[MRK The Company has upgraded its Enterprise Resource IQTPS]IIW[SVOMRKJVSQXLI½IPHXSEGGIWWGSQTPIXI Planning (ERP) System to achieve the following: and manage work orders and service requests via a) Enhanced in-memory database capability mobile devices. This will empower the workforce to IJ½GMIRXP]MRWTIGXQEMRXEMRERHVITEMVEWWIXWMRXLI This system upgrade has enabled faster transactions ½IPHWLST¾SSVER]XMQIERHER][LIVIVIKEVHPIWWSJ through combined database, data processing and connectivity. application platform capabilities in-memory increasing XLIIJ½GMIRG] 2. Cloud Applications b) Supplier Relationship Management (SRM) ;MXLXLIHITPS]QIRXSJ1MGVSWSJX3J½GIERH publishing of key corporate applications, such as e-mail, We have set up an e-Procurement platform, Supplier ;SVO¾S[ERH)\XVERIXWXEJJQSFMPMX]LEWFIIRIRLERGIH Relationship Management (SRM), that has enabled the KenGen staff can now work anywhere, anytime and access Company to interact with suppliers online, eliminating all corporate resources. This will increase productivity and the need for paper based tendering process. IJ½GMIRG] KENYA ELECTRICITY GENERATING COMPANY PLC 72 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 ERP Enterprise Resource Planning 3. Overcoming the Geographical Barriers KenGen has invested in Audio-Visual systems that allow staff to hold local and international meetings on a digital conferencing platform. Multiple mobile devices: iPad, smart phones, tablets and laptops, can be used to join these meetings anywhere, anytime. The systems can also be used for remote presentations through remote audio-visual interactions. This has not only reduced traveling costs but has only increased productivity. Securing Our Future The Kenyan energy market continues to evolve, with changes driven by global energy market best practices and legislative reforms as undertaken by the Government of Kenya. The reforms process is intended to stimulate competition and IRLERGIIJ½GMIRG]PIEHMRKXSEJJSVHEFPITS[IVWYTTP]XSGYWXSQIVW 8IGLRSPSKMGEPEHZERGIQIRXMRVIRI[EFPIIRIVK]KIRIVEXMSRLEWWMKRM½GERXP]VIHYGIHXLIGSWXSJTS[IV/IR]E´WEFYRHERX green energy resources have shaped KenGen’s expansion strategy in power development. To solidly secure our revenue streams, KenGen has signed power purchase agreements that ensure all risk allocation during power plant construction and operation are fully mitigated. Our agreements are carefully structured to ensure maximum returns for our stakeholders while balancing the need for affordable power. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 73 SUSTAINABILITY Economic Sustainability Change in Law in the Regulated Environment Ongoing Power Sector Engagements and Representation The Company operates in a highly regulated environment KenGen continues to engage power sectors players in and continues to engage stakeholders to come up with order to ensure that the sector develops plans that are ways to mitigate possible risks that can emerge with aligned with stakeholder’s long-term interests. These change in law or change in regulation. KenGen deliberately proceedings may be technical in nature or may be issues of TVS½PIWXLIVMWOWXLEXLEZIEHZIVWIMQTEGXSRPSRKXIVQ interest to our business. Some of the sector engagements agreements. where KenGen is well represented include: Energy Bill JSVQYPEXMSR0IEWX'SWX4S[IV(IZIPSTQIRX 0'4(  8LI½RERGMEPMQTPMGEXMSRWXLEXEVMWIJVSQGLERKIWMRXLI and ongoing sector Operational Committees. law (including tax law), or rules (or their interpretation) affect the various parties at different levels in the energy In the course of the project development cycle, KenGen value chain. These risks need to be mitigated without ensures stakeholder’s inclusivity to streamline the project causing market disruptions while safeguarding our path, addressing the concerns and needs of all at every stakeholder returns. stage of the development cycle. This ensures that there MWIJ½GMIRXERHIJJIGXMZITVSNIGXHIPMZIV]SRXMQIERHSR Evolving Regulatory Issues budget. In addition to generating energy to serve demand, ,QQRYDWLRQDQG'LYHUVL¼FDWLRQ generators in a power system are also major providers of an array of ancillary services that support system reliability. Institutionalizing an innovation culture is the foundation of A subset of these ancillary services are commonly competitive sustainability. This culture becomes the spring procured through market-based mechanisms: namely, board for success. Innovation and success are directly Regulation, Spinning, and Non-spinning Reserves. co-related. The Company has set a solid value creation foundation by main-streaming innovation as a core The ongoing restructuring of the power sector has led function of the organization. All staff have formal structured to a further unbundling of the sector, both in terms of capacity to re-invent, re-imagine and continuously improve services offered and its value chain. This has led to entry of what they do. The following initiatives were implemented external players with renewable energy sources that are to institutionalize an innovation culture. intermittent in nature.  8LIth Annual G2G Innovation Seminar was re- To address challenges that renewable energy sources casted to take a Global perspective. Thirteen introduce to the grid, KenGen is pursuing establishment (13) International organizations participated in of a business model that will provide commercial Ancillary the Seminar. The Annual Innovation Seminar has services to the grid. provided an international forum to showcase our In addition, KenGen is working in collaboration with other unique solutions. During the year, we submitted power sector players to come up a Hydro Risk Mitigation four innovation papers to the African Public Service fund (HRMF) that is intended to cushion the sector against Awards, a continental platform that recognises EHZIVWIL]HVSPSKMGEP¾YGXYEXMSRWEWWSGMEXIH[MXL'PMQEXI innovations in enhancing service delivery within Change. Other regulatory issues of interest to the sector public institutions. It is in this platform that KenGen FIMRKTYVWYIHGSPPIGXMZIP]MRGPYHIXEVMJJVEXMSREPM^EXMSR won a runner’s up prize in “Rethinking Innovation in demand growth and power transmission line constraints. Manufacturing” Kenyan chapter. KENYA ELECTRICITY GENERATING COMPANY PLC 74 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 1.2. The Company launched a digital innovation platform – Ignite - at the 2018 G2G Seminar. This platform enables IQTPS]IIWXSWLEVIMHIEWEXXLIGSQJSVXSJXLIMVSJ½GIWSVLSQIWMRXSEW]WXIQHIWMKRIHXSJEGMPMXEXIWTIIH] execution. Decision makers too have an on-demand reporting capability to aid the unlocking of bottlenecks in the execution process. Over 738 ideas have already been uploaded for implementation. Turning Ideas into value KenGen is expanding its business portfolio by investing in non- power generation projects and several projects are in different stages of implementation as outlined. -RRSZEXMSR4VSQSXMSR Innovation COPI Forums Ignite Friday Beyond Seminars Ignite Digital Platform Open Innovation 6 Annual Seminars 5 Communities of 1 2 hour session every last 1 Open Innovation since 2012 Practice and Innovation Friday of each month for platform for ideas innovation beyond KenGen staff KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 75 SUSTAINABILITY Economic Sustainability WHERE WE ARE 01 SINCE 2012 Innovation Implementation KenGen is expanding its business portfolio by investing in non- power generation projects and several projects are in different stages of implementation. Promoting Innovation Concepts 738 From 2012 to 2018, a total of 738 idea concepts wer submitted by staff to the Company. 34 of these ideas have so far been implemented and brought in Kshs Innovation Proposals 251 2.6 billion in additional revenue. The Company is developing a digital open innovation platform “Beyond” to receive innovative ideas from the public. Approved Innovations 143 This platform will enable the Company go beyond its internal resources to tap into value creation ideas. Implemented Innovations 34 Intellectual Property Protection Trademarks 12 Innovation Copyrights 10 Value 2.6bn Realized 4EXIRX 34 Applications KENYA ELECTRICITY GENERATING COMPANY PLC 76 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 02 Innovation in Action Value we are creating for our Stakeholders The Company has over the years offered geothermal drilling and Drilling & consultancy services. Consultancy Services Gitaru Drinking Water Plant was commissioned last year. Work is underway to brand and market the water for Gitaru commercial sale. Water Olkaria Spa was commissioned in 2014 and has so far served 600,000 visitors. The SPA services are being revamped Olkaria to accomodate the growing demand. SPA KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 77 SUSTAINABILITY Economic Sustainability KenGen Industrial Park KenGen has completed a feasibility study to set up an Industrial Park at its geothermal power generation hub at Olkaria. The Park will create a competitive business environment for manufacturing and service sectors through provision of competitively priced electricity, geothermal steam, heat and water. The industrial park shall provide new revenue sources for KenGen through direct sale of electricity, steam and brine. This will boost the local economy and reduce the cost of living in Kenya. Application for designation of the KenGen Industrial Park as a Special Economic Zone is FIMRKTYVWYIHXSIRWYVIXLEXXLIMRZIWXSVWFIRI½XJVSQ incentives as provided for in the SEZ Act of 2015. Civil Engineering Materials Testing Laboratory KenGen has completed developing a civil engineering material testing laboratory in Olkaria. The facility will be accredited and leased to an independent operator to offer testing services for ongoing projects nationally. Revenue shall be realised through lease of the facility under an agreed term sheet, which will take into consideration the prevailing testing rates by the Ministry of Infrastructure and Materials Testing department. KENYA ELECTRICITY GENERATING COMPANY PLC 78 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Olkaria II Geothermal Plant KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 79 SUSTAINABILITY Social Sustainability Social Investment The secondary school scholarships target top KCPE performing pupils, while the university scholarships target KenGen believes in making a difference in areas in which top KCSE performers, all from needy backgrounds. The it operates and continues to implement a comprehensive university students are offered internship and employment corporate social investment program, with a view to opportunities at KenGen upon graduation with honours in improving living standards and empowering communities the relevant disciplines. The Company is in the process of to take charge of their destinies. Key areas of focus EFWSVFMRKJSYVFIRI½GMEVMIW[LSKVEHYEXIH[MXLLSRSYVW are education, infrastructure development, economic in 2017 in the relevant subjects, as stipulated in the empowerment, water & sanitation and environment. The Company’s policy. Company also supports initiatives that promote sporting talent, peace, inclusion and cultural preservation. Currently, the Company is supporting 97 university WXYHIRXWERHWIGSRHEV]WXYHIRXW[MXLFIRI½GMEVMIW Education being sponsored by contributions from the KenGen Employee Giver Initiative and six from our project partner, Bamburi Cement Ltd. In addition, the Company offers stipends for university students under the program. /IR+IRLIPHMXW½JXL%RRYEP1IRXSVWLMTMR%TVMPXLMW ]IEVJSV)HYGEXMSR7GLSPEVWLMTWFIRI½GMEVMIW 8LIFIRI½GMEVMIW[IVIGSYRWIPPIHSRXLIMVEGEHIQMG performance and career guidance through practical and motivational exercises within an environment that encourages peer relationships, networking, and exchange of ideas and experiences. The Company operates in some of the remotest parts 7GLSSPWXLEXFIRI½XIHJVSQWGLSSPMRJVEWXVYGXYVI of the country, where schools are not only far between, development include Apoko Mixed Secondary School in but ill-equipped to provide quality education. During the Nyanza Region, Gachabari Secondary School in Eastern year, KenGen supported access to education by children Kenya, Turkwel Gorge, Lonyangalem and Olasiti Primary from disadvantaged backgrounds by providing scholarships, schools in the Rift Valley. The Company also extended developing school infrastructure and providing learning support to the Alliance High School Old Boys’ Club golf equipment. Schools at the Seven Forks, Olkaria, Turkwel, tournament to raise money to pay fees for needy students Sondu Miriu and Upper Tana were supported to build and expand school infrastructure. Similarly, KenGen classrooms and acquire equipment, with a view to creating supported a school feeding program in the semi-arid a conducive environment for learning and giving children a Turkwel with a view to keeping more than 2,000 children good start in life. in school. From sponsoring the initial group of 14 students in 2005, Mirira Primary School and Kiambaa Primary School XLI/IR+IR)HYGEXMSR7GLSPEVWLMTWXSHE]LEWFIRI½XIH MR1YVERK´E'SYRX]EPWSFIRI½XIHJVSQYTKVEHIH over 700 secondary and university students. classrooms, landscaping, new desks, and a refurbished water tank following the implementation of the CDM projects at Tana Power Station. KENYA ELECTRICITY GENERATING COMPANY PLC 80 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 6ILEFMPMXEXMSRSJ/MEQFEE4VMQEV]7GLSSP This was the result of a recent redevelopment of Tana The renovation of Mirira Primary School included which brought additional renewable energy capacity to GIQIRXMRKSJEPPGPEWWVSSQW¾SSVWXSGVIEXIEGSRHYGMZI offset the use of fossil fuels, thereby reducing the emission learning environment, and the refurbishment of their of greenhouse gases. water tank and rainwater collection gutters to ensure the The interventions at the two schools were necessitated sustainable availability of water throughout the year. The by the poor infrastructures and sanitation facilities at the establishment of a woodlot will boost the school feeding institutions, leading to unfavourable learning environment program with cheap alternative source of wood fuel. and consequently poor examinations performances. In addition, KenGen supported initiatives aimed at helping Kiambaa Primary School, with a total of 9 classrooms, had students to achieve their potential through mentoring and YRTPEWXIVIH[EPPWERH¾SSVWERHPEGOIH[MRHS[WLYXXIVW school tours to expose students to power generation I\TSWMRKXLIETTVS\MQEXIP]TYTMPWXSGSPHVEMRERH activities and inspire them to make meaningful contribution wind. Its blackboards were worn out and the desks were to the society. FVSOIRERHYRIZIRP]½RMWLIHPIEHMRKXSMRNYVMIWJVSQ splinters and falls. In addition, the lack of a veranda corridor outside each block left pupils exposed during the rainy seasons. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 81 SUSTAINABILITY Social Sustainability Infrastructure Water & Sanitation Infrastructure, especially roads, plays a critical role in Access to water continues to be a major challenge to opening up and enabling inaccessible areas to participate many communities, especially those in the semi-arid areas in the national economy. KenGen continues to enable where water-borne diseases are endemic. In fact, in some communities to access essential services and markets parts of the country, water is increasingly becoming a for their produce by building and maintaining roads. The WSYVGISJGSR¾MGX Company has rehabilitated roads in Turkwel, Olkaria, The Company, with installations in semi-arid areas, is Sondu Miriu and the Seven Forks. focusing on enabling the communities to access water At the same time, the Company’s presence has enabled by building sand dams and providing piped water as well the areas to access electric energy, which has led to as raising awareness on hygiene. During the year, the XLIHMZIVWM½GEXMSRSJWSYVGIWSJMRGSQIXLVSYKLXLI Company commissioned the Ngurunga dam to alleviate establishment of small businesses like barber shops and water shortage faced by 500 residents in Mbeere, Embu hair salons. Access to electric energy has also improved County. The Company also continued to support the access to health services as local health centres can now provision of water to thousands of people in the Seven undertake power-dependent medical tests and administer Forks region, Sondu Miriu, Turkwel and Olkaria by erecting vaccines that require refrigeration. and maintaining water points outside its installations. The 'SQTER]´W[EXIVTVSNIGXWFIRI½XEFSYXTISTPI Economic Empowerment who live near its installations. KenGen plays a critical role in enabling communities Innovation / Capacity Development to improve their living standards by providing jobs and economic opportunities. In Olkaria alone, where the Innovation is the bedrock of development and KenGen 'SQTER]MWTYXXMRKYTE1;KISXLIVQEPTVSNIGX continues to work with universities and other institutions the Company provided 200 temporary jobs to the of higher learning to promote and embed an innovation residents. In all areas of operations, the Company gives culture among students as way of preparing them for the priority to local communities in the provision of non- market. The Company supported the Technical University specialized services like security, cleaning and supply of of Kenya’s seminar on Innovation and Entrepreneurship materials. and Strathmore University’s research and innovation conference, which brought together universities, government agencies and industries to showcase their research and promote collaborative research. Oil deposits have been discovered in the country’s Rift Valley region and exploration has already begun in Turkana County. During the year, KenGen contributed to the development of the country’s nascent oil and gas industry by sponsoring a conference in Naivasha to build capacities for the exploration of extractives in East Africa Construction of Olkaria V steam pipes KENYA ELECTRICITY GENERATING COMPANY PLC 82 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Healthcare Healthcare remains elusive to many rural communities. Indeed, Kenyans are also beginning to bear the brunt of diseases like cancer which require intensive, specialized care. In Mt. Kenya Region, KenGen is partnering with the Nyeri Hospice to alleviate the suffering of people with terminal diseases. Every year, KenGen partners with the Nyeri Hospice to provide palliative care to terminally ill patients by sponsoring a charity golf tournament. The Company also enables Kenyans to access health care by sponsoring various events, including the Mater Heart Run, Coast Hospice Charity Golf Tournament, Diabetes Walk, 4VSQSXMRKMRRSZEXMSRHYVMRK++8IGLRMGEP7IQMREV and the Relay for Life (Cancer Walk). Inclusion Internship & Industrial Attachment In addition to implementing an inclusion policy, KenGen Partnering with academia for research and capacity also supports various initiatives that ensure mainstreaming development is a pillar in our talent recruitment. During of various groups in different parts of the society. During the year, we enhanced our collaboration with universities the year, the Company continued to provide opportunities and colleges, enabling 1,239 students to acquire skills and to disadvantaged communities through education, experience in various disciplines. There was an increase of provision of infrastructure and economic opportunities.  SJMRXIVRWLMTFIRI½GMEVMIW WXYHIRXW[LSLEZI The Company also sponsored initiatives focusing on completed university education) who have a six-month women, including the National Diversity & Inclusion development process as well as 4.02% increase in two- Awards, the Association of Women Accountants of Kenya, month industrial attachment (students who are still in Women in Manufacturing Gala Dinner and the second campus). This demonstrates our commitment in developing Women in Energy Conference and Awards. talent at the university and college level in preparation for XLINSFQEVOIX8LIMRGVIEWIMRXLIWIX[STVSKVEQWEJ½VQW The Company also supported the Lake Naivasha Half our support for the Government’s goal to prepare the Marathon, a forum for creating awareness about persons youth for economic development. with disability and raising funds for the completion of an inclusive career development centre at Kongoni to help them to exploit their talents as a means to livelihood. Program 2017 2018 Variance Internship KenGen also helped to put up a perimeter wall at Dr. 49 100 104.08% Ribeiro Parklands Primary School to guarantee the safety &IRI½GMEVMIW of pupils,118 of whom have cerebral palsy. Industrial 1,095 1,139 4.02% Attachments Total 1,144 1,239 8.30% KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 83 SUSTAINABILITY Social Sustainability Environmental Conservation The Company is also in the process of strengthening conservation through partnerships with agencies like the Nature Conservancy. In addition, the preparation of KenGen/Water Resource Management Authority (WARMA) joint conservation program in hydro dam catchment areas begun and is expected to further curb siltation. %XXLIWEQIXMQIXLI'SQTER]´W¾EKWLMTIRZMVSRQIRX project is the Schools Green Initiative Challenge (GIC) project, now running its third phase and implemented in partnership with Better Globe Forestry and Bamburi Cement Ltd. Leveraging on the presence of schools around the Chairman plants a tree during the GIC launch Company’s power stations, the GIC is structured as an Environmental conservation remains a key focus in the afforestation competition, with the institution recording Company’s corporate social investment and receives the highest number of tree survivals being awarded enormous attention. During the year, KenGen worked with several prizes including an educational trip, infrastructure communities in its operational areas to raise awareness development, and scholarships. of environmental conservation and promote planting of The ten-year project currently has 400 schools competing trees to minimize the impact of climate change as well as from the semi-arid counties of Embu, Kitui and Machakos expand livelihood opportunities through the growing of MRKVIIRMRKQSVIXLEREGVIW[MXL[SSHJYIPERHJVYMX fast-maturing, commercial trees. The Company, working trees, with additional institutions set to join in subsequent with stakeholders’ coordination committees, also raised years. awareness on sustainable use of resources, including sand The GIC involves the planting and nurturing of multi- harvesting at the Seven Forks. In addition, the Company purpose Sennasiamea (Muveshi) and Melia volkensii provided thousands of seedlings to communities living near (Mukau) tree seedlings for their 0.5-acre school plots. All its installations as part of the tree-planting effort schools receive an initial 300 tree seedlings. During the year, a total of 377,025 seedlings were issued Since inception in 2015 through a two-year pilot project, for planting in various KenGen operational areas, surpassing the GIC has so far distributed over 80,000 seedlings a government of Kenya target of 80,000 seedlings. Over through phase II and phase III of the tree-planting 700 tree seedlings were planted by KenGen staff at Olkaria competition. as part of well-pad enrichment. %XXLIWEQIXMQIETVSKVEQJSVGSRWIVZMRK½ZILIGXEVIW in Ngong Hills Forest, 15 acres in Kamburu, 5 acres in Tana and 10 acres in Kindaruma has been initiated and is I\TIGXIHXSGSRXMRYIHYVMRKXLIRI\X½RERGMEP]IEV8LMW will contribute to the 10% National forest cover target, and control siltation at the Seven- Forks cascade, thereby ensuring sustainable hydro power generation for national development. KENYA ELECTRICITY GENERATING COMPANY PLC 84 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Sports The Company also provided relief food to drought affected schools in Turkwel and provided support to Moi Nairobi Girls High School where some students died in a HSVQMXSV]½VIERHWGLSSPTVSTIVX][EWHIWXVS]IH Other Forms of Support The Company supported cultural and tourism initiatives, including the Lamu Cultural Week, Kenya Tourism Week and Kenya Energy Awards aimed at promoting energy IJ½GMIRG] The Future Tee time KenGen shall continue to collaborate with communities Globally, sport is turning into a big industry and KenGen is with a view to making a positive impact in areas in which playing a key role in helping Kenyans to develop and utilize it operates. Through the KenGen Foundation, now in its their talents. During the year, the Company sponsored, 5th year, the Company aims to raise funds from donors among other events, the Embu Sevens Rugby Tournament, and partners to scale up its Corporate Social Investment the only one of its kind in the Mount Kenya Region, aimed programs for greater reach and impact. The Foundation has at promoting grassroots rugby as well as inspire talented signed a memorandum of understanding with Tullow Oil to youth to take up rugby as a sport. initiate an afforestation project under the Green Initiative Disaster Response Challenge in West Pokot and Turkana counties. The project will involve 14 schools from each county and will kick off in During the year, the country experienced a number of January 2019. disasters, both natural and manmade. KenGen joined hands with the government and other institutions to alleviate Talent Management the suffering occasioned by the calamities. Among disaster Our People relief efforts supported by the Company are famine relief 8LI'SQTER]´WWXVEXIK]LEWX[MRXLIQIWJVSQE+SSH in Garissa and Tana River counties, where thousands of Company to a Great Company and more importantly people were displaced due to heavy rains experienced in from one generation to the next. Our people are the XLIWIGSRHLEPJSJXLI½RERGMEP]IEV drivers of greatness and sustainability. They are the foundation on which the Company’s success is anchored. Our improved operational performance in 2018 is a testament to our people’s technical capability and a strong work ethic. The Company continues to invest in ensuring employees have a conducive environment to innovate and bring out their very best. Indeed, during the year, we were voted as the best employer in Kenya’s public sector according to a survey conducted in 2017 by Brighter Monday Ltd. /IR+IRSJJIVMRKJEQMRIVIPMIJMR8ERE6MZIV'SYRX] KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 85 SUSTAINABILITY Social Sustainability 8LMWJIIHFEGOJVSQWXEOILSPHIVWEJ½VQIHXLIIJJIGXMZIRIWW Age Distribution of several of our employees’ engagement programs that 900 838 had been implmented to create a good environment for 800 employees and stimulate productivity. 689 700 643 Our human capital readiness begins with attracting 600 talent, building capacities, providing platforms to express 500 talents, growing leaders and retaining the best through 400 336 performance reward and recognition. 300 Our People Bring Out the Best 200 100 Our favourable work environment plays an increasingly important role in our ability to attract and retain talent. 0 Below 35 36-45 46-55 Above Our rich generation mix, agile leadership, freedom to years years years 55 years innovate, staff involvement in decision making and people development programs make KenGen an attractive Upscaling Organizational Capabilities employer. In tandem with our theme of building capabilities and Employees Complement leadership, we continuously develop our people leadership and functional capabilities, focusing on internal training Terms of Service 2017 2018 using our experienced employees. Due to the unique Management 1,413 1,485 nature of our geothermal skills mix, we partner with both local and international learning institutions to train our Union  1,023 employees. Total 2,476 2,508 Performance Accountability Framework We continue establishing a strong link between corporate Gender Distribution and employee performance by translating high level strategy to lower level objectives and measures through 1,942 the cascading process. Bi-annual Performance dialogues Male ensures target setting, monitoring and evaluation. Teams set weekly targets during performance board accountability 566 sessions, where they review previous week deliverables Female and allocate tasks and resources for the coming week. Industrial Relations We continue to enjoy cordial industrial relations with workers through their umbrella body “KETAWU”. During the year, the Company signed a 4-year collective bargaining agreement that stipulated improved terms and conditions of service for unionisable employees, in line with applicable laws and emerging global trends. We share with our partners, industry best practices to sustain conducive and harmonious work environment. KENYA ELECTRICITY GENERATING COMPANY PLC 86 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Employee Engagement (ii) Team Buildings Having engaged employees is critical in achieving KenGen Our teams work in diverse geographical areas, with strategic goals. We endeavour to create a conducive work members of the same project and sometimes not in environment, where each of our employees feel passionate direct contact with each other. To synergize and align the about their work, are always committed to the Company team towards common goals, we organized several team and bring out their best. building sessions for all departments and divisions. In these sessions, employees shared work related successes, issues During the year, we implemented the following employees’ and challenges. There were popular “fungua roho” moments engagement activities that are clearly aligned with our where employees shared emotional issues affecting their overall business strategy and our unifying theme of bringing productivity. All our team building sessions are anchored out the best and being present in engagement with on our core value of “Team Spirit” and Theme of “Bring out internal stakeholders: the Best”. (i) MDs Employee Engagement Forums (a) Staff Clinics: Our MD &CEO, in furtherance of her people agenda, sets aside a special day when she stops all her normal activities to attend to employees’ issues. Any employee with any idea, feedback, suggestion, complaint, compliment or innovation that in their view requires personal attention of MD &CEO, is requested to write to her directly. This is a unique opportunity that provides employees with a direct channel to interact with her, albeit by mail, in a direct and personal way. /IR+IRIQTPS]IIWMREXIEQFYMPHMRKWIWWMSR She endeavours to address all the issues raised by employees. (iii) Knowledge sharing platforms (b) Town hall Meetings: The MD & CEO, in cognizance We encourage our employees to share essential of our unifying theme of being present in experiences, ideas and best practices using different media. engagement with internal stakeholders, visits Through these platforms, workplace topical and cultural IQTPS]IIWEXXLIMV[SVOTPEGIWEXXLIWLST¾SSV issues that were rarely discussed have been tackled, for a one on one conversation on what can propel resulting into a desired corporate culture paradigm shift. the organization to succeed, work challenges and 8LIWIQIHMEEVI possible solutions. It is a forum for sharing Company E  /IR+IR;IIOP]2I[WPIXXIVW - an in-house magazine updates and has elicited a lot of excitement among featuring news coverage from Company operating employees, resulting in increased productivity. areas together with articles on work related issues. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 87 SUSTAINABILITY Social Sustainability F  'SQQYRMXMIWSJ4VEGXMGI -RRSZEXMSR '34- forums are decentralized innovation and knowledge sharing forums at the business area level where staff meet on a quarterly basis. The agenda includes discussions and brainstorming of work-related experiences, insights and innovative ideas. COPI forums are held in all the six business areas of the organization. c) G2G Global Annual Seminars – The Good-to-Great (G2G) Global Innovation Seminar is an annual corporate seminar that provides a platform for employees, partners and potential partners of the organization to showcase innovative solutions geared towards creating sustainable value for the Company as well as solutions that maintain the Company’s competitive edge. To date, over 3,000 delegates have attended the seminar and contributed over 738 innovation ideas. Staff attending the 2018 G2G Innovation Seminar KENYA ELECTRICITY GENERATING COMPANY PLC 88 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Reviewing the G2G program H ±-KRMXI²/IR+IR W(MKMXEP-RRSZEXMSR4PEXJSVQ, gives staff the chance to participate in future developments at KenGen by submission of ideas, and participating in the implementation of ideas online. Individuals/teams that implement their ideas are rewarded and recognized. e) Ignite Friday – Ignite Friday is a 2-hour innovation challenge breakout session every last Friday of the month. During -KRMXI*VMHE]WIGXMSREPXIEQWFVIEOSYXSJXLIMVRSVQEPHE]XSHE][SVOXSHMWGYWWEWTIGM½GMRRSZEXMSRGLEPPIRKI Teams are encouraged to come up with ideas that they can implement within their sections using the available resources. This bottom-up approach allows great ideas to bubble up. It is a fun, participatory and open way of sharing ideas and out of the box discussions on how to bring out the best in our people. Everyone has the chance to contribute their ideas towards the innovation challenge set out every month. During the year, KenGen vision, mission, core values and our unifying theme of build, be present and bring out the best were sung and recorded by our own employees. In some occasions, short plays and poems were orchestrated to provide powerful and transformative experience. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 89 SUSTAINABILITY Social Sustainability Employee Engagement Activities 2018 Ignite 9 TEAM BUILDINGS MUSIC & Our DRAMA COPI Employee Engagement DREAM IT, Activities WORK IT MAKE IT FUN IGNITE G2G FRIDAY GLOBAL SEMINAR SPARK CHANGE SMALL IDEAS CAN IMPACT KENGEN STAFF IGNITE CLINICS A DIGITAL INNOVATION TOWN WEEKLY PLATFORM HALL MAGAZINES MEETINGS W W W. I N N O VAT I O N . K E N G E N . C O . K E Y- Gen Forum The Company is committed to inculcating a high- KenGen rolled out Pink Energy, performance culture that recognizes the importance of a development program involving youthful employees aged below 35 years in which provides female driving the strategy towards a prosperous future. Y-Gen is employees with an avenue for a new program to mentor the young employees so that empowerment and participation they can realize their potential and aspirations. The aim is in major committees, projects to make sure there is no generation gap, as the young are implementation, innovation and other forums. The KenGen encouraged to learn from experienced employees. 4MRO)RIVK]MRMXMEXMZIWIEQPIWWP]½XWMRXSSYVWYWXEMREFPI development goals on inclusion and equality. The forum has provided opportunities for female employees and empowered them to perform better in their respective roles. The following continued to be Pink Energy focus areas for the year: (a) Personal development empowerment 838 (b) Condusive work place environment (c) Gender awareness The number of Y-Gen employees KENYA ELECTRICITY GENERATING COMPANY PLC 90 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 %4MRO)RIVK]IZIRXEXXLI'IRXVEP3J½GI Product Responsibility - The Supply Value Chain The main objective for supply function is to improve processes, increase wealth creation and deliver shareholder value for sustained economic development. Supply Chain plays a pivotal role in timely procurement of quality goods, works and services. The procurement process is guided by the Public Procurement and Assets Disposal Act 2015, relevant regulations, company procedures and best industry practices. Supply Chain is a strategic function in the Company to achieve best returns on key initiatives like cost reduction and enhanced plant availabilities. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 91 SUSTAINABILITY Social Sustainability SUPPLY CHAIN PLANNING INVENTORY SUPPLY CHAIN MANAGEMENT STRATEGY SUPPLY CHAIN MANAGEMENT LOGISTICS PROCUREMENT MANAGEMENT (SOURCING) CONTRACT MANAGEMENT KENYA ELECTRICITY GENERATING COMPANY PLC 92 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 The Supply Chain strategic activities target procurement planning, tendering process, contract management, logistics, inventory & asset management, disposal and stakeholder relations management. Value for Our Money The organization maximizes return on money spent through the procurement of goods, works and services throughout XLIIRXMVIGLEMR:EPYIEHHMXMSRLEWFIIRIRLERGIHMRXLIJSPPS[MRKEWTIGXW Procurement Planning The Company prepares Procurement plans on an annual basis, which guide all procurements as per approved budgets. The Procurement plan is approved by the Board of Directors and executed by management to support Company strategic objectives. The plans are implemented in accordance with the Public Procurement and Asset Disposal Act, 2015, ensuring all requirements (among them, reservations for special groups to access public procurement opportunities) are met. Framework Agreements The need to improve plant availabilities and ensure steady power generation from our units has led KenGen to embrace long-term partnerships with Original Equipment Manufacturers (OEMs). Framework agreements entered entered into with OEMs guarantee steady supply of spares required for scheduled maintenance of the plants. This strategy has drastically reduced the lead time for acquisition of spares, reduced administrative time and cost of procurements. Our generating plants are maintained as per approved schedules, thus maximizing output for best shareholder returns. In the ]IEV[IWMKRIH½ZI  EKVIIQIRXW[MXL3)1W Olkaria steam pipes KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 93 SUSTAINABILITY Social Sustainability Buy Kenya Build Kenya We achieved a total of Kshs1.20 billion against the negotiated target of Kshs1.30 billion, translating to a Our Company provides growth and development avenues 94% uptake. The improved uptake was achieved after through procurement of goods, works and services from implementing the following initiatives: - citizens. This has continued to create wealth sustainably. The following approaches were used in the previous year • Sensitization and awareness programs to these groups under this initiative: - to take advantage of the scheme. a) Creating Value for Special Groups • Roll out of Supplier Relationship Management System (SRM) The Public Procurement and Asset Disposal Act, 2015 provides for public procuring entities to set aside a • Effective planning and monitoring of the implementing reservation of procurement opportunities for Youth, teams Women and Persons living with Disabilities (YWPD). In the year, we awarded these special groups procurement contracts equivalent to Kshs 1.2 billion. This was an increase of 73.14% compared to the previous year when Kshs 730million was awarded. Our focus in the target group is anchored on our strong belief that local ½VQWWYTTSVXIQTPS]QIRXGVIEXMSRGVIEXIZEPYIJSV stakeholders and ensure sustainability. Allocation to Special Groups CATEGORY 2018 2017 (Awards in Kshs Mn) (Awards in Kshs Mn) Women  379,907 Youth 389,881  =SYXL[SQIRERH4;(HYVMRKE/IR+IRWYTTPMIVW PWD 118,215 21,918 sensitization and awareness session in Nairobi. b) Empowering Local Firms Total 1,264,998 730,590 The 40% local content requirement in international XIRHIVMRKTVSGIWWLEWIREFPIHPSGEP½VQWSFXEMRE The allocation increased by Kshs 534,398,000 from the portion of money spent on procurement through joint previous year, representing a growth rate of 73.14%. ventures and other partnerships. Promotion of Local Content in procurement (Buy Kenya, Build Kenya) 4;( initiatives continued to be supported whereby 40% of the 9% Company’s non-specialized procurement budget, based on internally generated funds, is spent on local products Youth Women and services supplied by citizen contractors. During the Wealth Creation year, procurement of locally produced goods and services 31% for Special 60% awarded to citizen contractors was Kshs 5,110.7 million. Groups This supports growth of the local industry for sustainable development for stakeholders. KENYA ELECTRICITY GENERATING COMPANY PLC 94 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Process Improvement We submit statutory reports to the Public Procurement Regulatory Authority (PPRA), The National Treasury Our supply chain processes require continuous and Ministry of Energy. We complied and submitted the improvement to address emerging challenges and JSPPS[MRKVITSVXW comply with legal requirements. During the period, we implemented the Supplier Relationship Management a) Quarterly reports on all procurement contracts (SRM) module under e-procurement platform to improve awarded for value above Kenya Shillings Five million. TVSGYVIQIRXIJ½GMIRG];ILIPHWIRWMXM^EXMSRERH b) Quarterly reports on procurement contracts awarded awareness sessions with suppliers on the SRM usage and to the Special Groups essential requirements for sustainable engagement with teams managing supply chain. The uptake of the system has c) Direct Procurement contracts awarded for Value above FIIRMQTVIWWMZIERH[IEVIRS[IRNS]MRKXLIFIRI½XW Kenya Shillings Five Hundred Thousand ;ILEZIHIPMZIVIHSRXLIJSPPS[MRKWXVEXIKMGVIWYPXW d) Procurement proceedings terminated before award. a) Suppliers participate in tendering process online e) Quarterly progress reports summarizing procurements without physical delivery of tenders to tender box. allocated to target groups. b) Online opening of tenders, where critical data for the These reports demonstrate commitment to compliance bids are recorded in secure computerized system. requirements that enhances transparency, fairness and c) Enhanced security of procurement information from value for money for sustainable growth. the tendering process to award of contracts. Sustainable Procurement d) Increased transparency and accountability of the Our Procurement is anchored on the legal framework tendering process and best practices where the acquisition of goods, works e) Ability to track procurement proceedings through a and services embraces Total Cost of Ownership (TCO) single integrated system. approach. Our assets and other procurements are compliant to safety, health and environmental requirements Compliance to Statutory Requirements for sustainable growth. These initiatives build a sustainable The supply chain function is guided by the Public supply chain function for the future. Procurement and Asset Disposal Act, 2015 and relevant regulations as established. All our procurements are processed with due compliance to all these statutory requirements and company procedures. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 95 SUSTAINABILITY Social Sustainability Enterprise Risk Management KenGen remains committed to robust risk management practices as an integral part of good management. The Board, through its Audit, Risk & Compliance Committee, exercises an oversight role on the Enterprise Risk Management (ERM) processes implemented by Management. During the year under review, KenGen continued to embed a risk-awareness GYPXYVIEMQIHEXWYTTSVXMRKWXVEXIKMGERHSTIVEXMSREPSFNIGXMZIW/I]GSVTSVEXIERHIQIVKMRKVMWOWVIPEXIHXSWTIGM½G business objectives were assessed, evaluated and are closely monitored by the Board and Management. Enterprise Risk Management (ERM) Framework Our risk management framework, that is aligned to ISO 31000, allows us to identify, measure, manage and monitor strategic and operational risks across the business. The framework provides management with a clear line of sight over risk to enable informed decision making. In order to support effective implementation of our ERM framework, we have adopted the three lines of defense model EWMPPYWXVEXIHFIPS[ Three Lines of Defense Model 1 st lines of defense 2 nd lines of defense 3 rd lines of defense Primary Risk Owners: Oversight function: Independent Assurance Providers: Report to management Report to CEO & Board Audit & Risk Committee Report to Board Audit & Risk • Each Division owns the risks Committee that face their operations • Risk Management • Internal & External Auditors • We have management and • Legal and Compliance ½RERGMEPGSRXVSPWMRTPEGIXS • Business Continuity mitigate the risks. • Safety and Quality Assurance Strategic Risk Management in KenGen 8LISFNIGXMZISJ7XVEXIKMG6MWO1EREKIQIRXMWXSIRWYVIXLEXQEREKIQIRXMHIRXM½IWEWWIWWIWERHGSRXMRYSYWP]QSRMXSVW events that drive deliberation and action regarding uncertainties and untapped opportunities that affect an organization’s strategic execution. It enables an integrated approach of strategic planning, risk management and strategy execution in managing risks and seizing opportunities. KENYA ELECTRICITY GENERATING COMPANY PLC 96 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Strategic Risks KenGen’s key strategic risks and mitigation measures are shown in the table below: Key Risk Indicator Tolerance A We don’t believe KenGen can or should do more B We believe KenGen can or should do more C ;IEVIRSXWYJ½GMIRXP]TVITEVIHERHMQQIHMEXIEGXMSRMWVIUYMVIH Strategic Risks & Mitigations Risk Risk Mitigation Strategies Rating 1. Single Buyer Model High KenGen deploys a robust debt management program for KenGen currently sells its increased collection of overdue amounts as well as enhanced generated electric energy to a collaboration with other stakeholders to ensure the enactment single off-taker, Kenya Power. This of the Energy Bill into law. This will allow entry of more players comes with the attendant risk in the wholesale and retail of electricity, thus giving KenGen of late or delayed payment for an option to sell bulk energy to multiple customers. We are electricity sales which could have also diversifying to other revenue generation modes e.g. the adverse effects on the KenGen’s Industrial Park in Naivasha. GEWL¾S[ERHVIZIRYIW 2. Resource Sustainability High KenGen continues to engage and collaborate with stakeholders Unfavourable hydrological for afforestation and the establishment of a hydro-risk conditions and changes in mitigation fund. We are also putting in place an effective steam geological formation underneath reservoir management system that ensures close monitoring the earth’s surface could adversely and supervision of the steam pressures in the geothermal affect the generating capacity of reservoir. the Company. 3. Power Evacuation from High KenGen is collaborating with KETRACO and other key Generation Sites stakeholders to ensure an effective integrated plan for new This applies to the uncompleted plants and transmission lines. projects by KETRACO directly linking to KenGen’s upcoming projects, therefore affecting the evacuation of power from generation sites. 4. Access to Capital Financing Medium /IR+IRGSRXMRYIWXSI\TPSVIRI[½RERGMRKETTVSEGLIWERH KenGen needs substantial capital RI[WXVYGXYVIWXSI\IGYXIERH½RERGITVSNIGXWWYGLEW4YFPMG XS½RERGIMXWFYWMRIWWTPERERHMR Private Partnerships (PPPs) and Special Purpose Vehicles particular, the capacity expansion 74:W XSQEREKIXLI½RERGMRKSJRI[TVSNIGXW projects. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 97 SUSTAINABILITY Social Sustainability Strategic Risks & Mitigation (continued) Risk Risk Mitigation Strategies Rating 5. Changes in the Legal and Medium KenGen continues to pro-actively engage with the relevant Regulatory Environment national and county government arms, building constructive Changes in laws and regulations relationships with the relevant regulators and participating in could expose KenGen to risks that discussions on emerging legislation and regulations. could result to increased operating costs, ultimately compromising on SYVTVS½XEFMPMX]  Market Disruptions Medium KenGen is exploiting geothermal resources within Olkaria and KenGen face increased other potential sites as well as capacity expansion programmes competition from a variety of new for renewable energy resources such as wind and solar. We are players in the market. also seeking public private partnerships to create new business models and growth opportunities. 7. Reputational Risk Medium KenGen undertakes frequent environmental scanning of KenGen is a market leader in any inherent reputational risk so that potential adverse the power generation industry communication is addressed with relevant stakeholders through and negative publicity could have a sound communication engagement strategy. adverse effects which may lead to a decline in the market share price and failure to attract investors to ½RERGISYVTVSNIGXW 8. Social and Community Risk Medium KenGen continues to be involved in Corporate Social KenGen’s plants and stations are Investment (CSI) activities through the KenGen CSI program located in close proximity to and KenGen foundation. We have also enhanced collaboration communities. As a result, projects with county governments, community stakeholders, may be stopped or delayed and implemented Resettlement Action Plans (RAP) as well as set plants rendered inoperable due to up a Community Liaison Department. community agitation. KENYA ELECTRICITY GENERATING COMPANY PLC 98 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Opportunities & Management Strategies Opportunity Management Strategies (MZIVWM½GEXMSRSJ6IZIRYI High The Company is exploiting new revenue streams and is Streams currently pursuing licences to undertake: • Bulk power sales to multiple commercial consumers There is need to explore various opportunities so as to diversify through the development of the industrial park in Naivasha. KenGen’s revenue streams. • Commercial drilling for other stakeholders within the region. KenGen has been relying on a • New drilling sites to increase green energy through single off taker in the sale of its geothermal. generated electric energy. This • Consultancy and Contracting work to stakeholders. poses a risk to the Company’s cash ¾S[WHYIXSHIPE]IHTE]QIRXW Our risk management framework, that is aligned to ISO 31000, allows us to identify, measure, manage and monitor strategic and operational risks across the business. The framework provides management with a clear line of sight over risk to enable informed decision making. Olkaria pressure gauges KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 99 SUSTAINABILITY Environmental Sustainability SUSTAINABLE DEVELOPMENT G ALS • The Company generated 7,987 Gwh in 2018, an increase of 6% from 2017, to power the growing economy. • It also supports various CSI initiatives and improves living standards by encouraging local communities to plant tress for micro-economic based timber products. • Provide cheap energy for irrigation to alleviate hunger through horticulture. • Support national consumption on food storage programme and the processing agenda of GoK. • Provide the much-needed electric power for food processing and preservation. • Regular drugs and substance abuse education provided to employees, families & contractors. • 23 health articles written and distributed to employees. • 45 bar attendants in Mbeere sensitized on ADA & HIV and AIDS. • Condom promotion & distrbution to employees and stakeholders 102,305. • 22 voluntary Counseling & Testing centres. • Medical Camps done through our Partners. • Enabled 1,239 youths to acquire industry knowledge and experience in various fields, including power plant operations, geothermal exploration, corporate communications, ICT and engineering. • Offer Education Scholarships. • Employment of ECDE teachers & Caretakers by the Company. • The Company provides text book and learning materials for the learners. • Training of ECDE teachers and Caretakers on new curriculum and general awareness. • Support Schools to raise funds to pay fees for needy students and expand school infrastructure. KENYA ELECTRICITY GENERATING COMPANY PLC 100 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 The Sustainable Development Goals are the blueprint to achieve a better and more sustainable future for all. They address the global challenges we face, including those related to poverty, inequality, climate, environmental degradation, prosperity, and peace and justice. • Pink Energy forums to develop women’s potential, mentorship of high school and university students, encouraging girls to take up technical courses like engineering. • Equal absorption into the education scholarships and awarding. • KenGen-sponsored leadership programs e.g. women in Leadership by Strathmore. • Career development, health and wellness, financial empowerment, and mentorship. • Collaboration with KenGen Foundation on sanitary pads donation to vulnerable girls in schools • Initiation of Lactation rooms. • 43,000 CSR water projects beneficiaries by sinking Boreholes near our installations, sand dams, water pans and water kiosks. e.g Kaewa Water Project at Hydros. • Addressing water and sanitation challenges faced by communities neighbouring the power stations through the sustainable provision of clean accessible water as a major Corporate Social Investment activity. • Kenya’s electricity demand has been on an upward trend, increasing from 1,044MW in 2008 to 1,802MW in 2018. • 84% Energy from Green sources supporting 40 million Kenyans . • Provision of power to schools to enable use of laptops and lighting for studies. • Direct employment for scholarship beneficiaries. • KenGen provides electricity to enable Kenyans to engage in meaningful economic activities. • Plans to set up an Industrial Park at its geothermal power generation hub at Olkaria to boost local economy. • Rehabilitated 200kms of the dilapidated Kivaa-Kiambere and Kaewa Masinga Roads. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 101 SUSTAINABILITY Environmental Sustainability SUSTAINABLE DEVELOPMENT G ALS • The Company has developed a digital Innovation Platform "Ignite" where staff can share innovations. • To date, 738 ideas have been submitted on Ignite. • Support Entrepreneurship students in Technical University, Annual Exhibition Clubs showcasing students projects & innovations. • Encourage students to be creative in order to prepare them for job markets. • Equal absorption in the education scholarship and awarding. • The Company supported the Lake Naivasha Half Marathon, a forum for creating awareness about persons with disability and raising funds for the completion of an inclusive career development center at Kongoni to help them to exploit their talents as a means to livelihood. • Resettlement action plan (RAP) formulated as a framework for relocation of Project. Affected Persons (PAPs), in compliance with the World Bank involuntary resettlement policy (OP 4.01). • 150 households resettled on 1700 acres piece of land adjacent to Olkaria IV project. • Undertook resettlement of four villages in Olkaria in order to pave way for construction of the 165.4MW Olkaria I AU 4 & 5 and Olkaria IV geothermal projects. • Dedicated Environment and Clean Development Mechanism (CDM) program to spearhead environmental sustainability. • Registered six (6) CDM projects under the United Nations Framework Convention on Climate Change (UNFCCC) and about to register 6 more projects in the next financial year. KENYA ELECTRICITY GENERATING COMPANY PLC 102 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 • Treatment of waste water to a pH of between 6 to 9.0. • Mangrove conservation - planted 600 seedlings of mangrove. • Controlled fishing in the hydro dams. • Control of water abstraction and usage through water permits. • Conservation of the riparian and buffer zone areas in hydrodams. • Quarterly cleanup of Makupa shoreline. • Conservation of breeding sites. • Use of noise silencers at our Olkaria Power Plants. • Colour coded steam pipes on the animal corridors at Geothermal Plants. • A total of 377,025 seedlings were issued for planting in various KenGen operational areas, surpassing a government of Kenya target of 80,000 seedlings. • Over 700 tree seedlings were planted by KenGen staff at Olkaria as part of well-pad enrichment. • Peace building initiatives in conflict affected areas like Turkwel. • Provided support to cultural and tourism initiatives, which include the Lamu Cultural Week. • Partners with communities, NGOs and other institutions in the implementation of CSI programs, e.g the Schools’ Green Initiative Challenge through KenGen Foundation • KenGen is in the process of strengthening conservation through partnerships with agencies like the Nature Conservancy. • In addition, the preparation of KenGen/Water Resource Management Authority (WARMA) joint conservation program in hydro dam catchment areas begun and is expected to further curb siltation. • Through the KenGen Foundation, now in its 5th year, the Company aims to raise funds from donors and partners to scale up its CSI programs for greater reach and impact. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 103 SUSTAINABILITY Environmental Sustainability 'PIERYTI\IVGMWIEX2KSRK;MRH4S[IV7XEXMSR KENYA ELECTRICITY GENERATING COMPANY PLC 104 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Implementation of Clean Development Mechanism iii. 50.7MW Olkaria I Rehabilitation projects (CDM) iv. 42.5MW Seven Forks Solar Project The Company has a dedicated Environment and Clean v. 80MW Meru Wind Plant Development Mechanism (CDM) program to spearhead environmental sustainability. The CDM program to date vi. 10MW Ngong Phase III Project LEWVIKMWXIVIHWM\  '(1TVSNIGXWYRHIVXLI9RMXIH It is envisaged that the projects will abate between Nations Framework Convention on Climate Change XSGEVFSRIQMWWMSRVIHYGXMSRWTIV]IEV (UNFCCC). These projects have offset an annual contributing to reduction of climate change impacts. IWXMQEXIHGIVXM½IHIQMWWMSRVIHYGXMSRW ')6W SJ Carbon Markets million tonnes of CO2 equivalent per year as follows. KenGen is exploring alternative markets for carbon credits, Estimated tCO2 including the Derivatives Market at the Nairobi Securities Project MW Exchange (NSE) and the Voluntary Cancellation Platform equiv/year (VCP) of the UNFCCC. Other consideration for our green Olkaria II 35  projects includes initiatives like the Transformative Carbon (Unit 3) Asset Facility (TCAF), which is being developed by the Tana 20  World Bank. Among the objectives of TCAF is to achieve Kiambere PEWXMRKXVERWJSVQEXMSREPMQTEGXPIZIVEKMRKSJTYFPMG½RERGI (Additional 20 41,204 to enhance investment in low-carbon technologies and Capacity) assist countries to implement market-based carbon pricing Ngong 5.1 9,941 and sectoral mitigation measures. Olkaria I, AU Participation in National Climate Change Activities 140  4&5 KenGen participated in the ongoing development of the Olkaria IV 140  National Climate Change Action Plan – NCCAP (2018- 2022) as part of a team within the Ministry of Energy. Total 360.1 1,512,855 The NCCAP outlines the programmes and strategies for adaptation and mitigation from 1st July 2018 to 30th June The CDM projects have resulted in environmental and 2022. The plan supports achievement of the Government’s WSGMEPFIRI½XWXS/IR+IRERHGSQQYRMXMIWEVSYRHXLI Big Four agenda and sustainable development goals. It projects. This is through committment of 10% of the also enhances the adaptive capacity and resilience of '(16IZIRYIXS'SQQYRMX]&IRI½XW4VSKVEQWJVSQ communities, with an emphasis on marginalised and the World Bank’s Emission Purchase Agreement for the QMRSVMX]KVSYTWERHSYXPMRIWEGXMSRWXSFIYRHIVXEOIRMR Olkaria II, Tana and Kiambere CDM projects. as low-carbon manner as possible to ensure that Kenya achieves its Nationally Determined Contributions (NDC) Going forward KenGen intends to enhance its portfolio under the UNFCCC Paris Agreement. Under the Energy & SJGPMQEXIGLERKIQMXMKEXMRKTVSNIGXWF]VIKMWXIVMRK7M\   Transport priority pillar of the draft NCCAP 2018-2022, other projects with the UNFCCC as CDM projects in the KenGen will contribute to increasing renewable energy for RI\X½RERGMEP]IEV8LIWITVSNIGXWEVI electricity generation that is climate resilient and accounts M 1;3POEVME: for needs of rural areas. MM 1;3POEVME-%HHMXMSREP9RMX KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 105 SUSTAINABILITY Environmental Sustainability The draft NCCAP 2018-2022 expects KenGen, together with the National Treasury, Climate Change Directorate, NEMA, Council of Governors and the private sector, to participate in the design and implementation of market-based QIGLERMWQWTVSQSXIMRZIWXSVGSR½HIRGIIRLERGI/IR]ERGETEGMX]XSIRKEKIMRGEVFSREWWIXEGXMZMXMIWWXVIRKXLIRXLI viability of domestic carbon asset production and increase access to international carbon markets. Environmental and Social Impact Assessment (ESIA) Studies 8LI'SQTER]LEWHIZIPSTIHERIRZMVSRQIRXEPWYWXEMREFMPMX]TSPMG]ERHMWGIVXM½IHMR)RZMVSRQIRXEP1EREKIQIRX Systems (EMS). It has established environmental objectives, targets and continuously reviews its environmental management programs. During the year, we conducted ESIA studies for the following projects: Project Location Status • Variation of license validity duration issued. Olkaria V Olkaria • Project construction in progress • Variation of license validity duration issued Olkaria I AU 6 Olkaria • Contracting in progress • Variation of license validity duration issued (for additional Olkaria I Rehabilitation Olkaria 1; • Preparation of tender documents • Preliminary ESIA conducted. Olkaria PPP project Olkaria • Feasibility study ongoing, including noise spread & air quality dispersion modelling Ngong Phase III project Ngong • ESIA study in progress Seven Forks Solar project Kamburu • Report under review by NEMA • Bats and birds survey study conducted Meru Wind project Phase I Meru • Resettlement Policy Framework developed • )7-%ERH6%4WXYHMIWE[EMXMRK½REPM^EXMSRSJPERHEGUYMWMXMSR KENYA ELECTRICITY GENERATING COMPANY PLC 106 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Implementation of Environmental Management Plans 2 acres of land at Makupa shoreline in Mombasa were (EMPs) and EIA License Conditions VILEFMPMXEXIH[MXLQERKVSZITVSTEKYPIW Pre-requisites of ESIA for award of license inform the i) Preparation of environmental performance reports and design of the plant, in order to include necessary controls WLEVMRK[MXLVIPIZERXWXEOILSPHIVWYGLEWXLI½RERGMIVW in the bidding documents. Stakeholders Management Implementation of Environmental Management Plans at a) KenGen’s involvement in the development of various KenGen business areas was as follows: ecosystem management plan for Hell’s Gate and Mount a) Statutory environmental audits were conducted on Longonot National Parks for 2017-2027. annual basis and reports submitted to NEMA. In the b) KenGen-KWS joint ecological assessment for the year 2017, the audits were conducted in Oct/Nov and proposed well pads within/near Hell’s Gate National the subsequent reports submitted. Park in Olkaria business area. b) KenGen participated in the environment health c) KenGen participation in biodiversity monitoring at and safety (EHS) compliance and technical audits Hell’s Gate National Park, in conjunction with Kenya conducted by the Energy Regulatory Commission Wildlife Service (KWS). (ERC) at various KenGen power plants. d) Community engagement strategy developed. Staff were c) Monitoring of environmental aspects is a continuous sensitized on the same and their input incorporated. I\IVGMWI7SQISJXLIEWTIGXWQSRMXSVIHMRGPYHIEMV Development of KenGen Community Engagement quality, noise levels, water quality analysis and quantity Policy is at advanced stage. monitoring, trace element analysis at geothermal ½IPHW[EWXISMP WPYHKI EXXLIVQEPTS[IVWXEXMSRERH e) Establishment and operationalization of Stakeholders auxiliary power consumption. Coordination Committee (SCC) for Olkaria V and 3POEVME-%9 H  ;EWXIKIRIVEXIHMWWIKVIKEXIHUYERXM½IHERH disposed of appropriately as per the requirements of The Olkaria IV Resettlement Action Plan (RAP) Environmental Management & Coordination (Waste Implementation QEREKIQIRX VIKYPEXMSRW In August 2014, KenGen undertook resettlement of four e) Acquisition of emission licenses for our thermal power villages in Olkaria in order to pave way for construction of plants such as Kipevu I & Kipevu III. the 140MW Olkaria I AU 4 & 5 and Olkaria IV geothermal projects. A resettlement action plan (RAP) was formulated f) Construction of a bunker at Turkwel for disposal of as the framework for the relocation of the Project asbestos sheets from Western Region. There exists Affected Persons (PAPs), in compliance with the World another bunker at Eastern Hydros. Bank involuntary resettlement policy (OP 4.01). A total of g) Recommended corrective actions following the ERC 150 households were resettled on 1,700 acres piece of EHS Technical audits and statutory environmental land adjacent to Olkaria IV project. KenGen continues to audits have been addressed. work with the community on the infrastucture of the RAP Land. h) Rehabilitation of degraded sites within our operations. In the year, approximately 8 acres of degraded/ cleared well sites were rehabilitated at Olkaria while KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 107 GOK PERFORMANCE REPORT GOK PERFORMANCE REPORT KENYA ELECTRICITY GENERATING COMPANY PLC 108 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Business Performance Report 2018 110 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 109 GOK PERFORMANCE REPORT Business Performance Report 2018 • Ensuring that public services are delivered in accordance [MXLXLIGSRWXMXYXMSR KenGen has signed a • Ensuring modernization of the public service by performance agreement with introduction of modern technologies and innovative service the Government of Kenya HIPMZIV] as a demonstration of its ˆ )RWYVMRKXLEXTYFPMGSJ½GIVWHIQSRWXVEXITVSJIWWMSREPMWQ transparency and accountability in performing their duties GSQQMXQIRXXS and that they show courtesy, integrity and neutrality in provision of service. 1. Finance Stewardship and Discipline • KenGen employees have been sensitized through the intranet. KenGen will continue to ensure compliance to Absorption of Allocated Funds the commitments and standards in the charter through (YVMRKXLI½RERGMEP]IEV/IR+IREFWSVFIHERHYXMPM^IH established feedback mechanisms and will maintain Kshs 37 billion of released budget for both recurrent VIGSVHWSRWIVZMGIHIPMZIV]ERH operations and capex in pursuit of projects such as Olkaria • KenGen will customize charters to unique needs of the :3POEVME-%93POEVME-6ILEF2KSRK---ERH1IVY;MRH GYWXSQIVWF]IRHSJUYEVXIVSRISJXLIRI\X½RERGMEP Appropriations - in - Aid (A-in-A) year by translating charters to braille where necessary. (YVMRKXLI½RERGMEP]IEV/IR+IRVIEPM^IHEXSXEPSJ/WLW Application of Service Delivery Innovations 275 million against a target of Kshs 159.2 million from During the year, KenGen continued to implement the the Geothermal Spa, steam, insurance compensation and following innovations: others. • Brine power generation- feasibility report to be Pending Bills ½REPMWIH KenGen had no pending bills as of 30 June 2018, as they • Production of drilling detergent- tender awarded and were paid within target. under contracting. Service Delivery Resolution of Public Complaints Implementation of Citizens’ Service Delivery Charter KenGen ensured prompt resolution of public complaints (YVMRKXLI½RERGMEP]IEV/IR+IRIRWYVIHXLEXIJJIGXMZI referred directly or channelled through the Commission service was delivered to all the stakeholders as it on Administrative Justice (CAJ). In addition, the Company continued executing its core mandate. Milestones include: will: • The Company reviewed its service charter in line with • Strengthen the resolution handling capacity through ZEPYIWERHTVMRGMTPIWSJTYFPMGWIVZMGI WXEJJWIRWMXM^EXMSRJSVYQW • The service charters have been displayed prominently • Conduct capacity building for complaints-handling at all points of entry / service delivery points in both SJ½GIVW )RKPMWLERH/MW[ELMPMMRXLITVIWGVMFIHWM^I KENYA ELECTRICITY GENERATING COMPANY PLC 110 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 • Create awareness through the intranet, company Access to New Geothermal Fields [IFWMXIERH7XEOILSPHIVW'SSVHMREXMSR*SVYQWERH KenGen has a 2.5MW geothermal plant at Eburru and • Resolved all public complaints referred directly / expects to be granted the concession license in the next indirectly from CAJ ½RERGMEP]IEV 2. Core Mandate Resource Sustainability Priority Projects / Vision 2030 Flagship Projects KenGen supported and participated in resource WYWXEMREFMPMX]QEREKIQIRXIJJSVXWXLVSYKL /IR+IRMWYRHIVXEOMRKJSYV  :MWMSR¾EKWLMT projects with a total additional capacity of 472MW to be • Conservation of water towers, especially Mau forest implemented by the year 2021, though no project will where massive deforestation has taken place recently. be commissioned in the reporting period. The Company • Steam Sustainability: KenGen has embarked on an drilled six wells with steam equivalent of 41.8MW within IPEFSVEXIWXIEQWYWXEMREFMPMX]TVSKVEQXLEXMRZSPZIW the contracting period. extensive reservoir monitoring, modelling and Project Completion Rate enhanced power plant designs for more conservation ERHIJ½GMIRG] KenGen implemented generation capacity expansion projects to meet the forecasted power demand. 3. Access to Government Procurement Opportunities 4VI8E\4VS½X Total procurement taken up by the target group was Kshs 8LITVIXE\TVS½X[EWQIX QMPPMSREWGSQTEVIHXS/WLWQMPPMSRMRXLI Dividend to the National Treasury TVIZMSYW½RERGMEP]IEV8LIVILEWFIIRERMQTVSZIQIRX The Board will declare any dividends approved at the end in absorption, enhanced by sensitizing special groups on SJXLI½RERGMEPTIVMSHJSPPS[MRKXLI'SQTER]´WERRYEP government procurement procedures, requirements for general meeting. accessing government procurement opportunities and the WTIGM½GSTTSVXYRMXMIWMR/IR+IR%7YTTPMIVLIPTHIWO[EW Return on Investment (ROI) set up at the KenGen Headquarters to help suppliers with 6IXYVRSRMRZIWXQIRXJSVXLI½RERGMEP]IEV[EW  pertinent information. against a target of 3.725%. The Company exceeded the set 4. Promotion of Local Content in Procurement target. (Buy Kenya Build Kenya) Capacity Utilization / Plant Availability KenGen continued to promote the Buy Kenya Build KenGen’s plant availabilities are based on threshold targets. Kenya policy. Forty percent (40%) of the Company’s The average availabilities for the year were: non-specialized procurement budget, based on internally generated funds, was spent on local products and services. ˆ  JSVL]HVSEKEMRWXXLI 44%XLVIWLSPH Total procurement captured for locally produced goods ˆ  JSVKISXLIVQEPEKEMRWXXLI 44%XLVIWLSPH and services was Kshs 5,110.7 million awarded to local ˆ  JSVKEWXYVFMRIWEKEMRWXXLI 44%XLVIWLSPH contractors. ˆ  JSVXLIVQEPEKEMRWXXLI 44%XLVIWLSPH KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 111 Business Performance Report 2018 5. Cross-Cutting Initiatives Asset Management Inventory Management – a catalogue of the assets and properties, including their status in terms of the working condition, is maintained with a total asset book value of Kshs 242 billion. Youth Internship / Industrial Attachment / Apprenticeship ;MXLMRXLI½RERGMEP]IEVXLI'SQTER]IRKEKIH youths in internship / industrial attachments for skills transfer. Competency Development Various training programs were implemented to enhance IQTPS]IIWOMPPWERHTVS½GMIRGMIWXSMQTVSZIMRWXMXYXMSREP TIVJSVQERGI%WMKRM½GERXRYQFIVSJWXEJJEXXIRHIHZEVMSYW training programs. • Data and Knowledge Management: Knowledge harvesting, preserving and sharing lessons learnt across the Company for continual improvement was effected through the annual innovation seminar held during the year. Disability Mainstreaming KenGen continued to implement Government policy on EJ½VQEXMZIEGXMSRJSVTIVWSRW[MXLHMWEFMPMXMIW 4;(  • Maintained disaggregated data of 24 employees (19 male and 5 female) of persons with disabilities by age, KIRHIVERHJSVQWSJHMWEFMPMX] • Ensured that progressively at least 5% of the new employees in the Company are persons with disabilities. ˆ -QTVSZIHIEWISJEGGIWWMR/IR+IRSJ½GIWERH MRWXEPPEXMSRWMRPMRI[MXLXLI½RHMRKWSJXLIFEWIPMRI survey. Prevention of HIV/AIDS Infections The Company implemented HIV and AIDS work-place ERHGSQQYRMX]XEVKIXIHTVSKVEQW[MXLEZMI[XS½KLXMRK stigma, promoting access to treatment and preventing further infections. KENYA ELECTRICITY GENERATING COMPANY PLC 112 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Safety and Security Measures During the year, the Company adhered to safety and security programs involving personnel, documents, information, equipment and assets. An elaborate safety and disaster preparedness mechanism, comprising Disaster Risk Management / Business Continuity Processes (DRM/BCP) plan and Implementation of the Information Security Management System (ISMS), is being put in place to address emergent safety and security risks. National Cohesion and Values KenGen promotes national cohesion, values and principles to create a cohesive and peaceful nation. To achieve this, KenGen implemented ½ZI  GSQQMXQIRXWERHWYFQMXXIHER%RRYEP Progress Report on the implementation and [E]JSV[EVHEWGETXYVIHMRXLI%RRYEP President’s Report on National Values and Principles of Governance. Corruption Prevention The Company is committed to combat and prevent corruption, unethical practices and promote standards and best practices in governance in line with the Ethics and Anti- Corruption Commission Act No. 22 of 2011 and Leadership and Integrity Act of 2012. To achieve this, KenGen undertook the following measures: - • Implementing recommendations emanating from the risk assessment index report has been done through Corruption Risk %WWIWWQIRX • Anonymous Reporting System to encourage and protect whistle blowing has been put in TPEGI • Quarterly reports to EACC, in the prescribed format, are regularly issued. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 113 FINANCIALS FINANCIALS KENYA ELECTRICITY GENERATING COMPANY PLC 114 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Statement of Directors’ Responsibilities 116 Directors’ Remuneration Report 117 Independent Auditor’s Report 120 6WDWHPHQWRI3UR¼WRU/RVV 2WKHU&RPSUHKHQVLYH,QFRPH  Statement of Financial Position 129 Statement of Changes in Equity - Restated* 130 Statement of Cash Flows 132 Notes to the Financial Statements 133 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 115 FINANCIALS Statement of Directors’ Responsibilities 8LI/IR]ER'SQTERMIW%GXVIUYMVIWXLIHMVIGXSVWXSTVITEVI½RERGMEPWXEXIQIRXWJSVIEGL½RERGMEP]IEVXLEXKMZIEXVYI ERHJEMVZMI[SJXLI½RERGMEPTSWMXMSRSJXLI'SQTER]EWEXXLIIRHSJXLI½RERGMEP]IEVERHSJMXWTVS½XSVPSWWERHSXLIV comprehensive income for that year. The Directors are responsible for ensuring that the Company keeps proper accounting VIGSVHWXLEXEVIWYJ½GMIRXXSWLS[ERHI\TPEMRXLIXVERWEGXMSRWSJXLI'SQTER]HMWGPSWI[MXLVIEWSREFPIEGGYVEG]EXER]XMQI XLI½RERGMEPTSWMXMSRSJXLI'SQTER]ERHXLEXIREFPIWXLIQXSTVITEVI½RERGMEPWXEXIQIRXWSJXLI'SQTER]XLEXGSQTP][MXL TVIWGVMFIH½RERGMEPVITSVXMRKWXERHEVHWERHXLIVIUYMVIQIRXWSJXLI/IR]ER'SQTERMIW%GX 8LI]EVIEPWSVIWTSRWMFPI for safeguarding the assets of the Company and for taking reasonable steps for the prevention and detection of fraud and other irregularities. 8LI (MVIGXSVW EGGITX VIWTSRWMFMPMX] JSV XLI TVITEVEXMSR ERH TVIWIRXEXMSR SJ XLIWI ½RERGMEP WXEXIQIRXW MR EGGSVHERGI [MXL International Financial Reporting Standards and in the manner required by the Companies Act 2015.They also accept responsibility for: i. (IWMKRMRKMQTPIQIRXMRKERHQEMRXEMRMRKMRXIVREPGSRXVSPEWXLI]HIXIVQMRIRIGIWWEV]XSIREFPIXLITVITEVEXMSRSJ½RERGMEP WXEXIQIRXWXLEXEVIJVIIJVSQQEXIVMEPQMWWXEXIQIRXW[LIXLIVHYIXSJVEYHSVIVVSV ii. 7IPIGXMRKWYMXEFPIEGGSYRXMRKTSPMGMIWERHXLIRETTP]XLIQGSRWMWXIRXP]ERH iii. Making judgements and accounting estimates that are reasonable in the circumstances -RTVITEVMRKXLI½RERGMEPWXEXIQIRXW XLI(MVIGXSVWLEZIEWWIWWIHXLI'SQTER]´WEFMPMX]XSGSRXMRYIEWEKSMRKGSRGIVRERH HMWGPSWIHEWETTPMGEFPIQEXXIVWVIPEXMRKXSXLIYWISJKSMRKGSRGIVRFEWMWSJTVITEVEXMSRSJXLI½RERGMEPWXEXIQIRXW2SXLMRKLEW 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. 8LI(MVIGXSVWEGORS[PIHKIXLEXXLIMRHITIRHIRXEYHMXSJXLI½RERGMEPWXEXIQIRXWHSIWRSXVIPMIZIXLIQSJXLIMVVIWTSRWMFMPMX] er 2018 and signed on its behalf by: Approved by the Board of Directors on 25 October ………………………………… …………………………… …………………………………… …………………… ………………………………… Joshua Choge ti Joseph Sitati Rebecca Miano Chairman Director Managing Director & CEO STATEMENT OF THE COMPANY SECRETARY In accordance to section 125 of the Companies Act, I certify that the Company has lodged with the Registrar-General all such returns as are required of a public Company in terms of the Act and that all such are true, correct and up to date. Paul Ndungi Company Secretary, Nairobi 25 October 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 116 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Directors’ Remuneration Report INFORMATION NOT SUBJECT TO AUDIT The Company’s Directors Remuneration Policy and Strategy The Board establishes and approves formal and transparent remuneration policies to attract and retain both executive and non-executive Board members. These policies clearly stipulate remuneration elements such as Directors’ fees, honorarium and attendance allowances that are competitive and in line with those of other agencies in the industry and with the State Corporations Act. In accordance with the guidelines provided in the State Corporations Act and issued by the Salaries & Remuneration 'SQQMWWMSREW[IPPEWWLEVILSPHIVETTVSZEPKVERXIHEXXLI%RRYEP+IRIVEP1IIXMRKXLI(MVIGXSVWEVITEMHEXE\EFPIWMXXMRK allowance of Kshs 20,000 for every meeting attended. The Chairman is paid a monthly honorarium of Kshs 80,000. Kenya Electricity Generating Company Plc does not grant personal loans, guarantees, share options or incentives to its Directors. -XMWTVSTSWIHXLEXIEGLRSRI\IGYXMZI(MVIGXSVVIGIMZIWEJIISJ7LWI\GPYHMRKEPPS[ERGIWERHLSRSVEVMYQJSVXLI ½RERGMEP]IEVIRHIH.YRIWYFNIGXXSETTVSZEPF]WLEVILSPHIVWHYVMRKXLI%RRYEP+IRIVEP1IIXMRK Contract of service In accordance with the Capital Markets Authority (CMA) regulations on non-executive Directors, a third of the Board is elected at every Annual General Meeting by the shareholders for a term of 3 years on rotation basis. The Managing Director and CEO has a three (3) year renewable contract of service with Kenya Electricity Generating Company Plc starting from 30 October 2017. Changes to Directors Remuneration During the period, there were no changes in Directors Remuneration which is set as per the guidelines provided in the State Corporations Act and the Salaries & Remuneration Commission. Statement of Voting on the Directors Remuneration Report at the Previous Annual General Meeting During the Annual General Meeting held on 22 November 2017, the shareholders approved the payments of Directors fees for the year ended 30 June 2017 by show of hands. At the Annual General Meeting to be held on 11 December 2018, approval will be sought from shareholders to pay (MVIGXSVWJIIWJSVXLI½RERGMEP]IEVIRHIH.YRI KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 117 FINANCIALS Directors’ Remuneration Report INFORMATION SUBJECT TO AUDIT (continued) 8LIJSPPS[MRKXEFPIWWLS[WEWMRKPI½KYVIVIQYRIVEXMSRJSVXLI1EREKMRK(MVIGXSVERH')3ERH2SR)\IGYXMZI(MVIGXSVW MR VIWTIGX SJ UYEPMJ]MRK WIVZMGIW JSV XLI ]IEV IRHIH  .YRI  XSKIXLIV [MXL XLI GSQTEVEXMZI ½KYVIW JSV 8LI aggregate Directors’ emoluments are shown in note 15(d). For the year ended 30 June 2018 Directors Name Category Salary Allowances Honorarium Total Fees Shs'000 Shs'000 Shs'000 Shs '000 Shs '000 Chairman, Joshua Choge -  1,540  3,100 Non-Executive Albert Mugo Managing (Retired on 25 August Director and 3,479 - - - 3,479 2017) CEO Rebecca Miano Managing (Appointed on 30 Director and  - - -  October 2017) CEO Henry Rotich (CS, The National Non-Executive -  - -  Treasury and Planning) Joseph Njoroge (PS, Non-Executive -  - -  Ministry of Energy) Dorcas Kombo (Retired Non-Executive - 238 940 - 1,178 on 22 November 2017) Ziporah Ndegwa Non-Executive -   -  Musa Arusei Non-Executive -   -  Kairu Bachia Non-Executive -  1,800 - 2,400 Joseph Sitati Non-Executive -  1,580 - 2,180 Maurice Nduranu Non-Executive -  920 - 1,520 Phyllis Wakiaga Non-Executive -  700 - 1,300 Reginalda Wanyonyi (Appointed on 22 Non-Executive -  1,120 - 1,482 November 2017) Humphrey Muhu (Alternate to Henry Non-Executive - - 1,420 - 1,420 Rotich) William Mbaka (Alternate to Joseph Non-Executive - - 1,340 - 1,340 Njoroge) Total 14,746 6,000 14,680 960 36,386 KENYA ELECTRICITY GENERATING COMPANY PLC 118 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 INFORMATION SUBJECT TO AUDIT (continued) For the year ended 30 June 2017 Directors Name Category Salary Allowances Honorarium Total Fees Shs'000 Shs'000 Shs'000 Shs '000 Shs '000 Chairman, Joshua Choge -    3,180 Non-Executive Managing Albert Mugo Director and 23,703 - - - 23,703 CEO Henry Rotich (CS, The National Treasury Non-Executive -  - -  and Planning) Joseph Njoroge (PS, Non-Executive -  - -  Ministry of Energy) Dorcas Kombo Non-Executive -   - 2,240 Ziporah Ndegwa Non-Executive -   -  Musa Arusei Non-Executive -  1,840 - 2,440 Kairu Bachia Non-Executive -  1,440 - 2,040 Joseph Sitati Non-Executive -  1,220 - 1,820 Maurice Nduranu Non-Executive -  1,020 -  Phyllis Wakiaga (Elected on 30 November Non-Executive - 348 380 - 728  Millicent Omanga (Retired Non-Executive - 252  - 1,112 SR2SZIQFIV Humphrey Muhu (Alternate to Henry Non-Executive - - 1,340 - 1,340 Rotich) William Mbaka - Alternate to Joseph Njoroge Non-Executive - - 1,000 - 1,000 (Appointed on 4 October  Momata Gichana (Retired on 4 October Non-Executive - - 80 - 80  Total 23,703 6,000 14,000 960 44,663 On behalf of the Board Secretary Date: 25 October 2018 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 119 FINANCIALS Independent Auditor’s Report KENYA ELECTRICITY GENERATING COMPANY PLC 120 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 121 FINANCIALS Independent Auditor’s Report KENYA ELECTRICITY GENERATING COMPANY PLC 122 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 123 FINANCIALS Independent Auditor’s Report KENYA ELECTRICITY GENERATING COMPANY PLC 124 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 125 FINANCIALS Independent Auditor’s Report KENYA ELECTRICITY GENERATING COMPANY PLC 126 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 7XEXIQIRXSJ4VS½XSV0SWWERH3XLIV'SQTVILIRWMZI-RGSQI Note 2018 2017 Restated* Shs’000 Shs’000 Revenue Electricity Revenue 4 (a)   Steam Revenue 4 (b)  5,189,072 Fuel charge 4 (c)   Water charge 4 (d) 159,172  Total revenue  43,431,919 Reimbursable expenses Fuel costs 4 (c)   Water costs 4 (d) (159,172)    Revenue less reimbursable expenses  34,452,483 Other Income 5 274,771 553,148 Other (losses)/gains - net  (1,049,948)   35,348,899 Expenses Depreciation and amortisation 8 (c)  (9,244,422) Employee expenses 8 (a)  (5,754,748) Steam costs 4 (b) (3,549,428) (2,795,798) Plant operation and maintenance expenses   (1,554,480) Other expenses 8 (b)   2SHUDWLQJSUR¼W  13,545,305 Finance income 7 3,341,383 1,333,325 Finance costs 9 (3,037,554) (3,417,442) 3UR¼WEHIRUHLQFRPHWD[   Income tax expense 10(a) (3,854,834) (2,454,972) 3UR¼WIRUWKH\HDU   * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 127 FINANCIALS 7XEXIQIRXSJ4VS½XSV0SWWERH3XLIV'SQTVILIRWMZI-RGSQI (continued) Note 2018 2017 Restated* Shs’000 Shs’000 Other comprehensive income/(loss): ,WHPVWKDWZLOOQRWEHUHFODVVL¼HGVXEVHTXHQWO\WRSUR¼WRUORVV 6IQIEWYVIQIRXSJHI½RIHFIRI½X 25 (a) (897,155)  Deferred tax on remeasurement   23,587 PPE impairment 12 -  Deferred tax on impairment  - 212,587  (551,072) ,WHPVWKDWPD\EHUHFODVVL¼HGVXEVHTXHQWO\WRSUR¼WRUORVV Net gain/(loss) on revaluation of available-for-sale treasury bonds 17 5,087 22,572 Other comprehensive income for the year, net of income tax  (528,500) Total comprehensive income for the year   Earnings per share Basic and diluted (Shs) 11 1.20 1.37 Dividends per share - Proposed (Shs) 21 0.40 - * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC 128 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Statement of Financial Position 2018 2017 2016 ASSETS Restated* Restated* Non-current assets Note Shs’000 Shs’000 Shs’000 Property, plant and equipment 12   320,932,980 Leasehold land 13 4,170,183 4,229,783  Intangible assets 14   1,181,241 Non-current receivables 15(a(iii)) 987,875 1,032,014  Financial asset at fair value  10,490,414  13,890,353 Treasury bonds 17 2,407,047 2,414,108  6IXMVIQIRXFIRI½XEWWIX 25   1,098,771 347,940,938 347,090,213 344,821,946 Current assets Inventories 18 1,149,180 1,082,044  Trade receivables 15(a(i)) 21,883,279 15,751,937 9,347,411 Financial asset at fair value   888,457  Other receivables and prepayments 19 3,359,793 3,741,225 3,925,727 Non – current assets held for sale 29 344,053 - - Current income tax recoverable 10(c)  - - Treasury bonds 17   322,031 Cash and bank balances 20 3,383,402 7,831,103  31,412,067 29,639,369 21,916,420 TOTAL ASSETS 379,353,005 376,729,582 366,738,366 EQUITY AND LIABILITIES Equity attributable to owners Share capital 21    Share premium 21 22,151,131 22,151,131  Other reserves 22 71,805,994 74,588,305 77,248,387 Retained earnings    190,103,625 182,835,913 172,385,381 Non- current liabilities Borrowings 23(a)    Deferred income tax    40,073,728 Trade and other payables 27   9,940,189 168,369,902 173,800,472 176,162,926 Current liabilities Borrowings 23(a)  10,829,802 10,757,003 Trade and other payables 27   4,943,371 Provision for compensating tax 28 2,331,022 2,431,022 2,431,022 Current income tax 10(c) -   20,879,478 20,093,197 18,190,059 TOTAL EQUITY AND LIABILITIES 379,353,005 376,729,582 366,738,366 TT 8LI½RERGMEPWXEXIQIRXWSRTEKIWXS[IVIETTVSZIHERHEYXLSVMWIHJSVMWWYIF]XLI&SEVHSJ(MVIGXSVWSR October 2018 and were signed on its behalf by:: ………………………………… …………………… …………………………………… ………………………………… Joshua Choge tat ti Joseph Sitati Rebecca Miano Chairman Director Managing Director & CEO *Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 129 Share Other Retained Share capital Total 130 premium reserves earnings Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 %WEX.YP]      FINANCIALS Restatement* - -   (357,301) As restated   77,248,387  172,385,381 4VS½XJSVXLI]IEV¯VIWXEXIH - - -   3XLIVGSQTVILIRWMZIMRGSQI - - - - - - revaluation of bonds available for sale - - 22,572 - 22,572 <PPE impairment. - -  -  KENYA ELECTRICITY GENERATING COMPANY PLC <Deferred income tax on impairment - - 212,587 - 212,587 VIQIEWYVIQIRXSJHI½RIHFIRI½X¯VIWXEXIH - -  -  -deferred income tax on remeasurement – restated* - - 23,587 - 23,587 Total comprehensive income for the year - - (528,500)   INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Transfer of excess depreciation - - (3,045,117) 3,045,117 - Deferred tax on excess depreciation - - 913,535 (913,535) - Statement of Changes in Equity - Restated* -rights issue (Note 21)  1,094,790 - -  As at 30 June 2017 16,487,710 22,151,131 74,588,305 69,608,767 182,835,913 Note 21 21 22 * Refer to note 37 for details Share Other Retained Share capital Total premium reserves earnings Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 (continued) As at 1 July 2018 - restated  22,151,131 74,588,305  182,835,913 4VS½XJSVXLI]IEV - - -   3XLIVGSQTVILIRWMZIMRGSQI - - - - - - revaluation of bonds available for sale - - 5,087 - 5,087 VIQIEWYVIQIRXSJHI½RIHFIRI½X - - (897,155) - (897,155) -Deferred income tax on remeasurement - -  -  Total Comprehensive for the year    Transfer of excess depreciation - - (3,084,843) 3,084,843 - Deferred tax on excess depreciation - - 925,453 (925,453) - As at 30 June 2018  22,151,131 71,805,994   Note 21 21 22 Statement of Changes in Equity - Restated* * Refer to note 37 for details INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 131 FINANCIALS Statement of Cash Flows 2018 2017 'EWL¾S[WJVSQSTIVEXMRKEGXMZMXMIW Note Shs ‘000 Shs ‘000 Cash generated from operations 30(a)  12,491,879 Income tax paid 10(c)  (234,149) Finance income received 30(b) 491,039 943,082 Payment of compensating tax 28 (100,000) - Net cash generated from operating activities 17,509,821 13,200,812 'EWL¾S[WJVSQMRZIWXMRKEGXMZMXMIW Purchase of property, plant and equipment 12  (12,819,938) Purchase of prepaid leasehold land 13 - (137,730) Purchase of intangible assets 14 (240,500)  Proceeds from disposal of assets  90,790 Net cash used in investing activities (14,842,548) (13,074,344) 'EWL¾S[WJVSQ½RERGMRKEGXMZMXMIW Repayment of borrowings 23(d)  (8,972,147) Proceeds from borrowings 23(d)  11,848,974 Cash proceeds from rights issue -  Finance costs paid 30(c)  (3,903,443) 2IXGEWL YWIHMR KIRIVEXIHJVSQ½RERGMRKEGXMZMXMIW (7,143,537)  Net (decrease) /increase in cash and cash equivalents   Cash and cash equivalents at the beginning of the year 7,831,103  Effects of exchange rate changes on cash and cash equivalents  2,111 Cash and cash equivalents at the end of the year 20 3,383,402 7,831,103 KENYA ELECTRICITY GENERATING COMPANY PLC 132 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements 1. General information The Company is incorporated and domiciled in Kenya under the Kenyan Companies Act, 2015. The Company was incorporated in 1954 as Kenya Power Company Limited (KPC) and was under management of Kenya Power and Lighting Company (KPLC). In 1997, the management was separated from Kenya Power and Lighting Company and the Company was renamed to Kenya Electricity Generating Company Plc (KenGen) following the implementation of the reforms in the energy sector. Its core business is to develop, manage and operate power generation plants to supply electric power to the Kenyan market. The shares of the Company are listed on the Nairobi Securities Exchange. 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV (a) Basis of preparation (i) Compliance with IFRS 8LI 'SQTER]´W ½RERGMEP WXEXIQIRXW LEZI FIIR TVITEVIH MR EGGSVHERGI [MXL -RXIVREXMSREP *MRERGMEP 6ITSVXMRK Standards (IFRS) and interpretations issued by the IFRS Interpretations Committee (IFRS IC) applicable to companies VITSVXMRKYRHIV-*678LI½RERGMEPWXEXIQIRXWGSQTP][MXL-*67EWMWWYIHF]XLI-RXIVREXMSREP%GGSYRXMRK7XERHEVHW Board (IASB). 8LI TVITEVEXMSR SJ ½RERGMEP WXEXIQIRXW MR GSRJSVQMX] [MXL -*67 VIUYMVIW XLI YWI SJ GIVXEMR GVMXMGEP EGGSYRXMRK estimates. It also requires the directors to exercise judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or where assumptions and estimates are WMKRM½GERXXSXLI½RERGMEPWXEXIQIRXWEVIHMWGPSWIHMR2SXI *SVXLI/IR]ER'SQTERMIW%GXVITSVXMRKTYVTSWIWMRXLIWI½RERGMEPWXEXIQIRXWXLIFEPERGIWLIIXMWVITVIWIRXIH F]XLIWXEXIQIRXSJ½RERGMEPTSWMXMSRERHXLITVS½XERHPSWWEGGSYRXMWTVIWIRXIHMRXLIWXEXIQIRXSJTVS½XSVPSWW and other comprehensive income. (ii) Historical cost convention 8LI½RERGMEPWXEXIQIRXWLEZIFIIRTVITEVIHSRELMWXSVMGEPGSWXFEWMWI\GITXJSVXLIJSPPS[MRK I. %ZEMPEFPIJSVWEPI½RERGMEPEWWIXWGIVXEMRGPEWWIWSJTVSTIVX]TPERXERHIUYMTQIRXQIEWYVIHEXJEMVZEPYI II. *MRERGMEPEWWIXXLVSYKLTVS½XSVPSWWLIPHEXJEMVZEPYI III. (I½RIHFIRI½XTIRWMSRTPERW¯TPEREWWIXWQIEWYVIHEXJEMVZEPYI (iii) New standards and interpretations not yet adopted Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2018 reporting periods and have not been early adopted by the Company. The Company’s assessment of the impact of these new standards and interpretations is set out below. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 133 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (a) Basis of preparation (continued) (iii) New standards and interpretations not yet adopted (continued) IFRS 9: Financial Instruments Nature of change -*67  VITPEGIW -%7  -X EHHVIWWIW XLI GPEWWM½GEXMSR QIEWYVIQIRX ERH HIVIGSKRMXMSR SJ ½RERGMEP EWWIXW ERH ½RERGMEPPMEFMPMXMIWMRXVSHYGIWRI[VYPIWJSVLIHKIEGGSYRXMRKERHERI[MQTEMVQIRXQSHIPJSV½RERGMEPEWWIXW IFRS 9 is required to be applied on a retrospective basis, with certain exceptions. As permitted, we will not restate our prior period comparative ½RERGMEPWXEXIQIRXW[LIR[IEHSTXXLIVIUYMVIQIRXWSJXLIRI[WXERHEVH (MJJIVIRGIWMRXLIGEVV]MRKEQSYRXWSJ½RERGMEPMRWXVYQIRXWVIWYPXMRKJVSQXLIEHSTXMSRSJ-*67[MPPFIVIGSKRM^IH as retained earnings and other comprehensive income (OCI) as if we had always followed the new requirements. The standard contains requirements in the following areas: &ODVVL¼FDWLRQDQGPHDVXUHPHQW -*67MRXVSHYGIWETVMRGMTPIWFEWIHETTVSEGLXSXLIGPEWWM½GEXMSRSJ½RERGMEPEWWIXW (IFXMRWXVYQIRXW MRGPYHMRK L]FVMHGSRXVEGXWEVIQIEWYVIHEXJEMVZEPYIXLVSYKLTVS½XSVPSWW *:840 JEMVZEPYIXLVSYKLSXLIVGSQTVILIRWMZI MRGSQI *:83'- SVEQSVXM^IHGSWXFEWIHSRXLIREXYVISJXLIGEWL¾S[WSJXLIEWWIXWERHERIRXMX]´WFYWMRIWW QSHIP8LIWI GEXIKSVMIW VITPEGI XLI I\MWXMRK -%7  GPEWWM½GEXMSRW SJ *:840 EZEMPEFPI JSV WEPI %*7  PSERW ERH receivables, and held-to-maturity. Equity instruments are measured at FVTPL, unless they are not held for trading purposes, in which case an irrevocable election can be made on initial recognition to measure them at FVOCI with RSWYFWIUYIRXVIGPEWWM½GEXMSRXSTVS½XSVPSWW *SV½RERGMEPPMEFMPMXMIWQSWXSJXLITVII\MWXMRKVIUYMVIQIRXWJSVGPEWWM½GEXMSRERHQIEWYVIQIRXTVIZMSYWP]MRGPYHIH in IAS 39 were carried forward unchanged into IFRS 9 other than the provisions relating to the recognition of GLERKIWMRS[RGVIHMXVMWOJSV½RERGMEPPMEFMPMXMIWHIWMKREXIHEXJEMVZEPYIXLVSYKLTVS½XSVPSWWEWTIVQMXXIHF]-*67 8LIGSQFMRIHETTPMGEXMSRSJXLIGSRXVEGXYEPGEWL¾S[GLEVEGXIVMWXMGWERHFYWMRIWWQSHIPXIWXWEWEX.YP] MWRSXI\TIGXIHXSLEZIEWMKRM½GERXMQTEGX[LIRGSQTEVIHXSSYVGPEWWM½GEXMSRYRHIV-%7 Impairment Overall comparison of the new impairment model and the current model The new impairment guidance sets out an expected credit loss (ECL) model applicable to all debt instrument ½RERGMEPEWWIXWGPEWWM½IHEWEQSVXM^IHGSWXSV*:3'--REHHMXMSRXLI)'0QSHIPETTPMIWXSPSERGSQQMXQIRXW ERH½RERGMEPKYEVERXIIWXLEXEVIRSXQIEWYVIHEX*:840 Currently, impairment losses are recognized if, and only if, there is objective evidence of impairment as a result of one or more loss events that occurred after initial recognition of the asset and that loss event has a detrimental MQTEGX SR XLI IWXMQEXIH JYXYVI GEWL ¾S[W SJ XLI EWWIX XLEX GER FI VIPMEFP] IWXMQEXIH -J XLIVI MW RS SFNIGXMZI IZMHIRGISJMQTEMVQIRXJSVERMRHMZMHYEP½RERGMEPEWWIX XLEX½RERGMEPEWWIXMWMRGPYHIHMREKVSYTSJEWWIXW[MXL WMQMPEV GVIHMXVMWO GLEVEGXIVMWXMGW ERH GSPPIGXMZIP] EWWIWWIH JSV MQTEMVQIRX PSWWIW MRGYVVIH FYX RSX ]IX MHIRXM½IH 9RHIV-*67)'0W[MPPFIVIGSKRM^IHMRTVS½XSVPSWWFIJSVIEPSWWIZIRXLEWSGGYVVIH[LMGLGSYPHVIWYPXMRIEVPMIV recognition of credit losses compared to the current model. KENYA ELECTRICITY GENERATING COMPANY PLC 134 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (a) Basis of preparation (continued) (iii) New standards and interpretations not yet adopted (continued) IFRS 9: Financial Instruments (continued) Nature of change (continued) Under the current standard, incurred losses are measured by incorporating reasonable and supportable information about past events and current conditions. Under IFRS 9, the ECL model, which is forward-looking, in EHHMXMSRVIUYMVIWXLEXJSVIGEWXWSJJYXYVIIZIRXWERHIGSRSQMGGSRHMXMSRWFIYWIH[LIRHIXIVQMRMRKWMKRM½GERX increases in credit risk and when measuring expected losses. Scope 9RHIV-*67 XLIWEQIMQTEMVQIRXQSHIPMWETTPMIHXSEPP½RERGMEPEWWIXW I\GITXJSV½RERGMEPEWWIXWGPEWWM½IH or designated as at FVTPL and equity securities designated as at FVTOCI, which are not subject to impairment EWWIWWQIRX8LIWGSTISJXLI-*67I\TIGXIHGVIHMXPSWWMQTEMVQIRXQSHIPMRGPYHIWEQSVXM^IHGSWX½RERGMEP EWWIXWHIFXWIGYVMXMIWGPEWWM½IHEWEX*:83'-ERHSJJFEPERGIWLIIXPSERGSQQMXQIRXWERH½RERGMEPKYEVERXIIW which were previously provided for under IAS 37 Provisions, Contingent Liabilities and Contingent Assets (IAS 37). Measurement of Expected Credit Losses (ECL) ECLs are measured as the probability-weighted present value of expected cash shortfalls over the remaining I\TIGXIHPMJISJXLI½RERGMEPMRWXVYQIRX The measurement of ECLs will be based primarily on the product of the instrument’s probability of default (PD), loss given default (LGD), and exposure at default (EAD). The ECL model contains a three-stage approach that is based on the change in the credit quality of assets since initial recognition. 7XEKI-JEXXLIVITSVXMRKHEXIXLIGVIHMXVMWOSJRSRMQTEMVIH½RERGMEPMRWXVYQIRXWLEWRSXMRGVIEWIHWMKRM½GERXP] WMRGIMRMXMEPVIGSKRMXMSRXLIWI½RERGMEPMRWXVYQIRXWEVIGPEWWM½IHMR7XEKIERHEPSWWEPPS[ERGIXLEXMWQIEWYVIH at each reporting date, at an amount equal to 12-month expected credit losses is recorded. 7XEKI;LIRXLIVIMWEWMKRM½GERXMRGVIEWIMRGVIHMXVMWOWMRGIMRMXMEPVIGSKRMXMSR XLIWIRSRMQTEMVIH½RERGMEP instruments are migrated to Stage 2, and a loss allowance that is measured, at each reporting date, at an amount equal to lifetime expected credit losses is recorded. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 135 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (a) Basis of preparation (continued) (iii) New standards and interpretations not yet adopted (continued) IFRS 9 (continued) Scope (continued) $VVHVVPHQWRIVLJQL¼FDQWLQFUHDVHLQFUHGLWULVN 8LIHIXIVQMREXMSRSJEWMKRM½GERXMRGVIEWIMRGVIHMXVMWOXEOIWMRXSEGGSYRXQER]HMJJIVIRXJEGXSVWMRGPYHMRKE GSQTEVMWSRSJE½RERGMEPMRWXVYQIRXWGVIHMXVMWOSV4(EXXLIVITSVXMRKHEXIERHXLIGVIHMXSV4(EXXLIHEXISJ initial recognition. 7XEKI*MRERGMEPMRWXVYQIRXWEVIGPEWWM½IHEWWXEKI[LIRXLIVIMWSFNIGXMZIIZMHIRGISJMQTEMVQIRXEWEVIWYPX of one or more loss events that have occurred after initial recognition with a negative impact on the estimated JYXYVIGEWL¾S[WSJEPSERSVETSVXJSPMSSJPSERW8LI)'0QSHIPVIUYMVIWXLEXPMJIXMQI)'0FIVIGSKRM^IHJSV MQTEMVIH½RERGMEPMRWXVYQIRXW [LMGLMWWMQMPEVXSXLIGYVVIRXVIUYMVIQIRXWYRHIV-%7JSVMQTEMVIH½RERGMEP instruments. Impact 8LI'SQTER]LEWVIZMI[IHMXW½RERGMEPEWWIXWERHPMEFMPMXMIWERHMWI\TIGXMRKXLIJSPPS[MRKMQTEGXJVSQEHSTXMSR of the new standard on 1 July 2018: 8LIEHSTXMSRSJ-*67[MPPVIUYMVIEVIZMI[SJXLIGYVVIRXGPEWWM½GEXMSRSJ½RERGMEPEWWIXWERHPMEFMPMXMIW8LI GEXIKSVMIWJSV½RERGMEPEWWIXWGLERKIHJVSQ-%7XS-*678LI-%7LIPHXSQEXYVMX]PSERWERHVIGIMZEFPIW and available-for-sale categories have been replaced by fair value through other comprehensive income, fair ZEPYIXLVSYKLTVS½XSVPSWWERHQIEWYVIHEXEQSVXMWIHGSWX%TVIPMQMREV]EWWIWWQIRXLEWFIIRGEVVMIHSYXERH IWXEFPMWLIHXLEXQENSVMX]SJXLI'SQTER] WHIFXMRWXVYQIRXWEVIGYVVIRXP]GPEWWM½IHEXEQSVXMWIHGSWXERHLIRGI XLIVI[MPPFIRSGLERKIXSXLIEGGSYRXMRKJSVXLIWIEWWIXW8LIVIQEMRMRKGPEWWM½GEXMSRGEXIKSVMIWEVIWXMPPFIMRK ½REPMWIH The new impairment model requires the recognition of impairment provisions based on expected credit losses )'0 VEXLIVXLERSRP]MRGYVVIHGVIHMXPSWWIWEWMWXLIGEWIYRHIV-%78LISXLIV½RERGMEPEWWIXWLIPHF]XLI 'SQTER]MRGPYHIHIFXMRWXVYQIRXWGYVVIRXP]GPEWWM½IHEW%ZEMPEFPIJSV7EPI %*7 JSV[LMGL*:83'-IPIGXMSRMW available. The Company has determined that the application of an expected credit loss model is likely to result in an earlier recognition of credit losses on receivables from its major customer. The derecognition rules have been transferred from IAS 39 Financial Instruments: Recognition and Measurement and have not been changed. The Company does not have any hedge relationships and therefore the new hedge accounting rules have no impact to the Company. KENYA ELECTRICITY GENERATING COMPANY PLC 136 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (a) Basis of preparation (continued) (iii) New standards and interpretations not yet adopted (continued) IFRS 9 (continued) Date of adoption 1YWXFIETTPMIHJSV½RERGMEP]IEVWGSQQIRGMRKSRSVEJXIV.ERYEV] The Company will apply the rules from 1 July 2018 with the practical expedients permitted under the standard. Comparatives for 2018 will not be restated. IFRS 15 Revenue from contracts with customers Nature of change IFRS 15 replaces the two main revenue recognition standards, IAS 18 Revenue and IAS 11 Construction Contracts and their related interpretations. FEWIH VIZIRYI VIGSKRMXMSR QSHIP ERH GPEVM½IW XLI TVMRGMTPIW JSV VIGSKRMWMRK -*67  TVSZMHIW E WMRKPI GSRXVSP revenue from contracts with customers. The core principle is that an entity should recognise revenue to depict XLIXVERWJIVSJTVSQMWIHKSSHWSVWIVZMGIWXSGYWXSQIVWEXEREQSYRXXLEXVI¾IGXWXLIGSRWMHIVEXMSRXS[LMGL the entity expects to be entitled in exchange for those goods or services. Revenue is recognised when a customer obtains control of a good or service. A customer obtains control when it has the ability to direct the use of and SFXEMRXLIFIRI½XWJVSQXLIKSSHSVWIVZMGI IFRS 15 also includes comprehensive disclosure requirements that will provide users with information about XLIREXYVI EQSYRX XMQMRKERHYRGIVXEMRX]SJVIZIRYIERHGEWL¾S[WEVMWMRKJVSQXLIIRXMX]´WGSRXVEGXW[MXL customers. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer. 8LIRI[KYMHERGIMRGPYHIWE½ZIWXITMRXLIQSHIPEVIEWJSPPS[W · Identify the contract with the customer · Identify the performance obligations in the contract · Determine the transaction price · Allocate the transaction price to the performance obligations in the contracts · 6IGSKRMWIVIZIRYI[LIR SVEW XLIIRXMX]WEXMW½IWETIVJSVQERGISFPMKEXMSR -*67I\GPYHIWJVSQMXWWGSTIVIZIRYIVIPEXIHXSPIEWIGSRXVEGXWMRWYVERGIGSRXVEGXWERH½RERGMEPMRWXVYQIRXW As a result, the majority of our revenue will not be impacted by the adoption of this standard, including net interest income. 8LIWXERHEVHTIVQMXWIMXLIVEJYPPVIXVSWTIGXMZISVEQSHM½IHVIXVSWTIGXMZIETTVSEGLJSVXLIEHSTXMSR KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 137 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (a) Basis of preparation (continued) (iii) New standards and interpretations not yet adopted (continued) IFRS 15 Revenue from contracts with customers (continued) Impact (continued) ;IGSRXMRYIXSIZEPYEXIXLIIJJIGXSJXLMWWXERHEVHSRSYV½RERGMEPWXEXIQIRXW MRGPYHMRKXLITVIWIRXEXMSRSJ revenue and expense items, and the timing and measurement of revenue for certain types of contracts. We do RSXGYVVIRXP]I\TIGXEQEXIVMEPMQTEGXXS½RERGMEPWXEXIQIRXWEWEVIWYPXSJEHSTXMRKXLMWWXERHEVH Date of adoption 1YWXFIETTPMIHJSV½RERGMEP]IEVWGSQQIRGMRKSRSVEJXIV.ERYEV] The Company will apply the rules from 1 July 2018 with the practical expedients permitted under the standard. Comparatives for 2018 will not be restated. IFRS 16 Leases Nature -*67  [EW MWWYIH MR .ERYEV]  -X WTIGM½IW XLI VIGSKRMXMSR QIEWYVIQIRX TVIWIRXEXMSR ERH HMWGPSWYVI SJ leases. The standard provides a single lessee accounting model, requiring lessees to recognise assets and liabilities for all leases unless the lease term is 12 months or less or the underlying asset has a low value. Lessors continue XSGPEWWMJ]PIEWIWEWSTIVEXMRKSV½RERGI [MXL-*67´WETTVSEGLXSPIWWSVEGGSYRXMRKWYFWXERXMEPP]YRGLERKIH from its predecessor, IAS 17 Leases. The new standard will result in on-balance sheet recognition for many leases that are considered operating leases under IAS 17, which will result in the gross-up of the balance sheet through the recognition of a right-of-use asset and a liability for the lease component of the future payments. Impact The Company expects that the new standard will primarily affect its accounting for operating leases, in particular those relating to its property and equipment. 3REHSTXMSRSJ-*67STIVEXMRKPIEWIGSWXW[MPPRSPSRKIVFIVIGSKRMWIHEWSTIVEXMRKI\TIRWIW8LII\XIRXSJ XLIVIHYGXMSRMRPIEWII\TIRWIWMWHITIRHIRXSRXLIETTPMGEXMSRSJXLITVEGXMGEPI\TIHMIRXWMR-*67VIKEVHMRK the separation of lease and non-lease components and the impact of the application of the low value asset exemption. The new standard will require the recognition of lease liabilities and corresponding right-of-use assets. The Company will recognise depreciation on the right-of-use assets and interest on the lease liabilities over the PIEWIXIVQMRTVS½XSVPSWW 8LIMRMXMEPPIEWIPMEFMPMXMIWERHVMKLXSJYWIEWWIXWVIGSKRMWIHYTSRXVERWMXMSRXS-*67[SYPHPMOIP]FIVITVIWIRXEXMZI of the non-cancellable lease commitments, discounted at an appropriate rate as applicable to the operation in which the lease arises, after taking into account the impact of the practical expedients and transitional elections applied by the Company. -XMWERXMGMTEXIHXLEX[LMPIXLI)&-8(%ERHXLIVIPEXIH)&-8(%QEVKMR[MPPMQTVSZIWMKRM½GERXP]HITVIGMEXMSRERH ½RERGIGLEVKIW[MPPEPWSMRGVIEWIWMKRM½GERXP] KENYA ELECTRICITY GENERATING COMPANY PLC 138 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (a) Basis of preparation (continued) (iii) New standards and interpretations not yet adopted (continued) IFRS 16 Leases (continued) Impact (continued) %TTPMGEXMSRSJ-*67[MPPMQTEGXXLI)&-8(%VEXMSWWMKRM½GERXP]-*67TIVQMXWQYPXMTPIXVERWMXMSR methods, and the Company is yet to determine which transition method would be the most appropriate. The new standard contains enhanced disclosure requirements for both lessees and lessors. We continue to IZEPYEXIXLIMQTEGXSJ-*67SRSYV½RERGMEPWXEXIQIRXW Date of adoption 1ERHEXSV]JSV½RERGMEP]IEVWGSQQIRGMRKSRSVEJXIV.ERYEV]%XXLMWWXEKIXLI'SQTER]HSIWRSXMRXIRH to adopt the standard before its effective date. There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. Annual Improvements to IFRS Standards 2016–2018 Cycle Applicable to annual reporting periods beginning on or after 1 July 2018 Makes amendments to the following standards: • IAS 12 - The amendments clarify that the requirements in the former paragraph 52B (to recognise the income tax consequences of dividends where the transactions or events that generated distributable TVS½XWEVIVIGSKRMWIH ETTP]XSEPPMRGSQIXE\GSRWIUYIRGIWSJHMZMHIRHWF]QSZMRKXLITEVEKVETLE[E] from paragraph 52A that only deals with situations where there are different tax rates for distributed and YRHMWXVMFYXIHTVS½XW • IAS 238LIEQIRHQIRXWGPEVMJ]XLEXMJER]WTIGM½GFSVVS[MRKVIQEMRWSYXWXERHMRKEJXIVXLIVIPEXIHEWWIXMW ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalisation rate on general borrowings. (b) Revenue and income Revenue recognition 6IZIRYIMWVIGSKRM^IHXSXLII\XIRXXLEXMXMWTVSFEFPIXLEXXLIIGSRSQMGFIRI½XW[MPP¾S[XSXLI'SQTER]ERH the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable excluding discounts, rebates and sales taxes or duty. Electricity revenue Electricity revenue is recognised based on available capacity and energy sold to the authorised distributor’s transmission systems. The Power Purchase Agreements (PPAs) between the Kenya Power and Lighting Company (Kenya Power) provide for the following categories of revenue: • Capacity revenue - This relates to the amounts earned from Kenya Power in respect of the contracted capacity EW TVSZMHIH JSV MR XLI 44%W8LI GLEVKI VEXIW GSQTVMWI SJ XLI MRZIWXQIRX GSQTSRIRX ERH E ½\IH GLEVKI Contracted capacity is expressed in megawatts (MW). KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 139 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (b) Revenue and income (continued) • Energy revenue - This relates to the amounts earned from Kenya Power in respect of the Net Electrical Output (NEO) as provided for in the PPAs. Net Electrical Output (NEO) refers to the electrical energy delivered to Kenya Power from the plant measured in Kilowatt hours (kWh). Steam Revenue Steam revenue is recognised based on the geothermal power sold to the authorised distributor’s transmission W]WXIQEWTVSZMHIHJSVMRXLI44%W7XIEQVIZIRYIMWHMZMHIHMRXSXLIJSPPS[MRKGEXIKSVMIW • Third party steam revenue – This relates to steam revenue earned from Kenya Power relating to steam purchased from a third party, Geothermal Development Company (‘GDC’). The GDC wells from which this WXIEQ MW SFXEMRIH EVI QEREKIH F] /IR+IR 3J XLI XSXEP VIZIRYI KIRIVEXIH   MW FMPPIH F] +(' ERH MW recognised as a cost, under steam costs. • KenGen steam revenue- This relates to steam revenue earned from Kenya Power for the use of steam obtained from KenGen’s own wells. Fuel charge Fuel charge is recognised based on amounts billed to Kenya Power for fuel used in the generation of electricity.The fuel revenue is billed based on a predetermined formula embedded in the PPAs.The corresponding cost incurred by KenGen for the fuel used in the power generation is recognised as a cost, under reimbursable expenses. Water charge Water charge is recognised based on amounts billed to Kenya Power for water used in the generation of electricity. The corresponding cost incurred by KenGen for the water used in the power generation is recognised as a cost, under reimbursable expenses. Other income Realised foreign exchange loss billed - This relates to the recovery of the losses arising from foreign currency I\GLERKIVEXI¾YGXYEXMSRWEJJIGXMRKXLIJSVIMKRGYVVIRG]XVERWEGXIHFEPERGIWYWIHTYVTSWIP]JSVTS[IVKIRIVEXMSR 8LI'SQTER]VIGSZIVWXLIWIJVSQ/IR]E4S[IVERHYPXMQEXIP]XSXLI½REPGSRWYQIV Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the expected life SJXLI½RERGMEPEWWIXXSXLEXEWWIX WRIXGEVV]MRKEQSYRXSRMRMXMEPVIGSKRMXMSR Rental income is accounted for on a straight-line basis over the lease term. KENYA ELECTRICITY GENERATING COMPANY PLC 140 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (c) Foreign currency translation Functional and presentation currency -XIQWMRGPYHIHMRXLI½RERGMEPWXEXIQIRXWEVIQIEWYVIHYWMRKXLIGYVVIRG]SJXLITVMQEV]IGSRSQMGIRZMVSRQIRX MR[LMGLXLIIRXMX]STIVEXIW ³XLIJYRGXMSREPGYVVIRG]´ 8LI½RERGMEPWXEXIQIRXWEVITVIWIRXIHMR/IR]E7LMPPMRKW in thousands (Shs) which is the Company’s functional currency. Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuations where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement *SVIMKRI\GLERKIKEMRWERHPSWWIWXLEXVIPEXIXSFSVVS[MRKWERHGEWLERHGEWLIUYMZEPIRXWEVITVIWIRXIHMRTVS½X SVPSWW[MXLMR³½RERGIMRGSQISVGSWX´%PPSXLIVJSVIMKRI\GLERKIKEMRWERHPSWWIWEVITVIWIRXIHMRTVS½XSVPSWW within ‘other income or expenses’. (d) Taxation -RGSQIXE\I\TIRWIVITVIWIRXWXLIWYQSJGYVVIRXERHHIJIVVIHXE\8E\MWVIGSKRMWIHMRTVS½XSVPSWWI\GITXXS the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity respectively. (i) Current tax The current income tax charge is calculated on the basis of the tax enacted or substantively enacted at the reporting date. The Directors periodically evaluate positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. (ii) Deferred tax Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax FEWIWSJEWWIXWERHPMEFMPMXMIWERHXLIMVGEVV]MRKEQSYRXWMRXLI½RERGMEPWXEXIQIRXW,S[IZIVHIJIVVIHMRGSQIXE\ is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business GSQFMREXMSRXLEXEXXLIXMQISJXLIXVERWEGXMSREJJIGXWRIMXLIVEGGSYRXMRKRSVXE\EFPITVS½XRSVPSWW (IJIVVIH income tax is determined using tax rates (and laws) that have been enacted or substantively enacted at the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. (IJIVVIHMRGSQIXE\EWWIXWPSWWIWEVIVIGSKRMWIHSRP]XSXLII\XIRXXLEXMXMWTVSFEFPIXLEXJYXYVIXE\EFPITVS½XW will be available against which the temporary differences can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 141 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (e) (PSOR\HHV³EHQH¼WV M 6IXMVIQIRXFIRI½XWSFPMKEXMSRW 8LI'SQTER]STIVEXIWEHI½RIHFIRI½XWWGLIQIERHEHI½RIHGSRXVMFYXMSRWWGLIQI 4E]QIRXWXSHI½RIHGSRXVMFYXMSRVIXMVIQIRXFIRI½XTPERWEVIVIGSKRMWIHEWERI\TIRWI[LIRIQTPS]IIWLEZI rendered service entitling them to the contributions. *SVHI½RIHVIXMVIQIRXFIRI½XTPERWXLIGSWXSJTVSZMHMRKFIRI½XWMWHIXIVQMRIHYWMRKXLITVSNIGXIHYRMXGVIHMX method, with actuarial valuations being carried out at the end of each annual reporting period. Re-measurements, comprising actuarial gains and losses, the effect of the changes to the asset ceiling (if applicable) and the return SRTPEREWWIXW I\GPYHMRKMRXIVIWX MWVI¾IGXIHMQQIHMEXIP]MRXLIWXEXIQIRXSJ½RERGMEPTSWMXMSR[MXLEGLEVKISV credit recognised in other comprehensive income in the period in which they occur. Re-measurement recognised MR SXLIV GSQTVILIRWMZI MRGSQI MW VI¾IGXIH MQQIHMEXIP] MR VIXEMRIH IEVRMRKW ERH [MPP RSX FI VIGPEWWM½IH XS TVS½XSVPSWW4EWXWIVZMGIGSWXMWVIGSKRMWIHMRTVS½XSVPSWWMRXLITIVMSHSJETPEREQIRHQIRX2IXMRXIVIWXMW GEPGYPEXIHF]ETTP]MRKXLIHMWGSYRXVEXIEXXLIFIKMRRMRKSJXLITIVMSHXSXLIRIXHI½RIHFIRI½XPMEFMPMX]SVEWWIX (I½RIHFIRI½XGSWXWEVIGEXIKSVMWIHEWWIVZMGIGSWXW MRGPYHMRKGYVVIRXWIVZMGIGSWXTEWXWIVZMGIGSWXEW[IPPEW gains and losses on curtailments and settlements), net interest expense or income and re-measurement. 8LI'SQTER]TVIWIRXWXLI½VWXX[SGSQTSRIRXWSJHI½RIHFIRI½XGSWXWMRTVS½XSVPSWWMRXLIPMRIMXIQSJ TIRWMSRGSWXHI½RIHFIRI½XWGLIQI MRGPYHIHMRWXEJJGSWXW 'YVXEMPQIRXKEMRWERHPSWWIWEVIEGGSYRXIHJSVEW past service costs. ii) Other entitlements 8LIQSRIXEV]FIRI½XWJSVIQTPS]IIW´EGGVYIHERRYEPPIEZIIRXMXPIQIRXEXXLIVITSVXMRKHEXIEVIVIGSKRMWIHEW an expense accrual. (f) Property, plant and equipment All categories of property, plant and equipment are initially recorded at cost. Land and buildings, transmission lines and plant and equipment are subsequently shown at fair value less subsequent depreciation for buildings, plant and machinery.Valuations are performed by external independent valuers on a periodic basis. All other categories of assets stated at historical cost less depreciation. The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of the decommissioning obligation and for qualifying assets, borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. Property, plant and equipment in the course of construction for production, supply or administrative purposes are carried at cost, less any recognised impairment loss. Cost includes professional fees and, for qualifying assets, FSVVS[MRKGSWXWGETMXEPMWIHSRUYEPMJ]MRKEWWIXW 7YGLMXIQWSJTVSTIVX] TPERXERHIUYMTQIRXEVIGPEWWM½IHXS the appropriate categories of property, plant and equipment when completed and ready for intended use. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. KENYA ELECTRICITY GENERATING COMPANY PLC 142 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (f) Property, plant and equipment (continued) 6IZEPYEXMSRWEVITIVJSVQIH[MXLWYJ½GMIRXVIKYPEVMX]WYGLXLEXXLIGEVV]MRKEQSYRXWHSRSXHMJJIVQEXIVMEPP]JVSQ those that would be determined using fair values at the reporting date. Any increases arising on the revaluation of such plant and machinery is recognised in other comprehensive income and accumulated in equity, except to XLII\XIRXXLEXMXVIZIVWIWEVIZEPYEXMSRHIGVIEWIJSVXLIWEQIEWWIXTVIZMSYWP]VIGSKRMWIHMRTVS½XSVPSWW MR [LMGLGEWIXLIMRGVIEWIMWGVIHMXIHXSTVS½XSVPSWWXSXLII\XIRXSJXLIHIGVIEWITVIZMSYWP]I\TIRWIH8LIEWWIXW were last revalued in 2015. %HIGVIEWIMRXLIGEVV]MRKEQSYRXEVMWMRKSRXLIVIZEPYEXMSRSJWYGLEREWWIXMWVIGSKRMWIHMRTVS½XSVPSWWXS the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of that asset. All productive wells are capitalised in property, plant and equipment when connected and are depreciated over XLIMVYWIJYPPMZIW8LIYWIJYPPMJIMWGYVVIRXP]IWXMQEXIHXSFIX[IRX]½ZI]IEVWJVSQXLIHEXISJGSQQIRGIQIRXSJ GSQQIVGMEPSTIVEXMSR8LIGSWXSJYRTVSHYGXMZI[IPPWMWXVERWJIVVIHXSXLITVS½XSVPSWWMRXLI]IEVMR[LMGLXLI] EVIGIVXM½IHGSQTPIXIFYXYRTVSHYGXMZI;LIVIE[IPPGIEWIWXSFITVSHYGXMZIFIJSVIXLIIRHSJMXWI\TIGXIH YWIJYPPMJIXLIRIXFSSOZEPYISJXLI[IPPMWGLEVKIHXSXLITVS½XSVPSWWMRXLI]IEVMXGIEWIWXSFITVSHYGXMZI Depreciation Depreciation is calculated on the straight-line basis and is recognised so as to write off the cost or valuation of assets (other than freehold land and Work-in progress under construction) less their residual values over their useful lives, using the straight-line method. The annual depreciation rates in use are: Asset class Depreciation rates Buildings 2.85% Transmission lines 2.5% Plant and machinery: Intake and tunnels 1% Hydro plants 2% Geothermal wells 4% Geothermal plants 4% Thermal plants and wind plants 5% Rigs  Motor vehicles 25% Computers 20% *YVRMXYVIIUYMTQIRXERH½XXMRKW  KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 143 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (f) Property, plant and equipment (continued) Depreciation (continued) Freehold land is not depreciated and leasehold land is amortised over the lease period. Residual value, useful life and depreciation methods are reviewed at least annually at the reporting date. Changes in the residual value and expected useful life are accounted for by changing the depreciation charge for the year, and treated as changes in accounting estimates. (ITVIGMEXMSRSRVIZEPYIHEWWIXWMWVIGSKRMWIHMRTVS½XSVPSWWERHEXVERWJIVSJI\GIWWHITVIGMEXMSRMWQEHIJVSQ the asset revaluation reserve to retained earnings. On the subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred directly to retained earnings. %RMXIQSJTVSTIVX]TPERXERHIUYMTQIRXMWHIVIGSKRMWIHYTSRHMWTSWEPSV[LIRRSJYXYVIIGSRSQMGFIRI½XW are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the GEVV]MRKEQSYRXSJXLIEWWIXERHMWVIGSKRMWIHMRTVS½XSVPSWW Capitalisation of employee costs The employee costs directly and indirectly attributable to projects associated with development of power generating resources are capitalised. Capitalisation rates are based on estimated time and effort spent on the related project activities. Capitalisation of depreciation and amortisation The depreciation and amortisation costs directly attributable to projects associated with development of power generating resources are capitalised. Capitalisation rates are based on estimated depreciation rates and time of use by the project. (g) Intangible assets Intangible assets comprise of computer software acquired for business process and operations. Intangible assets acquired separately are measured on initial recognition at cost and are subsequently carried at fair value less subsequent amortisation and any accumulated impairment losses. The useful life of the assets depends on the HYVEXMSRSJXLIPMGIRGIW-RXERKMFPIEWWIXW[MXL½RMXIPMZIWEVIEQSVXMWIHSZIVXLIYWIJYPIGSRSQMGPMJIERHEWWIWWIH for impairment whenever there is an indication that the intangible asset may be impaired.The amortisation period ERHXLIEQSVXMWEXMSRQIXLSHJSVERMRXERKMFPIEWWIX[MXLE½RMXIYWIJYPPMJIMWVIZMI[IHEXPIEWXEXXLIVITSVXMRK HEXI 'LERKIWMRXLII\TIGXIHYWIJYPPMJISVXLII\TIGXIHTEXXIVRSJGSRWYQTXMSRSJJYXYVIIGSRSQMGFIRI½XW embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.. 8LIEQSVXMWEXMSRI\TIRWISRMRXERKMFPIEWWIXW[MXL½RMXIPMZIWMWVIGSKRMWIHMRXLITVS½XSVPSWWMRXLII\TIRWI category consistent with the function of the intangible asset. An intangible asset is derecognised on disposal, or [LIRRSJYXYVIIGSRSQMGFIRI½XWEVII\TIGXIHJVSQYWISVHMWTSWEP+EMRWSVPSWWIWEVMWMRKJVSQHIVIGSKRMXMSR of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount SJXLIEWWIXERHEVIVIGSKRMWIHMRTVS½XSVPSWW[LIRXLIEWWIXMWHIVIGSKRMWIH KENYA ELECTRICITY GENERATING COMPANY PLC 144 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (h) Impairment At each reporting date the Company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis SJEPPSGEXMSRGERFIMHIRXM½IHGSVTSVEXIEWWIXWEVIEPWSEPPSGEXIHXSMRHMZMHYEPGEWLKIRIVEXMRKYRMXWSVSXLIV[MWI they are allocated to the smallest Company of cash-generating units for which a reasonable and consistent allocation FEWMWGERFIMHIRXM½IH Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the IWXMQEXIH JYXYVI GEWL ¾S[W EVI HMWGSYRXIH XS XLIMV TVIWIRX ZEPYI YWMRK E TVIXE\ HMWGSYRX VEXI XLEX VI¾IGXW GYVVIRXQEVOIXEWWIWWQIRXWSJXLIXMQIZEPYISJQSRI]ERHXLIVMWOWWTIGM½GXSXLIEWWIXJSV[LMGLXLIIWXMQEXIW SJJYXYVIGEWL¾S[WLEZIRSXFIIREHNYWXIH If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment PSWWMWVIGSKRMWIHMQQIHMEXIP]MRTVS½XSVPSWWYRPIWWXLIVIPIZERXEWWIXMWGEVVMIHEXEVIZEPYIHEQSYRXMR[LMGL case the impairment loss is treated as a revaluation decrease. Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate of its recoverable amount, so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the EWWIX SVGEWLKIRIVEXMRKYRMX MRTVMSV]IEVW%VIZIVWEPSJERMQTEMVQIRXPSWWMWVIGSKRMWIHMQQIHMEXIP]MRTVS½X or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. (i) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. -RZIWXQIRX MRGSQI IEVRIH SR XLI XIQTSVEV] MRZIWXQIRX SJ WTIGM½G FSVVS[MRKW TIRHMRK XLIMV I\TIRHMXYVI SR qualifying assets is deducted from the borrowing costs eligible for capitalisation. Capitalised costs include interest charges on borrowings for projects under construction. %PPSXLIVFSVVS[MRKGSWXWEVIVIGSKRMWIHMRTVS½XSVPSWWMRXLITIVMSHMR[LMGLXLI]EVIMRGYVVIH (j) Inventories Inventories are valued at the lower of cost or net realisable value. Cost is determined on a weighted average basis and comprises expenditure incurred in the normal course of business, including direct material costs. Net realisable value is the price at which the inventory can be realised in the normal course of business after allowing for the costs of realisation. Obsolete and defective inventories are fully written off. Engineering spares which are used for more than one period are categorised as plant and equipment. All other spares used on normal operations are GEXIKSVMWIHEWGSRWYQEFPIWERHGPEWWM½IHYRHIVMRZIRXSV] KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 145 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (k) Financial instruments Financial Assets *MRERGMEP EWWIXW ERH ½RERGMEP PMEFMPMXMIW EVI VIGSKRMWIH [LIR XLI 'SQTER] FIGSQIW E TEVX] XS XLI GSRXVEGXYEP provisions of the instrument. *MRERGMEPEWWIXWERH½RERGMEPPMEFMPMXMIWEVIMRMXMEPP]QIEWYVIHEXJEMVZEPYI8VERWEGXMSRGSWXWXLEXEVIHMVIGXP]EXXVMFYXEFPI XSXLIEGUYMWMXMSRSVMWWYISJ½RERGMEPEWWIXWERH½RERGMEPPMEFMPMXMIW SXLIVXLER½RERGMEPEWWIXWERH½RERGMEPPMEFMPMXMIW EXJEMVZEPYIXLVSYKLTVS½XSVPSWW EVIEHHIHXSSVHIHYGXIHJVSQXLIJEMVZEPYISJXLI½RERGMEPEWWIXWSV½RERGMEP PMEFMPMXMIW EWETTVSTVMEXI SRMRMXMEPVIGSKRMXMSR8VERWEGXMSRGSWXWHMVIGXP]EXXVMFYXEFPIXSXLIEGUYMWMXMSRSJ½RERGMEP EWWIXWSV½RERGMEPPMEFMPMXMIWEXJEMVZEPYIXLVSYKLTVS½XSVPSWWEVIVIGSKRMWIHMQQIHMEXIP]MRTVS½XSVPSWW *MRERGMEPEWWIXWEVIGPEWWM½IHMRXSXLIJSPPS[MRKWTIGM½IHGEXIKSVMIW½RERGMEPEWWIXW³EXJEMVZEPYIXLVSYKLTVS½XSV PSWW  *:840 ³LIPHXSQEXYVMX] MRZIWXQIRXW³EZEMPEFPIJSVWEPI  %*7 ½RERGMEPEWWIXWERH³PSERWERHVIGIMZEFPIW  8LIGPEWWM½GEXMSRHITIRHWSRXLIREXYVIERHTYVTSWISJXLI½RERGMEPEWWIXWERHMWHIXIVQMRIHEXXLIXMQISJ initial recognition. Held-to-maturity investments ,IPHXSQEXYVMX]MRZIWXQIRXWEVIRSRHIVMZEXMZI½RERGMEPEWWIXW[MXL½\IHSVHIXIVQMREFPITE]QIRXWERH½\IH maturity dates that the Company has the positive intent and ability to hold to maturity. Subsequent to initial recognition, held-to-maturity investments are measured at amortised cost using the effective interest method less any impairment. Effective interest method The effective interest method is a method of calculating the amortised cost of a debt instrument and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. $YDLODEOHIRUVDOH¼QDQFLDODVVHWV %ZEMPEFPIJSVWEPI½RERGMEPEWWIXWEVIRSRHIVMZEXMZI½RERGMEPEWWIXWXLEXEVIIMXLIVHIWMKREXIHEW%ZEMPEFPIJSVWEPI ½RERGMEPEWWIXWSVEVIRSXGPEWWM½IHEW E PSERWERHVIGIMZEFPIW F LIPHXSQEXYVMX]MRZIWXQIRXWSV G ½RERGMEP EWWIXWEXJEMVZEPYIXLVSYKLTVS½XSVPSWW The Company has investments in debt securities that are traded in an active market and are stated at fair value at the reporting date. The fair value of available-for-sale debt securities is determined by reference to published price quotations in an EGXMZIQEVOIX-RXIVIWXMRGSQIGEPGYPEXIHYWMRKXLIIJJIGXMZIMRXIVIWXQIXLSHMWVIGSKRMWIHMRTVS½XSVPSWWI\GITX JSVMRXIVIWXMRGSQIIEVRIHSRXLIXIQTSVEV]MRZIWXQIRXSJWTIGM½GFSVVS[MRKWTIRHMRKXLIMVI\TIRHMXYVISR qualifying assets which is deducted from the borrowing costs eligible for capitalisation. KENYA ELECTRICITY GENERATING COMPANY PLC 146 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (k) Financial instruments (continued) $YDLODEOHIRUVDOH¼QDQFLDODVVHWV FRQWLQXHG *EMVZEPYIGLERKIWMRXLIGEVV]MRKEQSYRXSJEZEMPEFPIJSVWEPI½RERGMEPEWWIXWEVIVIGSKRMWIHMRSXLIVGSQTVILIRWMZI income and accumulated under the heading of investments revaluation reserve. Where the investment is disposed of or is determined to be impaired, the cumulative gain or loss previously accumulated in the investments VIZEPYEXMSRVIWIVZIMWVIGPEWWM½IHXSTVS½XSVPSWW Loans and receivables 0SERW ERH VIGIMZEFPIW EVI RSRHIVMZEXMZI ½RERGMEP EWWIXW [MXL ½\IH SV HIXIVQMREFPI TE]QIRXW XLEX EVI RSX quoted in an active market. Loans and receivables (including trade and other receivables, bank balances and cash) are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. %XIEGLVITSVXMRKHEXIEPP½RERGMEPEWWIXWEVIWYFNIGXXSVIZMI[JSVMQTEMVQIRX-JMXMWTVSFEFPIXLEXXLI'SQTER] will not be able to collect all amounts due (principal and interest) according to the contractual terms of loans, receivables, or held-to-maturity investments carried at amortised cost, an impairment or bad debt loss has occurred. The carrying amount of the asset is reduced to its estimated recoverable amount either directly or XLVSYKLYWISJEREPPS[ERGIEGGSYRX8LIEQSYRXSJXLIPSWWMRGYVVIHMWHIEPX[MXLXLVSYKLTVS½XSVPSWWJSVXLI period. *SV%ZEMPEFPIJSVWEPIHIFXWIGYVMXMIWEWMKRM½GERXSVTVSPSRKIHHIGPMRIMRXLIJEMVZEPYISJXLIWIGYVMX]FIPS[MXW cost is considered to be objective evidence of impairment. *SVEPPSXLIV½RERGMEPEWWIXWSFNIGXMZIIZMHIRGISJMQTEMVQIRXGSYPHMRGPYHI ˆ WMKRM½GERX½RERGMEPHMJ½GYPX]SJXLIMWWYIVSVGSYRXIVTEVX]SV ˆ FVIEGLSJGSRXVEGXWYGLEWEHIJEYPXSVHIPMRUYIRG]MRMRXIVIWXSVTVMRGMTEPTE]QIRXWSV ˆ MXFIGSQMRKTVSFEFPIXLEXXLIFSVVS[IV[MPPIRXIVFEROVYTXG]SV½RERGMEPVISVKERMWEXMSRSV ˆ 8LIHMWETTIEVERGISJEREGXMZIQEVOIXJSVXLEX½RERGMEPEWWIXFIGEYWISJ½RERGMEPHMJ½GYPXMIW *SV½RERGMEPEWWIXWGEVVMIHEXEQSVXMWIHGSWX XLIEQSYRXSJXLIMQTEMVQIRXPSWWVIGSKRMWIHMWXLIHMJJIVIRGI FIX[IIRXLIEWWIX´WGEVV]MRKEQSYRXERHXLITVIWIRXZEPYISJIWXMQEXIHJYXYVIGEWL¾S[W HMWGSYRXIHEXXLI ½RERGMEPEWWIX´WSVMKMREPIJJIGXMZIMRXIVIWXVEXI KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 147 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (k) Financial instruments (continued) )LQDQFLDODVVHWVDWIDLUYDOXHWKURXJKSUR¼WRUORVV 8LI'SQTER]HIWMKREXIWGIVXEMR½RERGMEPEWWIXWYTSRMRMXMEPVIGSKRMXMSREWEXJEMVZEPYIXLVSYKLTVS½XSVPSWW (fair value option). This designation cannot subsequently be changed and can only be applied when the following conditions are met: • the application of the fair value option reduces or eliminates an accounting mismatch that would otherwise EVMWISV ˆ XLI½RERGMEPEWWIXWEVITEVXSJETSVXJSPMSSJ½RERGMEPMRWXVYQIRXW[LMGLMWVMWOQEREKIHERHVITSVXIHXS WIRMSVQEREKIQIRXSREJEMVZEPYIFEWMWSV ˆ XLI½RERGMEPEWWIXWGSRWMWXWSJHIFXLSWXERHIQFIHHIHHIVMZEXMZIWXLEXQYWXFIWITEVEXIH *MRERGMEPEWWIXWEXJEMVZEPYIXLVSYKLTVS½XSVPSWWEVIGEVVMIHEXJEMVZEPYIXLIJEMVZEPYIHIWMKREXMSRMWQEHISR initial recognition of the asset and is irrevocable. Subsequent to initial recognition, the fair values are re-measured at each reporting date. Fair value gains and losses arising from changes in fair value are recognised in other income. ,PSDLUPHQWRI¼QDQFLDODVVHWV *SVGIVXEMRGEXIKSVMIWSJ½RERGMEPEWWIXW WYGLEWXVEHIVIGIMZEFPIW EWWIXWXLEXEVIEWWIWWIHRSXXSFIMQTEMVIH individually are, in addition, assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio of receivables could include the Company's past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period of 40 days, as well as observable changes in national or local economic conditions that correlate with default on receivables. *SV½RERGMEPEWWIXWGEVVMIHEXEQSVXMWIHGSWX XLIEQSYRXSJXLIMQTEMVQIRXPSWWVIGSKRMWIHMWXLIHMJJIVIRGI FIX[IIRXLIEWWIX´WGEVV]MRKEQSYRXERHXLITVIWIRXZEPYISJIWXMQEXIHJYXYVIGEWL¾S[W HMWGSYRXIHEXXLI ½RERGMEPEWWIX´WSVMKMREPIJJIGXMZIMRXIVIWXVEXI *SV½RERGMEPEWWIXWGEVVMIHEXGSWX XLIEQSYRXSJXLIMQTEMVQIRXPSWWMWQIEWYVIHEWXLIHMJJIVIRGIFIX[IIR XLIEWWIX´WGEVV]MRKEQSYRXERHXLITVIWIRXZEPYISJXLIIWXMQEXIHJYXYVIGEWL¾S[WHMWGSYRXIHEXXLIGYVVIRX QEVOIXVEXISJVIXYVRJSVEWMQMPEV½RERGMEPEWWIX7YGLMQTEMVQIRXPSWW[MPPRSXFIVIZIVWIHMRWYFWIUYIRXTIVMSHW 8LIGEVV]MRKEQSYRXSJXLI½RERGMEPEWWIXMWVIHYGIHF]XLIMQTEMVQIRXPSWWHMVIGXP]JSVEPP½RERGMEPEWWIXW[MXLXLI exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying EQSYRXSJXLIEPPS[ERGIEGGSYRXEVIVIGSKRMWIHMRTVS½XSVPSWW KENYA ELECTRICITY GENERATING COMPANY PLC 148 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (k) Financial instruments (continued) ,PSDLUPHQWRI¼QDQFLDODVVHWV FRQWLQXHG ;LIR ER%ZEMPEFPIJSVWEPI ½RERGMEP EWWIX MW GSRWMHIVIH XS FI MQTEMVIH GYQYPEXMZI KEMRW SV PSWWIW TVIZMSYWP] VIGSKRMWIHMRSXLIVGSQTVILIRWMZIMRGSQIEVIVIGPEWWM½IHXSTVS½XSVPSWWMRXLITIVMSH *SV ½RERGMEP EWWIXW QIEWYVIH EX EQSVXMWIH GSWX MJ MR E WYFWIUYIRX TIVMSH XLI EQSYRX SJ XLI MQTEMVQIRX PSWW decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, XLITVIZMSYWP]VIGSKRMWIHMQTEMVQIRXPSWWMWVIZIVWIHXLVSYKLTVS½XSVPSWWXSXLII\XIRXXLEXXLIGEVV]MRKEQSYRX of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. -RVIWTIGXSJ%ZEMPEFPIJSVWEPIHIFXWIGYVMXMIWMQTEMVQIRXPSWWIWEVIWYFWIUYIRXP]VIZIVWIHXLVSYKLTVS½XSVPSWWMJ an increase in the fair value of the investment can be objectively related to an event occurring after the recognition of the impairment loss. 'HUHFRJQLWLRQRI¼QDQFLDODVVHWV 8LI'SQTER]HIVIGSKRMWIWE½RERGMEPEWWIXSRP][LIRXLIGSRXVEGXYEPVMKLXWXSXLIGEWL¾S[WJVSQXLIEWWIX I\TMVISV[LIRMXXVERWJIVWXLI½RERGMEPEWWIXERHWYFWXERXMEPP]EPPXLIVMWOWERHVI[EVHWSJS[RIVWLMTSJXLIEWWIX to another entity. If the Company neither transfers nor retains substantially all the risks and rewards of ownership and continues to control the transferred asset, the Company recognises its retained interest in the asset and an associated liability for amounts it may have to pay. If the Company retains substantially all the risks and rewards SJS[RIVWLMTSJEXVERWJIVVIH½RERGMEPEWWIX XLI'SQTER]GSRXMRYIWXSVIGSKRMWIXLI½RERGMEPEWWIXERHEPWS recognises a collateralised borrowing for the proceeds received. 3RHIVIGSKRMXMSRSJE½RERGMEPEWWIXMRMXWIRXMVIX] XLIHMJJIVIRGIFIX[IIRXLIEWWIX WGEVV]MRKEQSYRXERHXLI sum of the consideration received and receivable and the cumulative gain or loss that had been recognised in other GSQTVILIRWMZIMRGSQIERHEGGYQYPEXIHMRIUYMX]MWVIGSKRMWIHMRTVS½XSVPSWW 3R HIVIGSKRMXMSR SJ E ½RERGMEP EWWIX SXLIV XLER MR MXW IRXMVIX] IK [LIR XLI 'SQTER] VIXEMRW ER STXMSR XS repurchase part of a transferred asset or retains a residual interest that does not result in the retention of substantially all the risks and rewards of ownership and the Company retains control), the Company allocates the previous GEVV]MRKEQSYRXSJXLI½RERGMEPEWWIXFIX[IIRXLITEVXMXGSRXMRYIWXSVIGSKRMWIYRHIVGSRXMRYMRKMRZSPZIQIRX and the part it no longer recognises on the basis of the relative fair values of those parts on the date of the transfer. The difference between the carrying amount allocated to the part that is no longer recognised and the sum of the consideration received for the part no longer recognised and any cumulative gain or loss allocated to it that had FIIRVIGSKRMWIHMRSXLIVGSQTVILIRWMZIMRGSQIMWVIGSKRMWIHMRTVS½XSVPSWW%GYQYPEXMZIKEMRSVPSWWXLEXLEH been recognised in other comprehensive income is allocated between the part that continues to be recognised and the part that is no longer recognised on the basis of the relative fair values of those parts. &ODVVL¼FDWLRQDVGHEWRUHTXLW\ (IFXERHIUYMX]MRWXVYQIRXWMWWYIHF]XLI'SQTER]EVIGPEWWM½IHEWIMXLIV½RERGMEPPMEFMPMXMIWSVEWIUYMX]MR EGGSVHERGI[MXLXLIWYFWXERGISJXLIGSRXVEGXYEPEVVERKIQIRXWERHXLIHI½RMXMSRWSJE½RERGMEPPMEFMPMX]ERHER equity instrument. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 149 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (k) Financial instruments (continued) (TXLW\LQVWUXPHQWV An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. Financial liabilities *MRERGMEPPMEFMPMXMIWEVIGPEWWM½IHEWIMXLIV½RERGMEPPMEFMPMXMIW³EXJEMVZEPYIXLVSYKLTVS½XSVPSWW SV³SXLIV½RERGMEP liabilities' 3XLIV½RERGMEPPMEFMPMXMIW 3XLIV½RERGMEPPMEFMPMXMIW MRGPYHMRKFSVVS[MRKW EVIWYFWIUYIRXP]QIEWYVIHEXEQSVXMWIHGSWXYWMRKXLIIJJIGXMZI interest method. 8LIIJJIGXMZIMRXIVIWXQIXLSHMWEQIXLSHSJGEPGYPEXMRKXLIEQSVXMWIHGSWXSJE½RERGMEPPMEFMPMX]ERHSJEPPSGEXMRK interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest VEXIXVERWEGXMSRGSWXWERHSXLIVTVIQMYQWSVHMWGSYRXW XLVSYKLXLII\TIGXIHPMJISJXLI½RERGMEPPMEFMPMX]SV [LIVI appropriate) a shorter period, to the net carrying amount on initial recognition. 'HUHFRJQLWLRQRI¼QDQFLDOOLDELOLWLHV 8LI 'SQTER] HIVIGSKRMWIW ½RERGMEP PMEFMPMXMIW [LIR ERH SRP] [LIR XLI 'SQTER] W SFPMKEXMSRW EVI HMWGLEVKIH GERGIPPIH SV I\TMVI8LI HMJJIVIRGI FIX[IIR XLI GEVV]MRK EQSYRX SJ XLI ½RERGMEP PMEFMPMX] HIVIGSKRMWIH ERH XLI GSRWMHIVEXMSRTEMHERHTE]EFPIMWVIGSKRMWIHMRTVS½XSVPSWW &ODVVL¼FDWLRQDVGHEWRUHTXLW\ (IFXERHIUYMX]MRWXVYQIRXWMWWYIHF]XLI'SQTER]EVIGPEWWM½IHEWIMXLIV½RERGMEPPMEFMPMXMIWSVEWIUYMX]MR EGGSVHERGI[MXLXLIWYFWXERGISJXLIGSRXVEGXYEPEVVERKIQIRXWERHXLIHI½RMXMSRWSJE½RERGMEPPMEFMPMX]ERHER equity instrument. (TXLW\LQVWUXPHQWV An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recognised at the proceeds received, net of direct issue costs. *MRERGMEPPMEFMPMXMIWEVIGPEWWM½IHEWIMXLIV½RERGMEPPMEFMPMXMIW³EXJEMVZEPYIXLVSYKLTVS½XSVPSWW´ SV³SXLIV½RERGMEP liabilities’. KENYA ELECTRICITY GENERATING COMPANY PLC 150 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (l) Accounting for leases 0IEWIW EVI GPEWWM½IH EW ½RERGI PIEWIW [LIRIZIV XLI XIVQW SJ XLI PIEWI XVERWJIV WYFWXERXMEPP] EPP XLI VMWOW ERH VI[EVHWSJS[RIVWLMTXSXLIPIWWII%PPSXLIVPIEWIWEVIGPEWWM½IHEWSTIVEXMRKPIEWIW The Company as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. The Company as lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term, except where ERSXLIVW]WXIQEXMGFEWMWMWQSVIVITVIWIRXEXMZISJXLIXMQITEXXIVRMR[LMGLIGSRSQMGFIRI½XWJVSQXLIPIEWIH asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a PMEFMPMX]8LIEKKVIKEXIFIRI½XSJMRGIRXMZIWMWVIGSKRMWIHEWEVIHYGXMSRSJVIRXEPI\TIRWISREWXVEMKLXPMRIFEWMW I\GITX[LIVIERSXLIVW]WXIQEXMGFEWMWMWQSVIVITVIWIRXEXMZISJXLIXMQITEXXIVRMR[LMGLIGSRSQMGFIRI½XW from the leased asset are consumed. (m) Dividends on ordinary shares Dividends on ordinary shares are recognised as a liability and deducted from retained earnings when approved by the Company’s shareholders. Interim dividends are deducted from retained earnings when they are declared and no longer at the discretion of the Company. (n) Grants Government grants are not recognised until there is reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. +SZIVRQIRXKVERXWEVIVIGSKRMWIHMRTVS½XSVPSWWSREW]WXIQEXMGFEWMWSZIVXLITIVMSHWMR[LMGLXLI'SQTER] VIGSKRMWIWEWI\TIRWIWXLIVIPEXIHGSWXWJSV[LMGLXLIKVERXWEVIMRXIRHIHXSGSQTIRWEXI7TIGM½GEPP]KSZIVRQIRX grants whose primary condition is that the Company should purchase, construct or otherwise acquire non- GYVVIRXEWWIXWEVIVIGSKRMWIHEWHIJIVVIHVIZIRYIMRXLIWXEXIQIRXSJ½RERGMEPTSWMXMSRERHXVERWJIVVIHXSTVS½X or loss on a systematic and rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the TYVTSWISJKMZMRKMQQIHMEXI½RERGMEPWYTTSVXXSXLI'SQTER][MXLRSJYXYVIVIPEXIHGSWXWEVIVIGSKRMWIHMR TVS½XSVPSWWMRXLITIVMSHMR[LMGLXLI]FIGSQIVIGIMZEFPI KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 151 FINANCIALS Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (o) Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past IZIRX MXMWTVSFEFPIXLEXERSYX¾S[SJVIWSYVGIWIQFSH]MRKIGSRSQMGFIRI½XW[MPPFIVIUYMVIHXSWIXXPIXLI obligation and a reliable estimate can be made of the amount of the obligation. (p) Cash and cash equivalents -RXLIWXEXIQIRXSJGEWL¾S[WGEWLERHGEWLIUYMZEPIRXMRGPYHIWGEWLMRLERHHITSWMXWLIPHEXGEPP[MXLFEROWERH other short term highly liquid investments with original maturities of three months or less, net of bank overdrafts. (q) Earnings per share Basic earnings per share is calculated by dividing: • XLITVS½XEXXVMFYXEFPIXSS[RIVWSJXLI'SQTER]I\GPYHMRKER]GSWXWSJWIVZMGMRKIUYMX]SXLIVXLERSVHMREV] shares • F]XLI[IMKLXIHEZIVEKIRYQFIVSJSVHMREV]WLEVIWSYXWXERHMRKHYVMRKXLI½RERGMEP]IEVEHNYWXIHJSVFSRYW elements in ordinary shares issued during the year (note 11). i) Diluted earnings per share (MPYXIHIEVRMRKWTIVWLEVIEHNYWXWXLI½KYVIWYWIHMRXLIHIXIVQMREXMSRSJFEWMGIEVRMRKWTIVWLEVIXSXEOIMRXS account: • XLIEJXIVMRGSQIXE\IJJIGXSJMRXIVIWXERHSXLIV½RERGMRKGSWXWEWWSGMEXIH[MXLHMPYXMZITSXIRXMEPSVHMREV] shares, and • the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. (r) Segmental reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. 8LI'SQTER]´W&SEVHSJ(MVIGXSVW[LMGLGSRWMWXWSJXLI1EREKMRK(MVIGXSVERHXLI'LMIJ)\IGYXMZI3J½GIVERH other Directors is the Company’s Chief Operating Decision Maker (CODM). (s) Non – current assets held for sale 2SRGYVVIRXEWWIXWEVIGPEWWM½IHEWLIPHJSVWEPIMJXLIMVGEVV]MRKEQSYRX[MPPFIVIGSZIVIHTVMRGMTEPP]XLVSYKLE sale transaction rather than through continuing use and a sale is considered highly probable. They are measured at the lower of their carrying amount and fair value less costs to sell. An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of the non-current asset (or disposal group) is recognised at the date of derecognition. KENYA ELECTRICITY GENERATING COMPANY PLC 152 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 2. 6LJQL¼FDQW$FFRXQWLQJSROLFLHV FRQWLQXHG (s) Non – current assets held for sale (continued) 2SRGYVVIRXEWWIXWEVIRSXHITVIGMEXIHSVEQSVXMWIH[LMPIXLI]EVIGPEWWM½IHEWLIPHJSVWEPI-RXIVIWXERHSXLIV I\TIRWIWEXXVMFYXEFPIXSXLIPMEFMPMXMIWSJEHMWTSWEPKVSYTGPEWWM½IHEWLIPHJSVWEPIGSRXMRYIXSFIVIGSKRMWIH 2SRGYVVIRXEWWIXWGPEWWM½IHEWLIPHJSVWEPIEVITVIWIRXIHWITEVEXIP]JVSQXLISXLIVEWWIXWMRXLIFEPERGIWLIIX 8LIPMEFMPMXMIWSJEHMWTSWEPKVSYTGPEWWM½IHEWLIPHJSVWEPIEVITVIWIRXIHWITEVEXIP]JVSQSXLIVPMEFMPMXMIWMRXLI balance sheet. 3. Critical accounting estimates and judgements In the application of the Company's accounting policies, which are described in note 2, the Directors are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The following are the critical judgements, apart from those involving estimations, that the Directors have made in XLITVSGIWWSJETTP]MRKXLI'SQTER] WEGGSYRXMRKTSPMGMIWERHXLEXLEZIXLIQSWXWMKRM½GERXIJJIGXSRXLIEQSYRXW VIGSKRMWIHMRXLI½RERGMEPWXEXIQIRXW +HOGWRPDWXULW\¼QDQFLDODVVHWV 8LI(MVIGXSVWLEZIVIZMI[IHXLI'SQTER] WLIPHXSQEXYVMX]½RERGMEPEWWIXWMRXLIPMKLXSJMXWGETMXEPQEMRXIRERGI ERHPMUYMHMX]VIUYMVIQIRXWERHLEZIGSR½VQIHXLI'SQTER] WTSWMXMZIMRXIRXMSRERHEFMPMX]XSLSPHXLSWIEWWIXW XSQEXYVMX]8LIGEVV]MRKEQSYRXSJXLILIPHXSQEXYVMX]½RERGMEPEWWIXWMW7LW .YRI 7LW 2,414,108,000). Details of these assets are set out in note 17. Financial assets at fair value 8LI (MVIGXSVW LEZI HIXIVQMRIH XLI ZEPYI SJ XLI ½RERGMEP EWWIX EX JEMV ZEPYI YWMRK ZEPYEXMSR XIGLRMUYIW [LMGL incorporate assumptions that are directly supported by observable market data. Management have exercised judgement in determining the future spot rates and the discount rates to use in the discounting of the future cash MR¾S[W Deferred tax assets (IJIVVIHXE\EWWIXWEVIVIGSKRMWIHJSVEPPYRYWIHXE\PSWWIWXSXLII\XIRXXLEXMXMWTVSFEFPIXLEXXE\EFPITVS½X[MPP be available against which the losses can be utilised. Judgment is required to determine the amount of deferred tax EWWIXWXLEXGERFIVIGSKRMWIHFEWIHYTSRXLIPMOIP]XMQMRKERHPIZIPSJJYXYVIXE\EFPITVS½XWXSKIXLIV[MXLJYXYVI XE\TPERRMRKWXVEXIKMIW(IXEMPWSRHIJIVVIHXE\EVIWIXSYXMRRSXI Capitalisation of staff and other costs Project related costs including employee costs are capitalised. The rates applied in capitalising the employee GSWXWEVIFEWIHSRIWXMQEXIHXMQIWTIRXSRXLIGETMXEPTVSNIGXW 7MKRM½GERXNYHKIQIRXMWVIUYMVIHMRHIXIVQMRMRK capitalisation rates to be applied on indirect staff costs. Disclosure of capitalised costs is set out on note 8. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 153 FINANCIALS Notes to the Financial Statements (continued) 3. Critical accounting estimates and judgements (continued) 5HYDOXDWLRQRISURSHUW\SODQWDQGHTXLSPHQW Certain categories of property plant and equipment are stated at fair value. Revaluations are performed by TVSJIWWMSREP ZEPYIVW EX WYJ½GMIRX VIKYPEVMX] WYGL XLEX XLI GEVV]MRK EQSYRXW HS RSX HMJJIV QEXIVMEPP] JVSQ XLSWI that would be determined using fair values at the reporting date. At the reporting date, the Directors assess the carrying amount of revalued property, plant and equipment and apply judgement to determine that these do not differ materially from that which would be determined using independent valuers at 30 June 2018. &ODVVL¼FDWLRQRIOHDVHVRIODQGDV¼QDQFHRURSHUDWLQJOHDVHV At the inception of each lease of land or building, the Company considers the substance rather than the form of the lease contract. Examples of situations that individually or in combination would normally lead to a lease being GPEWWM½IHEWE½RERGIPIEWIEVI % 8LIPIEWIXVERWJIVWS[RIVWLMTSJXLIEWWIXXSXLIPIWWIIF]XLIIRHSJXLIPIEWIXIVQ8LIPIWWIILEWXLISTXMSR XSTYVGLEWIXLIEWWIXEXETVMGIXLEXMWI\TIGXIHXSFIWYJ½GMIRXP]PS[IVXLERXLIJEMVZEPYIEXXLIHEXIXLI option becomes exercisable for it to be reasonably certain, at the inception of the lease, that the option will be I\IVGMWIH % XLIPIEWIXIVQMWJSVXLIQENSVTEVXSJXLIIGSRSQMGPMJISJXLIEWWIXIZIRMJXMXPIMWRSXXVERWJIVVIH % at the inception of the lease the present value of the minimum lease payments amounts to at least substantially EPPSJXLIJEMVZEPYISJXLIPIEWIHEWWIXERH % 8LIPIEWIHEWWIXWEVISJWYGLEWTIGMEPMWIHREXYVIXLEXSRP]XLIPIWWIIGERYWIXLIQ[MXLSYXQENSVQSHM½GEXMSRW The Company also considers indicators of situations that individually or in combination could also lead to a lease FIMRKGPEWWM½IHEWE½RERGIPIEWI)\EQTPIWSJWYGLMRHMGEXSVWMRGPYHI % -JXLIPIWWIIGERGERGIPXLIPIEWIXLIPIWWSV WPSWWIWEWWSGMEXIH[MXLXLIGERGIPPEXMSREVIFSVRIF]XLIPIWWII % KEMRWSVPSWWIWJVSQXLI¾YGXYEXMSRMRXLIJEMVZEPYISJXLIVIWMHYEPEGGVYIXSXLIPIWWII JSVI\EQTPI MRXLI JSVQSJEVIRXVIFEXIIUYEPPMRKQSWXSJXLIWEPIWTVSGIIHWEXXLIIRHSJXLIPIEWI ERH % The lessee has the ability to continue the lease for a secondary period at a rent that is substantially lower than market rent. 8VHIXOOLYHVRISURSHUW\SODQWDQGHTXLSPHQW The Company reviews the estimated useful lives of property, plant and equipment at the reporting date. The useful lives of the plants are then used in establishing the contracts that the Company enters into under the Power Purchase Agreements. At the reporting date, the Company reviews the carrying amounts of its property, plant & machinery, tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. KENYA ELECTRICITY GENERATING COMPANY PLC 154 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 3. Critical accounting estimates and judgements (continued) 8VHIXOOLYHVRISURSHUW\SODQWDQGHTXLSPHQW FRQWLQXHG Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. Any impairment losses are recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount. A reversal of an impairment loss, other than that arising from goodwill, is recognised as income immediately. Impairment losses At the reporting date, the Company reviews the carrying amounts of its property, plant & machinery, tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash generating unit to which the asset belongs. Any impairment losses are recognised as an expense immediately. Where an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount. A reversal of an impairment loss, other than that arising from goodwill, is recognised as income immediately. ,PSDLUPHQWRIDYDLODEOHIRUVDOH¼QDQFLDODVVHWV 8LI'SQTER]GPEWWM½IWGIVXEMREWWIXWEWEZEMPEFPIJSVWEPIERHVIGSKRMWIWQSZIQIRXWMRXLIMVJEMVZEPYIXLVSYKL other comprehensive income. The Company treats available-for-sale investments as impaired when there has FIIREWMKRM½GERXSVTVSPSRKIHHIGPMRIMRXLIJEMVZEPYIFIPS[MXWGSWXSV[LIVISXLIVSFNIGXMZIIZMHIRGISJ impairment exists $FWXDULDOYDOXDWLRQRIGH¼QHGEHQH¼WVSODQ 8LIEWWIXSVPMEFMPMX]HYIYRHIVXLIHI½RIHFIRI½XTIRWMSRTPERMWHIXIVQMRIHYWMRKEGXYEVMEPZEPYEXMSRXIGLRMUYIW The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, WYGLIWXMQEXIWEVIWYFNIGXXSWMKRM½GERXYRGIVXEMRX] Impairment of receivables As at the reporting date the critical estimates are made by the directors in determining the recoverable amount of impaired receivables. The impairment of trade receivables is assessed based on the incurred loss model. Individual receivables which are known to be uncollectible were assessed for impairment. The other receivables were assessed collectively to determine whether there is objective evidence that an impairment had been MRGYVVIHFYXRSX]IXFIIRMHIRXM½IH *SVXLIWIVIGIMZEFPIWXLIIWXMQEXIHMQTEMVQIRXPSWWIWMWVIGSKRMWIHMRE separate provision for impairment. Impairment of inventory Critical estimates are made by the directors in determining the recoverable amount of impaired inventory. The carrying amount of impaired inventory is set out in Note 18. Compensating tax provisions The Company has made provisions against compensating tax on dividends. The estimated provisions were made F]XLI(MVIGXSVWJSPPS[MRKXLITE]QIRXWSJHMZMHIRHWMR KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 155 FINANCIALS Notes to the Financial Statements (continued) 4. Revenue 2018 2017 Restated* Shs’000 Shs’000 a) Electricity Revenue Capacity revenue (note 4(a (i))) 21,139,411  Energy revenue (Note 4(a (ii)))     i) Capacity Revenue Hydro  7,582,945 Geothermal  10,931,047 Thermal  3,199,934 21,139,411  ii) Energy Revenue Hydro 1,212,377 1,037,952 Geothermal 5,934,919 5,171,007 Thermal   Wind     b) Steam revenue Third party revenue 5,085,918 4,200,944 KenGen Steam revenue  988,128  5,189,072 The amounts billed to KenGen by GDC relating to the steam purchased amounts to Shs 3,549,428,000 (2017: 7LW 8LIWILEZIFIIRVIGSVHIHEWWXIEQGSWXWMRXLIWXEXIQIRXSJTVS½XERHPSWWERHSXLIV comprehensive income. 2018 2017 Restated* Shs’000 Shs’000 c) Fuel charge   8LIJYIPGSWXWXLEXLEZIFIIRFMPPIHXS/IR+IRMRXLI]IEVEQSYRXXS7LW 7LW  8LIWILEZIFIIRVIGSVHIHEWJYIPGSWXWMRXLIWXEXIQIRXSJTVS½XERHPSWWERHSXLIV comprehensive income. KENYA ELECTRICITY GENERATING COMPANY PLC 156 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 4. Revenue (continued) 2018 2017 Restated* Shs’000 Shs’000 d) Water charge 159,172  The water costs that have been billed to KenGen by the Water Resource Management Authority in the year EQSYRXXS7LW 7LW 8LIWILEZIFIIRVIGSVHIHEW[EXIVGSWXWMRXLIWXEXIQIRX SJTVS½XERHPSWWERHSXLIVGSQTVILIRWMZIMRGSQI * Refer to note 37 for details 5. Other income 2018 2017 Restated* Shs’000 Shs’000 Miscellaneous income  191,341 Gain on disposal of property, plant and equipment 951 15,814 Insurance compensation   Management fees - 2,281 Carbon credits - 57,391 274,771 553,148 6. Other (losses)/ gains -net Realised foreign exchange loss billed - others (Note 15 (a) (iv))   Foreign exchange gains from other monetary items 40,502  *EMVZEPYIPSWWSRVIZEPYEXMSRSJXLI½RERGMEPEWWIXEXJEMVZEPYI  (50,543) XLVSYKLTVS½XSVPSWW 2SXI Amortization of held to maturity investments (Note 17(c))   (1,049,948)  7. Finance income Interest income from Kenya Power (Note 15 (a) (iv)) 1,015,183  Interest income from treasury bonds  282,242 -RXIVIWXMRGSQIJVSQFEROWERHSXLIV½RERGMEPMRWXMXYXMSRW 227,180  Interest income from staff advances 4,175 4,822 Foreign exchange gains on borrowings (Note 23 (d)) 1,848,041  3,341,383 1,333,325 Interest income from Kenya Power relates to interest penalties charged to Kenya Power due to late payments invoices. Interest on late payments accrues after 40 days. * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 157 FINANCIALS Notes to the Financial Statements (continued) 8 Expenses 2018 2017 Restated* Shs’000 Shs’000 (a) )QTPS]IIFIRI½XWI\TIRWIW Salaries, wages and other staff costs   ;IPJEVIERHFIRI½XW 472,778  Training expenses   6IXMVIQIRXFIRI½XGSWX < 4SWXIQTPS]QIRXFIRI½X 2SXIE (47,854) (75,035) < (I½RIHFIRI½XERHGSRXVMFYXMSRWGLIQIW  522,789 < National Social Security Fund    8,158,133 Less: Capitalised costs**  (2,403,385)  5,754,748 **The employee expenses incurred and attributable to implementation of capital projects are capitalised in line with the Company accounting policy disclosed under Note 2. 2018 2017 Numbers Numbers The number of persons employed by the Company at the year-end was - Operational staff 1,750 1,703 - Geothermal resource assessment and other projects staff 758 773 2,508 2,476 Management staff 1,485 1,413 Union Staff 1,023  Total 2,508 2,476 Permanent employees – management 1,248 1,191 Permanent employees – unionisable  712 Contract employees 580 573 Total 2,508 2,476 * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC 158 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 8 Expenses (continued) 2018 2017 Restated* Shs’000 Shs’000 (b) Other Expenses Insurance expenses   3J½GII\TIRWIW 273,884 277,182 Catchment preservation and dam maintenance 107,000 107,000 Transport and travelling costs   Consultants fees 25,097 49,873 Provision for bad debts -  Legal and statutory expenses  122,974 Corporate social responsibility 172,532 73,510 Director's fees and expenses 52,259 75,709 Advertising 45,419  Auditor’s remuneration 8,000 8,000 Other costs 102,790 83,787   (c) Depreciation and amortization Depreciation (Note 12) 10,704,411  Less: amount capitalized**(note 12)   10,013,948  Amortisation - Prepaid leases on leasehold land (Note 13)   Less: amount capitalised (5,537) (5,537)  53,083 - Intangible assets- software (Note 14) 79,875  Total depreciation and amortisation charge for the year  9,244,422 ** The depreciation and amortization relating to leasehold land, drilling rigs and other equipment are capitalised as part of the cost of the wells in accordance with the Company accounting policy disclosed under Note 2. The main project ongoing in the development of Olkaria V power station. * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 159 FINANCIALS Notes to the Financial Statements (continued) 9. Finance cost 2018 2017 Shs’000 Shs’000 Interest on borrowings   Less: capitalised interest*  (1,750,283) 3,037,554 3,417,442 *The interest relating to implementation of projects are capitalised as part of the cost of the projects in accordance with the Company accounting policy disclosed under Note 2. 10. Current income tax expense- Restated* 2018 2017 Restated* (a) Taxation charge Shs’000 Shs’000 Current income tax  235,944 (IJIVVIHXE\GLEVKI 2SXI  2,219,028 3,854,834 2,454,972 Current income tax relates to interest which is taxed as a separate source of income. F  6IGSRGMPMEXMSRSJI\TIGXIHXE\FEWIHSRTVS½XFIJSVI taxation to taxation charge 2018 2017 Shs’000 Shs’000 4VS½XFIJSVIXE\EXMSR   Tax applicable rate of 30%   Tax effect of capital allowances exceeding 100% of cost - (1,320,005) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Ineligible depreciation of property plant and equipment 181,117  Ineligible amortisation of intangibles  15,925 Social responsibility  22,053 Club subscriptions 232 740 Bond amortization 2,118  4VS½XSRVIXMVIQIRXSJ½\IHEWWIXW (285) (4,744) Pension and provident fund 72,848 77,918 0SWWSRVIXMVIQIRXSJ½\IHEWWIXW 7,185 10,732 Total taxation charge 3,854,834 2,454,972 * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC 160 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 10. Current income tax expense- Restated* (continued) (c) Current income tax (recoverable)/ payable 2018 2017 Shs’000 Shs’000 Balance brought forward   Interest taxed as a separate source of income (Note 10(a))  235,944 Paid during the year  (234,149) At end of year   11. Earnings per share &EWMGIEVRMRKWTIVWLEVILEZIFIIRGEPGYPEXIHF]HMZMHMRKXLIRIXTVS½XJSVXLI]IEVF]XLI[IMKLXIHEZIVEKI number of ordinary shares in issue during the year. There were no potentially dilutive shares as at 30 June 2018. 2018 2017 4VS½XEXXVMFYXEFPIXSSVHMREV]WLEVILSPHIVW MR7LW´   Number of ordinary shares in issue at end of year   Basic and diluted earnings per share (Shs) 1.20 1.37 * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 161 12. Property , plant and equipment 162 Furniture, Freehold land Transmission Plant and Motor Equipment Work- in- Total FINANCIALS and buildings lines machinery vehicles DQG¼WWLQJV progress Cost or Valuation Year ended 30 June 2017 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 %X.YP] 42,923,901    3,878,222  335,400,220 Additions 12,819,938 12,819,938 Depreciation capitalised - - - - -   Transfers from WIP  539,599  231,029 439,738  - KENYA ELECTRICITY GENERATING COMPANY PLC Impairment - -   Disposals - -  (25,524) - - (114,889) At 30 June 2017 45,630,426 4,235,855 220,397,954 1,896,429 4,317,960 71,607,788 348,086,412 Depreciation %X.YP] 2,242,387 248,233 7,930,715 1,137,313 2,908,592 -  Charge for year 1,320,037  7,789,321  349,449 -  Disposals - - (10,337) (23,318) - -  INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) At 30 June 2017 3,562,424 433,848 15,709,699 1,279,037 3,258,041 - 24,243,049 Net book value as at 30 42,068,002 3,802,007 204,688,255 617,392 1,059,919 71,607,788 323,843,363 June 2017 Net book value as at 30   134,972,407  1,059,920   June 2017 (Cost basis) 12. Property , plant and equipment (continued) Furniture, Freehold equipment land and Transmission Plant and Motor and Work- in- buildings lines machinery vehicles ¼WWLQJV progress Total Year ended 30 June Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 2018 Cost or Valuation At 1 July 2017  4,235,855 220,397,954     Additions - - - - -   Depreciation capitalised - - - - -   Transfers from WIP 1,292,552  797,707 238,440 257,897  - Transfers to asset held - - (344,053) - - - (344,053) for sale (Note 29) Disposals - -  (23,119) - - (49,207) At 30 June 2018 46,922,978 4,266,801 220,825,520 2,111,750 4,575,857 84,302,121 363,005,027 Depreciation Notes to the Financial Statements (continued) At 1 July 2017  433,848  1,279,037 3,258,041 - 24,243,049 Charge for year 1,335,572 187,230    - 10,704,411 Disposals - - (3,984) (20,909) - - (24,893) At 30 June 2018 4,897,996 621,078 24,318,093 1,463,813 3,621,587 - 34,922,567 Net book value as at 42,024,982 3,645,723 196,507,427 647,937 954,270 84,302,121 328,082,460 30 June 2018 Net book value as at 30 30,934,245  129,898,527  954,271 84,302,121  June 2018 (Cost basis) The work in progress relates to ongoing projects the main project being the Olkaria V power plant project. INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 163 FINANCIALS Notes to the Financial Statements (continued) 12. Property plant and equipment (continued) Plant and machinery was revalued by independent valuer Aon Global Risk, as at 30 June 2015, on a depreciated replacement cost basis which represents the plant and machinery’s highest and best use. The land and buildings were valued by Gimco Limited as at 31 December 2013. The Company’s freehold and leasehold land is located in the following locations: • Olkaria • Turkwel • Mesco • Gitaru • Sosiani • Garissa • Kiambere • Gogo • Lamu • Kamburu • Wanjii • Kipevu • Kindaruma • Tana • ondu Miriu • Masinga • Sagana • Sangoro • Ndula If the freehold land, buildings and plant and machinery were stated on the historical cost basis, the amounts would be as follows: At 30 June 2017 Freehold land Transmission Plant and Total and buildings lines machinery Shs’000 Shs’000 Shs’000 Shs’000 At cost  3,002,834  212,277,551 Accumulated depreciation (11,213,370)      134,972,407  At 30 June 2018 At cost 43,483,187 3,033,780  214,998,805 Accumulated depreciation (12,548,942) (1,854,098) (38,583,311)  30,934,245  129,898,527  Impairment At each reporting date, the Directors review the carrying amount of its property plant and equipment to determine whether there are any indicators of impairment. If any such indication exists, an impairment assessment is performed. Cash generating units (CGUs) are determined as per the power plants based on the power purchase agreements. The recoverable amount of the (CGU) is determined based on value-in-use calculations which require the use of EWWYQTXMSRW8LIGEPGYPEXMSRWYWIGEWL¾S[TVSNIGXMSRWFEWIHSR½RERGMEPFYHKIXWETTVSZIHF]QEREKIQIRXERH power purchase agreements. KENYA ELECTRICITY GENERATING COMPANY PLC 164 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 12. Property plant and equipment (continued) Impairment of the Olkaria I plant In the year ended 30 June 2017, management made an assessment of impairment on the Olkaria 1 Plant. As per the accounting policy, Directors review the carrying amount of its property plant and equipment to determine whether there are any indicators of impairment. 3POEVME[EWEWWIWWIHEWLEZMRKMQTEMVQIRXMRHMGEXSVWHYIXSXLIJSPPS[MRK 1) Evidence of obsolescence or physical damage to an asset - turbine 3 was out of operation for over 1 year 2) Internal reporting indicating the economic performance of an asset is, or will be, worse than expected. The recoverable amount of the Olkaria 1 was determined as at 30 June 2017 based on value-in-use calculations [LMGLVIUYMVIXLIYWISJEWWYQTXMSRW8LIGEPGYPEXMSRWYWIGEWL¾S[TVSNIGXMSRWFEWIHSR½RERGMEPFYHKIXW approved by the management and the signed Power purchase agreements covering the estimated useful life and GSRXVEGXIHTIVMSHSJX[IRX]½ZI]IEVW The following table sets out the key assumptions used by management in the value in use calculations: Assumption: approach used to determine values Pre-tax discount rate &EWIHSRWTIGM½GVMWOWVIPEXMRKXSXLIMRHYWXV]ERHGSYRXV]*EGXSVWGSRWMHIVIH for the industry include majorly the regulatory environment. Long term escalable rate 8LMWMWXLIVEXIYWIHXSI\XVETSPEXIGEWL¾S[WFI]SRHXLIFYHKIXTIVMSH 8LI VEXI MW FEWIH SR XLI PSRKXIVQ MRGVIEWI MR MR¾EXMSR VEXI EW TIV XLI power purchase agreements. Annual capital expenditure Expected cash costs in the CGUs. This is based on the historical experience of management, the planned maintenance of the power plants, or sustaining expenditure. No incremental revenue or cost savings are assumed in the value-in-use model because of this expenditure. Earnings before interest, tax, This is based on past performance and management expectations of future depreciation and amortisation performance. (EBITDA) margin Based on the above assumptions, the carrying amount exceeded the recoverable value of the Olkaria 1 as at 30 .YRIF]LIRGIERMQTEMVQIRX[EWVIGSKRMWIHMRXLIFSSOW For the year ended 30 June 2018 there has been no plants with impairment indicators and hence no impairment has been recognised in the period. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 165 FINANCIALS Notes to the Financial Statements (continued) 13. Leasehold land This relates to leases on land that is under use by the Company countrywide mainly hosting power plants. The leases carry different lease periods and lease amounts, depending on when the land was leased. The land is leased from the Government of Kenya and other Government Agencies under renewable leases.The lease periods range from between 50 years to 99 years. Leases are renewed as they expire. Where leases have expired in the past, all have been renewed without any complications and no renewal complications are expected in the foreseeable future. 2018 2017 Cost Shs’000 Shs’000 At start of year  4,200,947 Additions - 137,730 At end year   Amortisation At start of year 108,894 50,274 Amortisation for the year (Note 8)   At end of year  108,894 Net book value At end of year 4,170,183 4,229,783 8LI'SQTER]´WPIEWILSPHPERH[EWVIZEPYIHSR.YRIF]+MQGS0MQMXIHE½VQSJERMRHITIRHIRXZEPYIVSR the existing market value basis. If the long term leasehold land was stated on the historical cost basis, the amounts would be as follows: 2018 2017 Shs’000 Shs’000 Cost 1,833,475 1,971,205 Accumulated amortisation (100,913) (99,933) Net book value  1,871,272 KENYA ELECTRICITY GENERATING COMPANY PLC 166 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 14. Intangible assets 2018 2017 Shs’000 Shs’000 Cost At start of year 1,595,574 1,388,108 Additions 240,500  At end of year  1,595,574 Amortisation At start of year 278,508  Charge for the year 79,875  358,383 278,508 At end of year   Intangible assets relate to costs incurred towards the installation of software and related operating systems mainly SCADA. Amortisation has been charged on these assets from the time they became available for use. The SCADA was revalued by independent valuer Aon Global Risk, as at 30 June 2015, on the basis of depreciated replacement costs taking into account its expected useful life. If the intangible assets were stated on the historical cost basis, the amounts would be as follows: 2018 2017 Shs’000 Shs’000 Cost 1,405,923 1,594,099 Accumulated depreciation (410,853)  Net book amount 995,070 1,191,481 15. Related parties The Company is 70% owned by the Government of Kenya. The remaining 30% of the shares are widely held by the public. In line with the exemptions by IAS 24, and by virtue that the Company is majority owned by the government, [IHSRSXGSRWMHIVEWVIPEXIHTEVXMIWTVSZMHIVWSJ½RERGIXVEHIYRMSRWTYFPMGYXMPMXMIWERHER]EKIRGMIWHITEVXQIRXW of the government of Kenya, any state corporations or other state or county entities that do not control, jointly GSRXVSPSVWMKRM½GERXP]MR¾YIRGIXLIVITSVXMRKIRXMX] The Company’s main related parties include Government of Kenya - Ministry of Energy, Kenya Power and Lighting Company (Kenya Power) and Geothermal Development Company Limited (GDC). Kenya Power is the authorised electricity distributor in Kenya with its majority shareholder being the Government of Kenya. GDC is wholly owned by the Government of Kenya and its principal activities are the development of geothermal resources in Kenya through surface exploration and drilling for steam and to avail steam power to developers for electricity generation. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 167 FINANCIALS Notes to the Financial Statements (continued) 15. Related parties (continued) (a) Kenya Power and Lighting Company (i) The following amounts due from Kenya Power relate to outstanding balances at year end billed as per the respective PPA’s. It also includes current portion of deferred debt. 2018 2017 Shs’000 Shs’000 Due from Kenya Power and Lighting Company   0IWW4VSZMWMSRJSVMQTEMVQIRXHIFXSR/IR]E4S[IV   Due from Kenya Power and Lighting Company – deferred debt 40,321 40,480 (Note 15 (a (iii)) 21,883,279 15,751,937 The impairment on the Kenya Power receivables was assessed based on the incurred loss model. Individual receivables which were known to be impaired were written off by reducing the carrying amount directly. (ii)The following amounts are due to Kenya Power relate to outstanding balances at year end for sale of electricity. 2018 2017 Shs’000 Shs’000 Trade payables 5,292 1,290 (iii) Deferred debt due from Kenya Power Deferred debt relates to the amounts recoverable from Kenya Power in respect of a loan taken out by the Company for the construction of the Sondu Miriu project implemented by the Company on behalf of Kenya Power and Lighting Company under a management agreement. Japan Bank for International Corporation funded the foreign component of the Sondu Miriu project under the loan agreement between the Japan Bank for International Corporation and the Company. The debt is payable over a period of 30 years commencing 15 August 2014. The effective interest rate in Japanese Yen on the deferred debt during the year was 0.75% (2017: 0.75%). The deferred debt and corresponding loan from Japan Bank for International Corporation are both denominated MR.ETERIWI=IR .4= 8LIEQSYRXSYXWXERHMRKEWEX]IEVIRH[EW.4= .4= 8LI deferred debt due from Kenya Power at end of year is as follows: 2018 2017 Shs’000 Shs’000 Current portion 40,321 40,480 Non-current portion 987,875 1,032,014  1,072,494 KENYA ELECTRICITY GENERATING COMPANY PLC 168 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 15. Related parties (continued) (a) Kenya Power and Lighting Company (continued) (iv) During the year the following transactions were carried out with Kenya Power 2018 2017 Shs’000 Shs’000 Electricity sales   Steam revenue  5,189,072 Fuel charges billed   Water charges billed 159,172  Interest income on amounts due 1,015,183  Realised foreign exchange loss billed-borrowings   Realised foreign exchange loss billed-others   47,921,191  Electricity purchases from Kenya Power 253,225 215,314 The sales to Kenya Power are made in accordance with the signed Power Purchase Agreements whereas the purchases from Kenya Power are made at normal market prices. Outstanding balances at end of year are unsecured and have credit period of 40 days. (b) Geothermal Development Company Limited (GDC) Geothermal Development Company Limited is wholly owned by the Government of Kenya and its principal activities are the development of geothermal resources in Kenya through surface exploration and drilling for steam and to avail steam power to developers for electricity generation. 2018 2017 Shs’000 Shs’000 (i) Amount due to GDC (included in trade payables) 1,845,834  (ii) Steam purchases 3,549,428 2,795,798 (c) Staff advances Amounts due from staff  94,432 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 169 FINANCIALS Notes to the Financial Statements (continued) 15. Related parties (continued) (d) Director and key management compensation 2018 2017 Shs’000 Shs’000 Fees for services as a Director Non-Executive Directors   Other emoluments: 7EPEVMIWERHSXLIVWLSVXXIVQIQTPS]QIRXFIRI½XW Key Management (Divisional Directors) 105,394 108,504 Managing Director & CEO  23,703 Other allowances: Non-Executive Directors   Leave accrual – Managing Director & CEO 757 2,940 Total other emoluments  150,107 Total fees and other emoluments 142,537  (e) $PRXQWGXHIURP5XUDO(OHFWUL¼FDWLRQ$XWKRULW\ 5($  2018 2017 Shs’000 Shs’000 Amounts due from REA 32,321 72,599 The amount due from REA relates to the disposal of Lamu generators after the connection of the area to the National grid. 16. Financial asset at fair value 8LI½RERGMEPEWWIXXLVSYKLTVS½XSVPSWWVIPEXIWXSYRVIEPMWIHI\GLERKIHMJJIVIRGIWSRJSVIMKRHIRSQMREXIH borrowings recoverable from Kenya Power under the respective Power Purchase Agreements (“PPAs”) with Kenya 4S[IV8LIHIVMZEXMZI½RERGMEPMRWXVYQIRXMWIRXIVIHMRXSXSQEREKIJSVIMKRI\GLERKIFSVVS[MRKWI\TSWYVIW8LI PPA provide that the amounts should be billed to Kenya Power as the related borrowings are repaid. This allows XLI'SQTER]XSFMPPERHVIGSZIVEPPVIEPMWIHJSVIMKRGYVVIRG]¾YGXYEXMSRWVIPEXMZIXSXLIFEWIVEXIWEPPS[IHF]XLI 44%8LIEQSYRXMRXLIWXEXIQIRXSJ½RERGMEPTSWMXMSRVIPEXIWXSJEMVZEPYISJXLI½RERGMEPEWWIX KENYA ELECTRICITY GENERATING COMPANY PLC 170 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 16. Financial asset at fair value (continued) 8LIQSZIQIRXMRXLI½RERGMEPEWWIXHYVMRKXLI]IEVMWEWJSPPS[W 2018 2017 Shs’000 Shs’000 At start of the year 14,005,833 14,588,582 Realised foreign exchange loss billed - borrowings (Note 15 (a) (iv))   *EMVZEPYIPSWWSRVIZEPYEXMSRSJXLI½RERGMEPEWWIXEXJEMVZEPYIXLVSYKL  (50,543) TVS½XSVPSWW At end of the year  14,005,833 Less: current portion recoverable within one year  (888,457) 10,490,414  17. Treasury bonds 2018 2017 Shs’000 Shs’000 Available-for-sale treasury bonds carried at fair value   Held-to-maturity treasury bonds carried at amortised cost 2,407,047 2,414,108  2,758,711 Maturity analysis of treasury bonds - Within one year(current)   %JXIV½ZI]IEVW PSRKXIVQ 2,407,047 2,414,108  2,758,711 Weighted average interest rate 11.25% 11.25% KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 171 FINANCIALS Notes to the Financial Statements (continued) 17. Treasury bonds (continued) Movement in treasury bonds Available-for-sale Held-to-maturity Total Shs’000 Shs’000 Shs’000 30 June 2018 At start of year  2,414,108 2,758,711 Fair value gain 5,087 - 5,087 Amortization -     At end of year  2,407,047  30 June 2017 At start of year 322,031  2,742,591 Fair value gain 22,572 - 22,572 Amortization -    At end of year  2,414,108 2,758,711 18. Inventory 2018 2017 Shs’000 Shs’000 Inventory   Provision for impairment (529,517) (532,212) 1,149,180 1,082,044 -RZIRXSV]MXIQWGSRWMWXSJXLIJSPPS[MRK Fuel and lubricants   General stores  152,400 Machinery consumable spares 1,030,742 1,005,582   The cost of inventories recognised as an expense and included in operating costs are: machinery consumable WTEVIWEQSYRXMRKXS7LW 7LW ERHJYIPGSRWYQIHEQSYRXMRKXS7LW 7LW 4VSZMWMSRJSVMRZIRXSV]MWVIGSKRMWIHSRMXIQWXLEXEVISFWSPIXI KENYA ELECTRICITY GENERATING COMPANY PLC 172 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 19. Other receivables and prepayments 2018 2017 Shs’000 Shs’000 Other receivables   0IWW4VSZMWMSRJSVMQTEMVQIRXPSWWIWSRSXLIVVIGIMZEFPIW   Prepayments* 2,343,730  Staff receivables  94,432 3,359,793 3,741,225 As shown below there has been no movement in the provisions in other receivables 2018 2017 Shs’000 Shs’000 At the beginning of the year  245,707 Additional provisions in the year -  At the end of the year   In the prior year, the impairment of other receivables was assessed based on the incurred loss model. Individual receivables which were known to be impaired were written off by reducing the carrying amount directly. *Included in prepayments is an amount of Shs 2,141,000,000 (2017: Shs 2, 337,000,000 relating to advances to Contractors for Olkaria V project and other ongoing projects. 20. Cash and bank balances 2018 2017 Shs’000 Shs’000 Cash at Bank 3,379,102  Cash at hand 4,300 4,340 Short term deposits - 3,000,000 3,383,402 7,831,103 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 173 FINANCIALS Notes to the Financial Statements (continued) 21. Ordinary share capital and share premium Number of shares Ordinary shares Share premium Ordinary share capital and share premium (Thousands) Shs’000 Shs’000 Authorised %X.YP].YRIERH.YRI 10,000,000 25,000,000 - 2018 Issued %X.YP]    Rights issue   1,094,790 At 30 June 2017 and 30 June 2018 6,594,522 16,487,710 22,151,131 The total authorised number of ordinary shares is 10,000,000,000 with a par value of Shs 2.50 per share. All MWWYIHWLEVIWEVIJYPP]TEMH 3R1EVGLEHHMXMSREPWLEVIW[IVIMWWYIHEX7LWTIVSVHMREV]WLEVI under a rights issue. Dividends 8LIHMVIGXSVWTVSTSWITE]QIRXSJE½VWXERH½REPHMZMHIRHSJ7LWTIVWLEVIEQSYRXMRKXS 7LW RMP KENYA ELECTRICITY GENERATING COMPANY PLC 174 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 22. Other reserves- Restated* Investments Property Capital revaluation revaluation Actuarial reserve reserve reserve gains/(losses) Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 %WEX.YP]%WTVIZMSYWP]VITSVXIH 8,579,722     Restatement* - - -   As restated 8,579,722    77,248,387 Other comprehensive income for the year -revaluation of available for sale bonds - 22,572 - - 22,572 VIQIEWYVIQIRXSJHI½RIHFIRI½X - - -   -deferred tax on re-measurement - - - 23,587 23,587 - Total comprehensive income for the year - 22,572 -    Transfer of excess depreciation - - (3,045,117) - (3,045,117) Impairment  -  Deferred tax on impairment 212,587 - 212,587 Notes to the Financial Statements (continued) Deferred tax on excess depreciation - - 913,535 - 913,535 At 30 June 2017 8,579,722    712,873 74,588,305 *Refer to note 37 for details INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 175 22. Other reserves- Restated* (continued) 176 Investments Property Capital revaluation revaluation Actuarial FINANCIALS reserve reserve reserve gains/(losses) Total Shs’000 Shs’000 Shs’000 Shs’000 Shs’000 At 1 July 2017 - As previously reported 8,579,722   923,745 74,799,177 Restatement* - - - (210,872) (210,872) As restated 8,579,722    712,873 74,588,305 3XLIVGSQTVILIRWMZIMRGSQIJSVXLI]IEV -revaluation of available for sale bonds - 5,087 - - 5,087 KENYA ELECTRICITY GENERATING COMPANY PLC VIQIEWYVIQIRXSJHI½RIHFIRI½X - - - (897,155) (897,155) -deferred tax on re-measurement - - -   Total comprehensive income for the year - 5,087 -   Transfer of excess depreciation - - (3,084,843) - (3,084,843) Deferred tax on excess depreciation - - 925,453 - 925,453 At 30 June 2018 8,579,722    71,805,994 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) *Refer to note 37 for details Notes to the Financial Statements (continued) 22. Other reserves (continued) (a) 8LIGETMXEPVIWIVZIVIPEXIWXSHIZIPSTQIRXWYVGLEVKIVIGIMZIHJVSQ/IR]E4S[IVJSV½RERGMRKXLIHIZIPSTQIRX of certain power projects for the period on or before 1997. The reserve is not distributable to shareholders. (b) The investments revaluation reserve represents the cumulative gains and losses arising on the revaluation of EZEMPEFPIJSVWEPI½RERGMEPEWWIXWXLEXLEZIFIIRVIGSKRMWIHMRSXLIVGSQTVILIRWMZIMRGSQIRIXSJEQSYRXW VIGPEWWM½IHXSTVS½XSVPSWW[LIRXLSWIEWWIXWLEZIFIIRHMWTSWIHSJ8LIVIWIVZIMWRSXHMWXVMFYXEFPIXS shareholders. (c) The property, plant and equipment revaluation reserve arises on the revaluation of plant and machinery. When revalued property, plant and equipment are disposed, the portion of the plant and machinery revaluation reserve that relates to that asset is transferred directly to retained earnings. The reserve is not distributable to shareholders. (d) %GXYEVMEPVIWIVZIWVITVIWIRXWXLIEGGYQYPEXIHVIQIEWYVIQIRXWEVMWMRKJVSQXLIVIXMVIQIRXFIRI½XWGLIQI recognised through other comprehensive income as disclosed under Note 25. The reserve is not distributable to shareholders. 23. Borrowings (a) Analysis of interest bearing borrowings: Maturity 2018 2017 Year Shs’000 Shs’000 Government of Kenya Guaranteed  .ETER&EROJSV-RXIVREXMSREP'SSTIVEXMSR/)4/MTIZY 2025 2,728,278  (JPY 2,977,212,000) 2.3% Japan Bank for International Cooperation KE P21 –Sondu Miriu 2027 2,789,249  .4= 0.75% Japan Bank for International Cooperation KE P23-Sondu Miriu 2044 8,244,532 8,593,489 .4= 0.75% Japan Bank for International Cooperation KE P24-Sangoro 2047   ( JPY 4,105,588,000)  .ETER-RXIVREXMSREP'SSTIVEXMSR%KIRG]/)43POEVME- -: 2040 17,871,410 17,928,735 .4= 2.09% Kreditanstalt Fur Wiederaufbau (KfW)-Kindaruma 2024 2,741,470  (Euro 23,459,999.90) 2.2% Kreditanstalt Fur Wiederaufbau (KfW)-Olkaria I & IV   4,874,958 )YVS KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 177 FINANCIALS Notes to the Financial Statements (continued) 23. Borrowings (continued) (a) Analysis of interest bearing borrowings (continued) Maturity 2018 2017 Year Shs’000 Shs’000 On lent 3.5% International Development Association IDA 4743 KE-Olkaria I & IV 2035   97( 2.003% Agence Francaise de Development (AFD) - Olkaria I & IV (EURO 2031 9,147,114   3.884% European Investment Bank-Olkaria I & IV (Euro 5,374,808.93) 2037   2.50% Export-Import Bank of China (EXIM) – 89 wells(USD382,499,999.98) 2033    7TERMWLPSER2KSRK4LEWI--1; )YVS 2030    /&'2KSRK-4LEWI1; )YVS 2020 48,099 73,047  2EXMSREP&EROSJ&IPKMYQ 2&& 2KSRK4LEWI1; )YVS 2043 710,258 719,093  3.5% International Development Association IDA 5844-KE Olkaria I& IV (USD 2041 5,325,724  52,703,852.24) 0.20% Japan International Cooperation Agency Loan (KE-P31) Olkaria V (JPY    4,758,273,374) On lent facilities are entered into by the Government of Kenya with Development Finance Institutions (DFIs) and subsequently cascaded down to the Company through subsidiary loan agreements. Maturity 2018 2017 Year Shs’000 Shs’000 Direct borrowings  %KIRGI*VERGEMWIHI(IZIPSTTIQIRX %*( 3POEVME--9RMX )YVS 2024  1,380,293 10,000,000) 5.1% HSBC Bank Loan-Rigs (USD 20,274,519.72) 2024 2,048,740  12.5% Public Infrastructure Bond –Various projects(Shs) 2019   Standard Chartered Bank loan-Olkaria II Unit 3 (USD 19,459,445.45) 2021   CBA Term loan - Wellheads 75MW (USD 93,208,398.73) 2027 9,418,709 10,371,170 Cooperative Bank Term Loan (Shs) 2022  5,833,333 130,740,958  Accrued interest    138,714,088 Total borrowings  138,714,088 Less: Amounts due within 12 months  (10,829,802) Non-current borrowings   KENYA ELECTRICITY GENERATING COMPANY PLC 178 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 23. Borrowings (continued) 2018 2017 Shs’000 Shs’000 (b) Borrowings maturity analysis: Due within 1 year  10,829,802 Due between 1 and 2 years 11,094,032 11,573,732 Due between 2 and 5 years 23,947,980  Due after 5 years    138,714,088 (c) Analysis of loans by currency: Borrowings in US$   Borrowings in JPY  38,287,082 Borrowings in EUR 21,027,558  Borrowings in Shs 10,521,577  Total  138,714,088 (d) The movement in borrowings is as follows: At start of year   Received in the year  11,848,974 Repaid in the year  (8,972,147) Realised exchange gains  (491,581) Unrealised exchange gains in the year (1,848,041)  130,740,958  Add: accrued interest   At end of year  138,714,088 Securities: The Government of Kenya has issued guarantees to the lenders in relation to the guaranteed and the on-lent borrowings. The securities held for the Agence Francaise de Developpement borrowings are E½\IHGLEVKISZIVEPPVMKLXW XMXPI and interest of the Company in and to (a) all the land, (b) all the real property including power plant buildings and WXVYGXYVIEXXLI3POEVME--KISXLIVQEPTS[IVTPERXE½\IHGLEVKISZIVXLITPERXQEGLMRIV]ERHSXLIVMRJVEWXVYGXYVI EXXLI3POEVME--KISXLIVQEPTS[IVTPERXERHEREWWMKRQIRXSJXLIFIRI½XWSJTVSGIIHWSJMRWYVERGIMRGSRRIGXMSR with the project. The Public Infrastructure Bond is unsecured. Other direct borrowings are secured by a letter of negative pledge from the Company. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 179 FINANCIALS Notes to the Financial Statements (continued) 23. Borrowings (continued) I  ;SVPH&ERO½RERGMRKGVIHMXPMRI (a) Designated Account B  8LI'SQTER]VIGIMZIH½RERGMEPWYTTSVXJVSQXLI;SVPH&ERO'VIHMX2S HEXIH3GXSFIV ERHEHHMXMSREPGVIHMX2S/)HEXIH7ITXIQFIVXSWYTTSVXMQTPIQIRXEXMSRSJTVSNIGXWYRHIV Part A of the Kenya Electricity Expansion Project (KEEP), namely Geothermal Generation. A portion of this is disbursed directly into a US Dollar denominated Designated Account B operated by the Company and summary information on transactions during the year is as follows: 2018 2017 Shs’000 Shs’000 Balance at the beginning of the year - 302,215 Amounts received during the year -  Amount to be transferred to WB 31,917 - Net interest expense - (230) Transfers to project account - (2,981,795) Balance at the end of the year 31,917 - The total amounts advanced are included in borrowings. The cash balance above is included in cash and cash equivalents. The funds are held in a World Bank funded designated Account No.  held at Equity Bank Limited. b) Project account 2018 2017 Shs’000 Shs’000 Balance at the beginning of the year 1,155,488 507,815 Amounts received during the year - 2,981,795 Amounts transferred to Kenya Power  - Amounts transferred to designated account 5844E (31,917) - Net interest income/expense 29,252 27,580 Payments to contractors   Balance at the end of the year 157,401 1,155,488 The closing balance shown above is included in cash and cash equivalents and represent balances SYXWXERHMRKSRXLI;SVPH&EROJYRHIHTVSNIGX%GGSYRX2SLIPHEXXLI'SQQIVGMEP&EROSJ Africa. KENYA ELECTRICITY GENERATING COMPANY PLC 180 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 24. Lease commitments As lessee The future rental payments under operating leases are as shown below: 2018 2017 Shs’000 Shs’000 Within 1 year   After 1 year but not later than 5 years 320,324    The Company has entered into commercial leases on premises. These leases have an average life of between three ERH½ZI]IEVW  5HWLUHPHQWEHQH¼WV®5HVWDWHG 8LI'SQTER]STIVEXIHENSMRXHI½RIHFIRI½XWGLIQI[MXL/IR]E4S[IV [LMGL[EWJYRHIHF]GSRXVMFYXMSRWJVSQ both the Company and employees up to 31 December 1999. 8LI 'SQTER] VIKMWXIVIH MXW S[R HI½RIH FIRI½XW WGLIQI MR  ERH GSQQIRGIH QEOMRK GSRXVMFYXMSRW XS XLI scheme, alongside employees’ contributions, with effect from 1 January 2000. The scheme is administered by Zamara Limited while British-American Asset Managers and Co-op trust Investment Services Ltd act as Investment Managers for the Scheme. 9RHIVXLITPERXLIIQTPS]IIWEVIIRXMXPIHXSVIXMVIQIRXFIRI½XWSJ SJ½REPTIRWMSREFPIIQSPYQIRXWJSVTIRWMSREFPI WIVZMGIYTXS.ERYEV]ERH SJ½REPTIRWMSREFPIIQSPYQIRXWJSVTIRWMSREFPIWIVZMGIEJXIV.ERYEV] SREXXEMRQIRXSJEVIXMVIQIRXEKISJ]IEVW2SSXLIVTSWXVIXMVIQIRXFIRI½XWEVITVSZMHIHXSXLIWIIQTPS]IIW 8LI /IR+IR 7XEJJ 6IXMVIQIRX &IRI½XW 7GLIQI (& 7GLIQI  MW IWXEFPMWLIH YRHIV XVYWX ERH [EW GPSWIH XS RI[ IRXVERXWERHXSJYXYVIEGGVYEPSJFIRI½XW[MXLIJJIGXJVSQ(IGIQFIVMRVIWTIGXSJQIQFIVWEKIHFIPS[ ]IEVW%RI[(I½RIH'SRXVMFYXMSR7GLIQIXLI/IR+IR(I½RIH'SRXVMFYXMSR ('7GLIQI [EWIWXEFPMWLIH effective 1 January 2012, for all new eligible employees. All active in service members aged 45 years and over as at (IGIQFIVLEHERSTXMSRXSIMXLIVVIQEMRMRXLI(&WGLIQIJSVJYXYVIFIRI½XEGGVYEPSVNSMRXLIRI[(' WGLIQI 7SQIQIQFIVWLEZISTXIHXSNSMRXLIRI[('WGLIQIJSVJYXYVIFIRI½XEGGVYEP[LMPISXLIVWSTXIHXS remain in the DB scheme. The DC scheme is administered by Zamara Limited while Stanlib Ltd and Old Mutual act as Investment Managers for the Scheme. The Company therefore only makes contributions to the DB scheme in respect SJXLSWIQIQFIVW[LSSTXIHXSVIQEMRMRXLI(&WGLIQI(&WGLIQIQIQFIVGSRXVMFYXMSRWEVIE½\IHTIVGIRXEKI of their basic pay with the Company responsible for the balance of the contributions. * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 181 FINANCIALS Notes to the Financial Statements (continued)  5HWLUHPHQWEHQH¼WV5HVWDWHG  FRQWLQXHG %ZEPYEXMSRSJTPEREWWIXWERHXLITVIWIRXZEPYISJXLIHI½RIHFIRI½XSFPMKEXMSR[IVIGEVVMIHSYXF]>EQEVE0MQMXIH JSVWXEXYXSV]TYVTSWIW%REGXYEVMEPZEPYEXMSRXSJYP½PPXLI½RERGMEPVITSVXMRKERHHMWGPSWYVIVIUYMVIQIRXWSJ-%7[EW EPWSGEVVMIHSYXEWEX.YRI3RXLMWFEWMWXLITVIWIRXZEPYISJXLIHI½RIHFIRI½XSFPMKEXMSRERHXLIVIPEXIH current service cost and past service cost, were measured using the Projected Unit Credit Method. The principal assumptions used for the purposes of the actuarial valuations were as follows: 2018 2017 Discount rate(s) 1 13.30% 13.90% Future salary increases 8% 8% Future pension increases 0% 0% Mortality (pre-retirement) A 1949-1952 A 1949-1952 At rates consistent At rates consistent Withdrawals with similar with similar arrangements arrangements At rates consistent At rates consistent Ill health with similar with similar arrangements arrangements Retirement age ]IEVW ]IEVW 1 The discount rate is determined by using a government bond of the same currency and estimated time period as XLIIQTPS]QIRXFIRI½XSFPMKEXMSR * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC 182 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued)  5HWLUHPHQWEHQH¼WV5HVWDWHG  FRQWLQXHG Recognition 8LI EQSYRX VIGSKRM^IH MR XLI WXEXIQIRX SJ TVS½X SV PSWW ERH SXLIV GSQTVILIRWMZI MRGSQI ERH WXEXIQIRX SJ ½RERGMEPTSWMXMSRMRVIWTIGXSJXLIWIHI½RIHFIRI½XTPEREVIEWWLS[RFIPS[ E %QSYRXVIGSKRMWIHMRXLIWXEXIQIRXSJTVS½XSVPSWWERHSXLIVGSQTVILIRWMZI-RGSQI  8LIEQSYRXVIGSKRM^IHMRXLIWXEXIQIRXSJTVS½XSVPSWWERHSXLIVGSQTVILIRWMZIMRGSQIMRVIWTIGXSJXLIWI HI½RIHFIRI½XTPEREVIEWJSPPS[W 2018 2017 Shs’000 Shs’000 M 7XEXIQIRXSJTVS½XSVPSWW Service Cost: Current service cost (employer) (105,437)  Interest income/(cost): -RXIVIWXGSWXSRHI½RIHFIRI½XSFPMKEXMSR (811,011) (749,483) Interest income on plan assets 1,029,210  Interest income on the effect of the asset ceiling  - Net interest income as previously stated -  Restatement* - Interest effect of the asset ceiling -  As restated 153,291 153,900 8SXEPMRGPYHIHMRTVS½XSV PSWW MRVIWTIGXSJWGLIQI 47,854 75,035 (ii) Other comprehensive income (OCI) %GXYEVMEPPSWWHYIXSGLERKIMR½RERGMEPEWWYQTXMSRW   Return on plan assets  (8,013) Change in effect of asset ceiling  - (excluding amount in interest cost) As previously stated - (194,828) Restatement*- Change in effect of asset ceiling -  As restated Amount recognized in OCI (897,155)  *Refer to Note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 183 FINANCIALS Notes to the Financial Statements (continued)  5HWLUHPHQWEHQH¼WV5HVWDWHG  FRQWLQXHG F %QSYRXVIGSKRMWIHMRXLIWXEXIQIRXSJ½RERGMEPTSWMXMSR 8LIEQSYRXMRGPYHIHMRXLIWXEXIQIRXSJ½RERGMEPTSWMXMSREVMWMRKJVSQXLIIRXMX] WSFPMKEXMSRMRVIWTIGXSJMXW HI½RIHFIRI½XTPERWMWEWJSPPS[W Restated* 2018 2017 Shs’000 Shs’000 4VIWIRXZEPYISJJYRHIHHI½RIHFIRI½XSFPMKEXMSR   Fair value of plan assets   Effect of asset ceiling  - %WTVIZMSYWP]WXEXIH4VIWIRXZEPYISJYRJYRHIHHI½RIHFIRI½XEWWIX -  Restatement* - Effect of asset ceiling -  Restated   The reconciliation of the effect of asset ceiling is as follows: Effect of asset ceiling  (510,450) Interest effect of the asset ceiling   Change in the effect of the asset ceiling (OCI)   Effect of asset ceiling at end of the period   8LIVIGSRGMPMEXMSRSJXLIEQSYRXMRGPYHIHMRXLIWXEXIQIRXSJ½RERGMEPTSWMXMSRMWEWJSPPS[W 2018 2017 Shs’000 Shs’000 Net asset at the start of the period - restated   Net expense recognized in the income statement 47,854 147,771 Employer contributions  41,320 Amount recognized in other comprehensive income (897,155) (194,828) As previously stated -  Restatement* -  Restated   *Refer to Note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC 184 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued)  5HWLUHPHQWEHQH¼WV5HVWDWHG  FRQWLQXHG F %QSYRXVIGSKRMWIHMRXLIWXEXIQIRXSJ½RERGMEPTSWMXMSR GSRXMRYIH 1SZIQIRXWMRXLITVIWIRXZEPYISJXLIHI½RIHFIRI½XSFPMKEXMSRMRXLIGYVVIRX]IEV[IVIEWJSPPS[W 2018 2017 Shs’000 Shs’000 3TIRMRKFIRI½XSFPMKEXMSR   Current service cost (105,437)  Interest cost (811,011) (749,483) Employee contributions (19,033)  %GXYEVMEPPSWWHYIXSGLERKIMR½RERGMEPEWWYQTXMSRW   Actuarial loss on Experience -  &IRI½XWTEMH   'PSWMRKHI½RIHFIRI½XSFPMKEXMSR   Movements in the present value of the plan assets in the current year were as follows: 2018 2017 Shs’000 Shs’000 Opening market value of assets  7,047,843 Interest income on plan assets 1,029,210  Employer contributions  41,320 Employee contributions 19,033  Return on plan assets  (8,013) &IRI½XWTEMH   Closing fair value of plan assets   * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 185 FINANCIALS Notes to the Financial Statements (continued)  5HWLUHPHQWEHQH¼WV5HVWDWHG  FRQWLQXHG F %QSYRXVIGSKRMWIHMRXLIWXEXIQIRXSJ½RERGMEPTSWMXMSR GSRXMRYIH The fair values of the plan assets at the end of the reporting period for each category are as follows: 2018 2017 Shs’000 Shs’000 Property investments 4,813,470  Quoted equity instruments 795,452  Offshore investments -  Government securities   Commercial paper and corporate bonds  292,494 Cash & short term deposits  200,223 Total scheme assets   (c) Sensitivity analysis 8LIWIRWMXMZMX]SJXLIHI½RIHFIRI½XSFPMKEXMSRXSGLERKIWMRXLITVMRGMTEPEWWYQTXMSRWMW Change in 2018 ,PSDFWRQGH¼QHGEHQH¼WREOLJDWLRQ assumption Increase in the present value of obligation by Shs Discount rate 13.30% Decrease 1% 507,300,000 Reduction in the present value of obligation by Shs Salary 8% Decrease 1%  Increase in the present value of obligation by Shs Retirement age  Reduction 5yrs 999,053,000 Increase in the present value of obligation by Shs Age Rating* N/A Reduction 5% 201,453,000 *Assuming the membership was 5 years younger The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated. When calculating the WIRWMXMZMX]SJXLIHI½RIHFIRI½XSFPMKEXMSRXSWMKRM½GERXEGXYEVMEPEWWYQTXMSRWXLIWEQIQIXLSH TVIWIRXZEPYISJ XLIHI½RIHFIRI½XSFPMKEXMSRGEPGYPEXIH[MXLXLITVSNIGXIHYRMXGVIHMXQIXLSHEXXLIIRHSJXLIVITSVXMRKTIVMSH  LEWFIIRETTPMIHEW[LIRGEPGYPEXMRKXLIHI½RIHFIRI½XEWWIXVIGSKRMWIHMRXLIFEPERGIWLIIX The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period. * Refer to note 37 for details KENYA ELECTRICITY GENERATING COMPANY PLC 186 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 26. Deferred income tax – Restated* Deferred income taxes are calculated on all temporary differences under the liability method using the applicable rate, currently at 30%. The makeup of the deferred tax liabilities in the year and the movement on the deferred tax account during the year are presented below: Charged / Charged / 2016 (Credited) to P/L (Credited) to OCI 2017 Year ended 30 June 2017 Shs’000 Shs’000 Shs’000 Shs’000 Deferred tax assets: Tax losses   -  Provisions and other temporary differences  (82,497) -   383,425 -  Deferred tax liabilities: Unrealized exchange gains and losses   - (28,011) (I½RIHFIRI½X < As previously stated   (58,448)  < Restatement* (153,129) (21,821)  (140,089) < As restated  247,494 (23,587) 553,538 Notes to the Financial Statements (continued) Revaluation surplus property plant and equipment 29,143,721  (212,588) 27,805,011 Accelerated capital allowances 31,832,938 2,818,797 -      Net deferred tax liability 40,073,729 2,219,028   *Refer to Note 37 for details INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 187 188 26. Deferred income tax – Restated* (continued) Charged / Charged / FINANCIALS 2017 (Credited) to P/L (Credited) to OCI 2018 Year ended 30 June 2018 Shs’000 Shs’000 Shs’000 Shs’000 Deferred tax assets: Tax losses  5,048,032 -  Provisions and other temporary differences      - (507,050)  4,779,950 -  Deferred tax liabilities: KENYA ELECTRICITY GENERATING COMPANY PLC Unrealized exchange gain (28,011)  - 57,852 (I½RIHFIRI½X¯VIWXEXIH 340,950 25,777  97,580 Revaluation surplus 28,017,599 (925,453)  Accelerated capital allowances   - 34,394,199  (1,071,349)   INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) Net deferred tax liability     * Refer to note 37 for details Notes to the Financial Statements (continued) 27. Trade and other payables 2018 2017 Shs’000 Shs’000 Trade payables 3,815,172  Due to Kenya Power (note 15 (a)(ii)) 5,292 1,290 Contract and Retention money 2,104,244 4,197,999 Sundry Creditors accruals 3,545,249 2,474,902 Other accrued expenses  189,782 Total trade and other payables 9,513,953  Non-current trade and other payables   Current trade and other payables   * Contract and retention money relate to payments due to contractors for the ongoing construction of long-term EWWIXW8LI]EVI½RERGIHF]XLI(IZIPSTQIRX*MRERGI-RWXMXYXMSRW (*-W ERHMRGPYHIMRZSMGIWXLEX[IVIYRHIV ZIVM½GEXMSREXXLIVITSVXMRKHEXIW 28. Compensating tax 2018 2017 Shs’000 Shs’000 As at 1 July 2,431,022 2,431,022 Paid during the year (100,000) - At end of year 2,331,022 2,431,022 The provision relates to amounts payable in relation to Compensating tax on dividends. The amounts were EWWIWWIHMRXLI'SQTER]JSPPS[MRKXLITE]QIRXSJHMZMHIRHWMR8LI'SQTER]LEWWMKRM½GERXXE\PSWWIW EVMWMRKJVSQMRZIWXQIRXHIHYGXMSRWKVERXIHSRMXWTVSNIGXWERHXLIVIJSVIMRWYJ½GMIRXGYVVIRXXE\GVIHMXWXSGSZIV for the dividend tax account. (YVMRKXLI½RERGMEP]IEVXLI'SQTER]TEMH/WLW8LITE]QIRXXIVQWJSVXLIFEPERGISJXLI principal amounts outstanding are being discussed with the relevant authorities. 29. Non – current assets held for sale 2018 2017 Shs’000 Shs’000 Non – current assets held for sale held for sale 344,053 - 8LIEWWIXWLIPHJSVWEPIMRGPYHITPERXEWWIXWLIPHEXXLI+EVMWWETPERX8LI'SQTER]MRHIGSQQMWWMSRIHXLI Garissa power station after the region was connected to the National Electricity Grid. The Company has initiated a TPERXSHMWTSWISJXLIEWWIXWXSEXLMVHTEVX]ERHXLIWEPII\TIGXIH[MXLMRXLI½RERGMEP]IEV KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 189 FINANCIALS Notes to the Financial Statements (continued)  1RWHVWRWKHVWDWHPHQWRIFDVK½RZV E 6IGSRGMPMEXMSRSJSTIVEXMRKTVS½XXSGEWLKIRIVEXIHJVSQSTIVEXMSRW 2018 2017 Shs’000 Shs’000 4VS½XFIJSVIXE\EXMSR   Adjustments for: Depreciation (Note 8 (c )) 10,013,948  Prepaid lease expense (Note 8 (c ))  53,083 Amortisation of intangible assets (Note 8 (c )) 79,875  Finance income (Note 7) (3,341,383) (1,333,325) Finance cost (Note 9) 3,037,554 3,417,442 Net exchange differences on borrowings and cash  89,057 Gain on disposal of assets (Note 5) (951) (15,814) Unrealised foreign exchange loss/repayment related to amount due from Kenya Power -deferred debt  281,119 Net loss on de-recognition of treasury bonds (Note 17 ) 5,087 22,572 %QSVXMWEXMSRSJLIPHXSQEXYVMX]XVIEWYV]FSRHW 2SXI   'LERKIWMRXLIVIXMVIQIRXFIRI½XEWWIX (85,920)  3TIVEXMRKTVS½XFIJSVI[SVOMRKGETMXEPGLERKIW 23,299,115  Changes in working capital: Increase in inventories (note 18)   Increase in trade receivables (note 15 )   (IGVIEWI MRGVIEWI MR½RERGMEPEWWIX RSXI 72,775 (190,228) Decrease in other receivables (note 19) 381,432 184,501 Decrease in trade and other payables (note 27)  (4,252,041) Cash generated from operations  12,491,879 F 1SZIQIRXMR½RERGIMRGSQI At start of year 27,089 40,775 Interest income 1,493,342 1,242,157 Finance income received (491,039) (943,082) Accrued interest from Kenya Power (1,015,183)  At end of year 14,209 27,089 (c) Movement in interest payable At start of year  1,754,325 Interest expense 3,037,554 3,417,442 Interest paid  (3,903,443) At end of year (Note 23(a))   KENYA ELECTRICITY GENERATING COMPANY PLC 190 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued)  1RWHVWRWKHVWDWHPHQWRIFDVK½RZV (d) Net debt reconciliation This section sets out an analysis of net debt and the movements in net debt for each of the periods presented. 2018 2017 Shs’000 Shs’000 Cash and cash equivalents 3,383,402 7,831,103 Borrowings repayable within one year  (10,829,802) Borrowings repayable after one year   Net Debt  (130,882,985) Cash and cash Borrowings Net Debt equivalents Shs’000 Shs’000 Shs’000 Net debt as 1 July 2016      'EWL¾S[W  -  Received in the year - (11,848,974) (11,848,974) Repaid in the year - 8,972,147 8,972,147 Realised exchange loss - 491,581 491,581 Unrealised exchange gain in the year 2,111  93,279 Accrued interest     Net Debt as at 30 June 2017 7,831,103 138,714,088 (130,882,985) Net debt as 1 July 2017 7,831,103    'EWL¾S[W  -   Received in the year -    Repaid in the year -   Realised exchange loss -   Unrealised exchange loss in the year  1,848,041  Accrued interest -    Net Debt as at 30 June 2018 3,383,402 (131,908,369) (128,524,967) KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 191 FINANCIALS Notes to the Financial Statements (continued) 31. Emergency Power Project The Company manages an Emergency Power Supply project known as Aggreko International Projects as an implementing commissioning agent on behalf of the Ministry of Energy. These funds are held in an escrow bank account at the Commercial Bank of Africa. Movements in the escrow account which is not included in the 'SQTER]´WGEWLERHGEWLIUYMZEPIRXWEVIWYQQEVMWIHFIPS[ 2018 2017 Shs’000 Shs’000 At start of year  508,083 Receipts from sale of electricity - 25,002 Interest income 2,544 4,385 KenGen Management fees - (2,281) Expenditure during the year  (9,589) At end of year 514,738  32. Contingent liabilities I. Letters of credit Letters of credit signify commitment by the Company to make payments to third parties for contracts entered into, generally relating to foreign payments. Outstanding letters of credit as at 30 June 2018 amounted to Shs 1,447,775,000 (30 June 2017 Shs: 280,727,000) II. Disputed withholding tax -R/IR]E6IZIRYI%YXLSVMX] /6% TIVJSVQIHEXE\EYHMXJSVXLI½RERGMEP]IEVW7YFWIUYIRXP] /6%MWWYIHEREWWIWWQIRXSJ7LW8LI'SQTER]SFNIGXIHXSXLIEWWIWWQIRXERH/6%MWWYIHEWXERH over notice pending resolution of matter in dispute. The Company applied for the abandonment of collection of the withholding tax from The National Treasury and Planning. The Company is likely to get the waiver from The 2EXMSREP8VIEWYV]ERH4PERRMRKEWXLITVSGIWWSJKVERXMRKXLI[EMZIVMWMR½REPWXEKIW[MXL/6%GYVVIRXP]TVITEVMRK XLIMVVIGSQQIRHEXMSRSJXLIWEQI-RXLISTMRMSRSJXLIHMVIGXSVWRSTVSZMWMSRMWVIUYMVIHMRXLI½RERGMEP statements as the liability is not expected to crystallize. III. Compensating tax -RXLI'SQTER]TEMHSYXWXERHMRKHMZMHIRHWSJ7LWXSXLIQENSVWLEVILSPHIV8LI2EXMSREP Treasury and Planning, giving rise to a compensating tax obligation of Shs 2,431,022,000. As disclosed in Note 28, RSTVSZMWMSRLEWFIIRQEHI[MXLVIKEVHWXSTIREPX]ERHMRXIVIWXIWXMQEXIHXSFI7LWEX.YRI .YRI7LW  The Company has applied for abandonment of principal, penalty and interest from the National Treasury and 4PERRMRK8LI(MVIGXSVWEVIGSR½HIRXSJEJEZSVEFPISYXGSQIERHXLIVIJSVIEVISJXLISTMRMSRRSTVSZMWMSRMW required with regards to interest and penalty. KENYA ELECTRICITY GENERATING COMPANY PLC 192 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 33. Capital commitments The capital commitments relates to the ongoing capital projects and new projects which have been approved for MQTPIQIRXEXMSRFYXEVIEXZEVMSYWWXEKIWSJMQTPIQIRXEXMSR8LI]EVI½RERGIHF](IZIPSTQIRX*MRERGMEP-RWXMXYXMSRW (*-W ERHMRXIVREPVIWSYVGIW8LITVSNIGXWMRGPYHI1;3POEVME:1;3POEVME-9RMX6ILEFMPMXEXMSRSJ Olkaria I, Meru Wind 80MW, Ngong Wind phase III and 140MW Olkaria VI to be implemented under Public Private Partnership arrangement. 'ETMXEPGSQQMXQIRXWEXXLI]IEVIRHJSV[LMGLRSTVSZMWMSRLEWFIIRQEHIMRXLIWI½RERGMEPWXEXIQIRXWEVI 2018 2017 Shs’000 Shs’000 Authorised but not contracted for   Authorised and contracted for     34. Operating segments 8LI'SQTER]´W&SEVHSJ(MVIGXSVW [LMGLGSRWMWXWSJXLI1EREKMRK(MVIGXSVERHXLI'LMIJ)\IGYXMZI3J½GIVERH other directors is the Company’s Chief Operating Decision Maker (CODM). In accordance with IFRS 8 - Operating segments, information reported to the CODM for the purposes of resource allocation and assessment of segment performance is focused on the principal activities and the products offered by the Company. The Company has one reportable segment, which is the electricity generation. In making this consideration, the CODM considers the following: (a) Reported revenue/ Products and Services All the primary activities of the Company resulted in the generation of revenue which is the sole product and revenue stream. (b) Geographical areas The CODM considered that though there are different plants in different locations, all these plants are based in Kenya and operate effectively within one geographical location (Kenya). (c) Major customers The Company operates in a regulated industry. All its revenue as outlined is derived from one single external customer, Kenya Power. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 193 FINANCIALS Notes to the Financial Statements (continued) 35. Financial risk management Introduction and overview 8LI'SQTER]´WEGXMZMXMIWI\TSWIMXXSEZEVMIX]SJ½RERGMEPVMWOWERHXLSWIEGXMZMXMIWMRZSPZIXLIEREP]WMW IZEPYEXMSR acceptance and management of some degree of risk or combination of risks. Taking risk is core to the Company’s business and the operational risks are an inevitable consequence of being in business.The Company’s aim is therefore XSEGLMIZIERETTVSTVMEXIFEPERGIFIX[IIRVMWOERHVIXYVRERHQMRMQMWITSXIRXMEPEHZIVWIIJJIGXWSRMXW½RERGMEP performance. The key types of risks include: • Market risk – includes currency, interest rate and other price risk • Credit risk • Liquidity risk The Company’s overall risk management programme focuses on the unpredictability of changes in the business IRZMVSRQIRXERHWIIOWXSQMRMQMWITSXIRXMEPEHZIVWIIJJIGXWSJWYGLVMWOWSRMXW½RERGMEPTIVJSVQERGI[MXLMRXLI options available by setting acceptable levels of risks. Risk management framework The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. 8LI'SQTER]´W*MRERGI(MZMWMSRMHIRXM½IW IZEPYEXIWERHLIHKIW½RERGMEPVMWOWMRGPSWIGSSTIVEXMSR[MXLSTIVEXMRK YRMXW8LI&SEVHTVSZMHIW[VMXXIRTVMRGMTEPWJSVSZIVEPPVMWOQEREKIQIRXEW[IPPEW[VMXXIRTSPMGMIWGSZIVMRKWTIGM½G areas such as credit risk, liquidity risk, foreign exchange risk, interest rate risk and price risk. 8LI'SQTER]HSIWRSXIRXIVMRXSSVXVEHIMR½RERGMEPMRWXVYQIRXW MRGPYHMRKHIVMZEXMZI½RERGMEPMRWXVYQIRXW JSV speculative purposes. (a) Market risks The Board has put in place an internal audit function to assist it in assessing the risk faced by the Company on an ongoing basis, evaluate and test the design and effectiveness of its internal accounting and operational controls. Market risk is the risk arising from changes in market prices, such as interest rate, equity prices and foreign I\GLERKIVEXIW[LMGL[MPPEJJIGXXLI'SQTER]´WMRGSQISVXLIZEPYISJMXWLSPHMRKSJ½RERGMEPMRWXVYQIRXW The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. Overall responsibility for managing market risk rests with the Audit, Risk & Compliance Committee. The Company’s Finance Department is responsible for the development of detailed risk management policies (subject to review and approval by Audit, Risk & Compliance Management Committee) and for the day to day implementation of those policies. There has been no change to the Company’s exposure to market risks or the manner in which it manages and measures the risk. KENYA ELECTRICITY GENERATING COMPANY PLC 194 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 35. Financial risk management (continued) (a) Market risks (continued) Foreign currency risk The Company has transactional currency exposures. Such exposure arises when borrowings are revalued at the reporting date and also through purchases of goods and services that are done in currencies other than the local currency. The Company has loans from multilateral donors, which are denominated in currencies other than the functional local currency. Loan payments are made by using the prevailing exchange rate as there is no forward currency contracts to eliminate the currency exposures. Invoices denominated in foreign currencies are paid after 30 days from the date of the invoice and conversion at the time of payment is done using the prevailing exchange rate. The carrying amount of the Company’s foreign currency denominated monetary assets and monetary liabilities MW 2018 2017 Shs’000 Shs’000 Financial assets Amount due from Kenya Power – Deferred debt (Note 15)  1,072,494 Cash and cash equivalents (Note 20) 2,052,089 707,157 3,080,285  Liabilities Trade and other payables (Note 27) (2,104,244) (4,197,999) Borrowings (Note 23)  (123,954,342)   (128,152,341) Net currency liability (120,410,751)   Exposure to foreign currency risk is mitigated by the terms of the Power Purchase Agreement that allows the Company to recover in full a foreign exchange movement from Kenya Power. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 195 FINANCIALS Notes to the Financial Statements (continued) 35. Financial risk management (continued) (a) Market risks (continued) Foreign currency risk (continued) Foreign currency sensitivity analysis 8LIJSPPS[MRKXEFPIHIQSRWXVEXIWXLIIJJIGXSRXLI'SQTER]´WTVS½XSVPSWWSRETTP]MRKXLIWIRWMXMZMX]JSV a reasonable possible change in the exchange rate of the three main transaction currencies, with all other variables held constant. The reverse is also true. Change in (IIHFWRQ3UR¼W currency rate before tax Shs’ 000 2018 US$  (445,141) Yen -0.4%  Euro -1.2% (77,079) Total  2017 US$ 3% 475,977 Yen -7%  Euro 5%  Total  Interest rate risk 8LI'SQTER]I\TSWYVIXSMRXIVIWXVEXIVMWOMW[MXLVIKEVHWXS¾YGXYEXMSRMRFEROW´MRXIVIWXVEXIWMRXLIQEVOIX [LMGLEJJIGXWXLIFSVVS[MRKWF]XLI'SQTER]8LI'SQTER]´WRSRGYVVIRXFSVVS[MRKWEVIEX½\IHVEXIWXLYW QMRMQMWMRKXLII\TSWYVIXSXLIMRXIVIWXVEXIVMWO8LIIJJIGXSJ¾YGXYEXMSRSJSZIVHVEJX¾SEXMRKMRXIVIWXVEXI [SYPHRSXFIWMKRM½GERX8LIMRXIVIWXIEVRMRK½RERGMEPEWWIXWXLEXXLI'SQTER]LSPHWMRGPYHIMRZIWXQIRXWMR government securities and short-term deposits whose rates of return are predetermined. Other price risk This is the risk that the rate of the tariff will decline in the future. It is the risk of losing energy revenues due to a fall in the tariff. The Company’s exposure to this kind of risk is highly regulated by the Power Purchase Agreement, which is a product of discussion by Kenya Power and the Company, with Energy Regulatory Commission as a moderator. The Company’s main input for thermal energy generation is fuel which is a WMKRM½GERXGSWXGSQTSRIRX8LI'SQTER]MWMREREVVERKIQIRXXSTEWWXLMWGSWXXSXLIGYWXSQIV/IR]E4S[IV KENYA ELECTRICITY GENERATING COMPANY PLC 196 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 35. Financial risk management (continued) (b) Credit risk The Company has exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. Credit risk arises from cash and cash equivalents, and deposits with banks, as well as trade ERHSXLIVVIGIMZEFPIWVIPEXIHTEVX]EHZERGIW,81XVIEWYV]FSRHWERHEZEMPEFPIJSVWEPI½RERGMEPMRZIWXQIRXW 8LI GEVV]MRK EQSYRX SJ ½RERGMEP EWWIXW VIGSVHIH MR XLI ½RERGMEP WXEXIQIRXW VITVIWIRXMRK XLI 'SQTER]´W maximum exposure to credit risk without taking account of the value of any collateral obtained, ageing of the receivables as follows: Past due and Neither past Past due but not impaired impaired Due over over nor impaired 60 days 365 days Total Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 At 30 June 2018 Trade receivables- Kenya Power 7,440,948 13,707,380    Treasury bonds  - - -  Deferred debt -non- current portion  - - -  Financial asset at fair value  - - -   Other receivables (excluding prepayments)   10,588   Cash and cash equivalents 3,379,102 - - - 3,379,102   705,218 838,993 42,134,212 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 197 FINANCIALS Notes to the Financial Statements (continued) 35. Financial risk management (continued) (b) Credit risk (continued) Past due and Neither past Past due but not impaired impaired Due over over nor impaired 60 days 365 days Total Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 At 30 June 2017 Trade receivables- Kenya Power   -   Treasury bonds  - 2,414,108 - 2,758,711 Deferred debt -non- current portion 1,032,014 - - - 1,032,014 Financial asset at fair valueġ 14,005,833 - - - 14,005,833 Other receivables (excluding prepayments) 984,044 - -   Cash and cash equivalents  - - -    2,414,108 838,993 43,157,815 The Company only sells generated electricity to Kenya Power and this minimizes the credit risk exposure on amount due from Kenya Power. Both companies have a contract that stipulates a 40 day credit period. Receivable balances from Company staff are recovered on payment of salaries. 'VIHMXVMWOJVSQFEPERGIW[MXLFEROWERH½RERGMEPMRWXMXYXMSRWMWQEREKIHF]'SQTER]´WXVIEWYV]HITEVXQIRX in accordance with the Company’s policies. Investments of surplus funds are made only with approved counterparties and within credit limits assigned to each counterparty. Counterparty credit limits are reviewed by the Company’s Directors on an annual basis and may be updated throughout the year subject to approval of the Company’s audit and risk management committee. The Company has one main customer Kenya Power, however limits are set to minimise the concentration of risk around Kenya Power and therefore mitigate ½RERGMEPPSWWXLVSYKLTSXIRXMEPGSYRXIVTEVX]JEMPYVI Credit risk from other receivables are managed by the Company’s credit management policy. KENYA ELECTRICITY GENERATING COMPANY PLC 198 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 35. Financial risk management (continued) (c) Liquidity risk 0MUYMHMX]VMWOMWXLIVMWOXLEXXLI'SQTER][MPPRSXFIEFPIXSQIIXMXW½RERGMEPSFPMKEXMSRWEWXLI]JEPPHYI 8LI'SQTER]´WETTVSEGLXSQEREKMRKPMUYMHMX]MWXSIRWYVIEWJEVEWTSWWMFPIXLEXMX[MPPEP[E]WLEZIWYJ½GMIRX liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. Typically, the Company ensures that it LEWWYJ½GMIRXGEWLSRHIQERHXSQIIXI\TIGXIHSTIVEXMSREPI\TIRWIWJSVETIVMSHSJHE]WMRGPYHMRKXLI WIVZMGMRKSJ½RERGMEPSFPMKEXMSRW8LMWI\GPYHIWXLITSXIRXMEPMQTEGXSJI\XVIQIGMVGYQWXERGIWXLEXGERRSX reasonably be predicted, such as natural disasters and political violence. The Company monitors its risk to shortage of funds using a recurring liquidity planning tool. This tool considers XLIEGGSYRXVIGIMZEFPIWJVSQ/IR]E4S[IVERHXLI1MRMWXV]SJ)RIVK] 4IXVSPIYQERHQEXYVMX]SJ½RERGMEP MRWXVYQIRXW XSKIXLIV [MXL TVSNIGXIH GEWL ¾S[W JVSQ STIVEXMSRW8LI 'SQTER]´W SFNIGXMZI MW XS QEMRXEMR E FEPERGIFIX[IIRGSRXMRYMX]SJJYRHMRKERH¾I\MFMPMX]XLVSYKLXLIYWISJFEROSZIVHVEJXWERHSXLIVFSVVS[MRKW 8LI XEFPI FIPS[ EREP]WIW QEXYVMX] TVS½PIW SJ XLI ½RERGMEP PMEFMPMXMIW SJ XLI 'SQTER] FEWIH SR XLI VIQEMRMRK period using 30 June 2018 as a base period to the contractual maturity date: Less than 3 3 to 12 1 to 5 months months years > 5 years Total At 30 June 2018 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Trade and other payables 4,178,524 -  -  Amount due to Kenya Power 5,292 - - - 5,292 Borrowings - 11,204,903    Off balance sheet items Letters of credit - - 1,447,775 - 1,447,775 Capital commitments - -  -   11,204,903 172,408,222   KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 199 FINANCIALS Notes to the Financial Statements (continued) 35. Financial risk management (continued) (c) Liquidity risk (continued) Less than 3 3 to 12 1 to 5 months months years > 5 years Total At 30 June 2018 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Shs ‘000 Trade and other payables 4,219,099 -  - 8,078,703 Amount due to Kenya Power 1,290 - - - 1,290 Borrowings - 11,425,441 53,375,805 81,542,117  Off balance sheet items Letters of credit - - 280,727 - 280,727 Capital commitments - -  -  4,220,389 11,425,441 202,174,899 81,542,117  (d) Fair value measurement Financial instruments Fair Value hierarchy 8LI'SQTER]YWIWXLIJSPPS[MRKLMIVEVGL]JSVHIXIVQMRMRKERHHMWGPSWMRKXLIJEMVZEPYISJ½RERGMEPMRWXVYQIRXW by valuation technique: -*67WTIGM½IWELMIVEVGL]SJZEPYEXMSRXIGLRMUYIWFEWIHSR[LIXLIVMRTYXWYWIHMRXLIZEPYEXMSRXIGLRMUYIW SJ½RERGMEPMRWXVYQIRXWEVISFWIVZEFPISVYRSFWIVZEFPI*MRERGMEPMRWXVYQIRXWEVIKVSYTIHMRXSPIZIPWFEWIH on the degree to which fair value data / input is observable. i) Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active trading markets for identical assets or liabilities.This level includes corporate bonds traded on the Nairobi Securities Exchange (“NSE”). ii) Level 2 fair value measurements are those derived from inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as a price) or indirectly (i.e. derived from prices). iii) Level 3 fair value measurements are those derived from valuation techniques that include inputs that are not based on observable market data (unobservable inputs). KENYA ELECTRICITY GENERATING COMPANY PLC 200 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 35. Financial risk management (continued) (d) Fair value measurement (continued) Financial instruments (continued) Fair Value hierarchy (continued) Assets Level 1 Level 2 Level 3 Total Shs’000 Shs’000 Shs’000 Shs’000 Year ended 30 June 2018 Treasury bonds available for sale -  -  Financial asset at fair value -  -  Total assets -  -  Assets Year ended 30 June 2017 Treasury bonds available for sale -  -  Financial asset at fair value - 14,005,833 - 14,005,833 Total assets  -  8LIVIEVIRS½RERGMEPPMEFMPMXMIWQIEWYVIHEXJEMVZEPYIJSVXLI]IEVIRHIH.YRI 2MP There were no transfers between levels 1, 2 and 3 in the period (2017: Nil). 9DOXDWLRQWHFKQLTXHVXVHGWRGHWHUPLQHIDLUYDOXHV 7TIGM½GZEPYEXMSRXIGLRMUYIWYWIHXSZEPYI½RERGMEPMRWXVYQIRXWMRGPYHI (i)the use of quoted market prices – This was used to value the treasury bonds (ii) the fair value of forward foreign exchange contracts is determined using forward exchange rates at the FEPERGIWLIIXHEXI8LMW[EWYWIHXSZEPYIXLI½RERGMEPEWWIXEXJEMVZEPYI 6HQVLWLYLW\RIIDLUYDOXHRIOHYHO¼QDQFLDOLQVWUXPHQWV 8LI JEMV ZEPYI SJ PIZIP  ½RERGMEP MRWXVYQIRXW MW HIXIVQMRIH YWMRK ZEPYEXMSR XIGLRMUYIW [LMGL MRGSVTSVEXI assumptions that are indirectly supported by prices from observable current market transactions in the same instruments and are based on available observable market data. Such assumptions include risk premiums, liquidity discount rates, credit risk, volatilities and correlations. Changes in these assumptions could affect the VITSVXIHJEMVZEPYIWSJXLIWI½RERGMEPMRWXVYQIRXW KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 201 FINANCIALS Notes to the Financial Statements (continued) 35. Financial risk management (continued) (d) Fair value measurement (continued) Financial instruments (continued) Fair Value hierarchy (continued) Financial instruments not measured at fair value 8LIJEMVZEPYILMIVEVGL]JSV½RERGMEPEWWIXWRSXQIEWYVIHEXJEMVZEPYIMWEWWLS[RMRXLIXEFPIFIPS[ Level 1 Level 2 Level 3 Fair value Carrying value KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 At 30 June 2018 Assets Cash and balances with 3,383,402 - - 3,383,402 3,383,402 Banks Deferred Debt – Kenya - -    Power Trade receivables - - 21,883,279 21,883,279 21,883,279 Financial assets – held-to- -   2,407,047 maturity Other receivables - -    Total 3,383,402 1,835,866 23,927,538 29,146,806 29,717,987 Liabilities Trade and other payables - - 9,513,953 9,513,953 9,513,953 Borrowings - -    Total - - 141,422,322 141,422,322 141,422,322 KENYA ELECTRICITY GENERATING COMPANY PLC 202 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 35. Financial risk management (continued) (d) Fair value measurement (continued) Financial instruments not measured at fair value (continued) Level 1 Level 2 Level 3 Fair value Carrying value KShs’000 KShs’000 KShs’000 KShs’000 KShs’000 At 30 June 2017 Assets Cash and balances with 7,831,103 - - 7,831,103 7,831,103 Banks Deferred Debt – Kenya - - 1,072,494 1,072,494 1,072,494 Power Trade receivables - - 15,711,457 15,711,457 15,711,457 Financial assets – held-to- -  -  2,414,108 maturity Other receivables - -    Total 7,831,103 1,816,301 17,862,427 27,509,831 28,107,638 Liabilities Trade and other payables - -    Borrowings - - 138,714,088 138,714,088 138,714,088 Total - - 149,345,607 149,345,607 149,345,607 7KHYDOXDWLRQWHFKQLTXHVXVHGLQGHWHUPLQLQJWKHIDLUYDOXHRI¼QDQFLDODVVHWVDQGOLDELOLWLHVFODVVL¼HG within level 2 and level 3. The table below indicates the valuation techniques and main assumptions used in the determination of the fair value of the level 2 and level 3 assets and liabilities not measured at fair value but for which fair value is disclosed: 2017 Valuation basis/technique Main assumptions Deferred Debt – Kenya Power (MWGSYRXIHGEWL¾S[QSHIP Discount rate Trade receivables (MWGSYRXIHGEWL¾S[QSHIP Discount rate Financial assets – held-to-maturity (MWGSYRXIHGEWL¾S[QSHIP Market yield of the bond Other receivables (MWGSYRXIHGEWL¾S[QSHIP Discount rate Trade and other payables (MWGSYRXIHGEWL¾S[QSHIP Discount rate Borrowings (MWGSYRXIHGEWL¾S[QSHIP Discount rate KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 203 FINANCIALS Notes to the Financial Statements (continued) 35. Financial risk management (continued) (d) Fair value measurement (continued) 2SR½RERGMEPEWWIXWLIPHEXJEMVZEPYI 8LMWRSXII\TPEMRWXLINYHKIQIRXWERHIWXMQEXIWQEHIMRHIXIVQMRMRKXLIJEMVZEPYIWSJXLIRSR½RERGMEPEWWIXW XLEXEVIVIGSKRMWIHERHQIEWYVIHEXJEMVZEPYIMRXLI½RERGMEPWXEXIQIRXW8STVSZMHIERMRHMGEXMSREFSYXXLI VIPMEFMPMX]SJXLIMRTYXWYWIHMRHIXIVQMRMRKJEMVZEPYIXLI'SQTER]LEWGPEWWM½IHMXWRSR½RERGMEPEWWIXWMRXS the three levels prescribed under the accounting standards. Assets Level 1 Level 2 Level 3 Total Shs’000 Shs’000 Shs’000 Shs’000 Year ended 30 June 2018 Non-current assets held for sale - - 344,053 344,053 Property plant and equipment - - 242,178,132 242,178,132 Total assets - - 242,522,185 242,522,185 Assets Year ended 30 June 2017 Non-current assets held for sale - - - - Property plant and equipment - -   Total assets - -   There were no transfers between levels 1, 2 and 3 in the period (2017: Nil). 9DOXDWLRQWHFKQLTXHVXVHGWRGHWHUPLQHOHYHOIDLUYDOXHV 8LI'SQTER]SFXEMRWMRHITIRHIRXZEPYEXMSRWJSVMXWTVSTIVX]TPERXERHIUYMTQIRXEXPIEWXIZIV]½ZI]IEVW The valuation method used is the depreciated replacement cost approach.The property plant and equipment classes subject to fair valuation are land and buildings, transmission lines and plant and equipment. )DLUYDOXHPHDVXUHPHQWVXVLQJVLJQL¼FDQWXQREVHUYDEOHLQSXWV OHYHO We have disclosed under Note 12 , the changes in level 3 items for the periods ended 31 June 2017 and 31 June 2018 for recurring fair value measurements KENYA ELECTRICITY GENERATING COMPANY PLC 204 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) 35. Financial risk management (continued) (d) Fair value measurement (continued) 2SR½RERGMEPEWWIXWLIPHEXJEMVZEPYI GSRXMRYIH 8LIJSPPS[MRKXEFPIWYQQEVMWIWXLIUYERXMXEXMZIMRJSVQEXMSREFSYXXLIWMKRM½GERXYRSFWIVZEFPIMRTYXWYWIHMR recurring level 3 fair value measurements. See above for the valuation techniques adopted. Relationship of Fair value as at Fair value as at Unobservable unobservable Description 30 June 2018 30 June 2017 inputs inputs to fair value Shs’000 Shs’000 Property plant Estimated The higher the 242,178,132  and equipment useful life estimated useful Non-current assets held Estimated life, the higher the 344,053 - for sale useful life fair value 36. Capital risk management The primary objective of the Company’s capital management is to ensure that it maintains some strong and healthy capital ratios in order to support its business and maximize shareholder value. The Capital Management policy as approved by the Board of Directors (the Board) is to maintain a strong capital FEWIWSEWXSQEMRXEMRMRZIWXSVGVIHMXSVERHQEVOIXGSR½HIRGIERHXSWYWXEMRJYXYVIHIZIPSTQIRXSJXLIFYWMRIWW 8LI&SEVHQSRMXSVWXLIVIXYVRSRGETMXEP [LMGLXLI'SQTER]HI½RIWEWRIXSTIVEXMRKMRGSQIHMZMHIHF]XSXEP shareholders’ equity. The Board also monitors the level of dividends to ordinary shareholders. The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares as circumstances would dictate.There were no changes in the Company’s approach to capital management as regards the objectives, policies or processes during the year. The Company monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Company’s target is to keep the gearing ratios below 70%. 2018 2017 Shs’000 Shs’000 Ordinary shares and distributable reserves   Borrowings  138,714,088 Less cash and bank balances (note 20) (3,383,402) (7,831,103) Net debt  130,882,985 Gearing ratio 52% 55% KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 205 FINANCIALS Notes to the Financial Statements (continued) 37 Restatement -RXLIGYVVIRX]IEVXLIVILEWFIIREVIWXEXIQIRXSJXLI½RERGMEPWXEXIQIRXWSRXLIJSPPS[MRKQEXXIVW (a) 1EREKIQIRXLEWVIWXEXIHXLI½RERGMEPWXEXIQIRXWXSVI¾IGXXLIETTPMGEXMSRSJEREWWIXGIMPMRKSRXLIVIXMVIQIRX FIRI½XWSFPMKEXMSREWWIX8LMWMWMRPMRI[MXLXLIVIUYMVIQIRXWSJ-%7 6 ERHXLI6IXMVIQIRX&IRI½XW%GX -%7 6 PMQMXWXLIHI½RIHFIRI½XEWWIXXSXLIPS[IVSJ M XLIWYVTPYWMRXLIHI½RIHFIRI½XTPERERH MM XLI EWWIXGIMPMRK -XJYVXLIVHI½RIWXLIEWWIXGIMPMRKEW³XLITVIWIRXZEPYISJER]IGSRSQMGFIRI½XWEZEMPEFPIMRXLI form of refunds from the plan or reductions in future contributions to the plan’ plus unrecognised gains and losses. 8LI6IXMVIQIRX&IRI½XW%GX 6&% 6IKYPEXMSRWXEXIWXLEXEWYVTPYWGERSRP]FIYXMPMWIHXSSJJWIXJYXYVI contributions to the extent that the assets of the scheme exceed the liabilities by 110%. In addition, it stipulates that only 50% of the surplus is available to the sponsor on winding up. (b) 1EREKIQIRXLEWVIWXEXIHXLI½RERGMEPWXEXIQIRXWXSEGGSYRXJSVXLIJSVIMKRI\GLERKIHMJJIVIRGIWVIGSZIVEFPI from Kenya Power as a derivative in line with IAS 39. KenGen’s transactions are based on Power Purchase Agreements which provide for recovery of KenGen’s total foreign denominated costs for the applicable foreign currencies related to the plant from Kenya Power. The EVVERKIQIRXJEPPW[MXLMRXLIWGSTISJ-%7EWE½RERGMEPEWWIXEXJEMVZEPYI8LIMQTEGXSJXLIVIWXEXIQIRXSR XLI½RERGMEPWXEXIQIRXWMWEWJSPPS[W i. 8LIHI½RMXMSRSJXLIEWWIXERHVIPEXIHHMWGPSWYVIW[MPPGLERKIXSVI¾IGXXLIVIUYMVIQIRXWSJ-%7 ii. The asset has been measured at fair value. iii. 'LERKIWMRXLIJEMVZEPYISJXLIHIVMZEXMZILEZIFIIRVIGSVHIHWITEVEXIP]MRTVS½XSVPSWWMR³SXLIV (losses)/ gains –net’. iv. 8LI VIPEXIH JSVIMKR I\GLERKI KEMRW ERH PSWWIW LEZI FIIR VIGSVHIH WITEVEXIP] MR TVS½X SV PSWW MR ‘Finance income’ and ‘Finance costs’ respectively. (c) 1EREKIQIRXLEWVIWXEXIHXLI½RERGMEPWXEXIQIRXWXSEGGSYRXJSVJYIPERH[EXIVVIZIRYIWFMPPIHXS/IR]E4S[IV and related costs separately in line with the requirements of IAS 18 and to further disaggregate the statement SJTVS½XSVPSWWERHSXLIVGSQTVILIRWMZIMRGSQI[LMGLMWTVIWIRXIHMRPMRI[MXL-%7 KENYA ELECTRICITY GENERATING COMPANY PLC 206 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 37. Restatement (continued) As previously stated Impact of Restatement As restated Shs Shs Shs 6WDWHPHQWRI¼QDQFLDOSRVLWLRQ (a) (b) (c) As at 30 June 2016 Non-current assets 6IXMVIQIRX&IRI½X3FPMKEXMSR%WWIX  (510,430) - - 1,098,771 Financial asset at fair value - - 13,890,353 - 13,890,353 Non-current receivables 15,037,721 - (13,890,353) -  Current assets Financial asset at fair value - -  -  Trade receivables  -  - 9,347,411 Non-current liabilities Deferred income tax  153,129 - - (40,073,728) Equity Notes to the Financial Statements (continued) Other reserves   - - (77,248,387) Retained earnings   - -  INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 207 37. Restatement (continued) 208 As previously stated Impact of Restatement As restated Shs Shs Shs FINANCIALS 6WDWHPHQWRI¼QDQFLDOSRVLWLRQ (a) (b) (c) (continued) As at 30 June 2017 Non-current assets 6IXMVIQIRX&IRI½X3FPMKEXMSR%WWIX   - -  Financial asset at fair value - -  -  Non-current receivables 14,149,390 -  - 1,032,014 KENYA ELECTRICITY GENERATING COMPANY PLC Current assets Financial asset at fair value - - 888,457 - 888,457 Trade receivables  - (888,457) - 15,751,937 Non-current liabilities Deferred income tax  140,089 - -  INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) Equity Other reserves (74,799,177) 210,872 - - (74,588,305) Retained earnings   - -  37. Restatement (continued) As previously Impact of Restatement As restated 6WDWHPHQWRISUR¼WRUORVV stated Shs Shs Shs Year ended 30 June 2017 a) b) c) Revenue Electricity Revenue  -  -  Steam Revenue 5,189,072 - - - 5,189,072 Fuel charge - - -   Water charge - - -   Reimbursable expenses Fuel costs - - -   Water costs - - -   Other Income 882,170 - (72,233)  553,148 Other (losses)/gains - net - -  -  Expenses Depreciation and amortisation (9,244,422) - - - (9,244,422) Employee expenses   -  (5,754,748) Notes to the Financial Statements (continued) Steam costs (2,795,798) - - - (2,795,798) Plant operation and maintenance expenses - - - (1,554,480) (1,554,480) Other expenses - - -   Operating expenses (4,777,874) - - 4,777,874 < Finance income 1,242,157 -  - 1,333,325 Finance costs (3,417,442) - - - (3,417,442) Income tax expense  21,821 - - (2,454,972 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 209 37. Restatement (continued) 210 As previously stated Impact of Restatement As restated Other comprehensive income Shs Shs Shs FINANCIALS Year ended 30 June 2017 a) b) c) ,WHPVWKDWZLOOQRWEHUHFODVVL¼HG VXEVHTXHQWO\WRSUR¼WRUORVV 6IQIEWYVIQIRXSJHI½RIHFIRI½X (194,828)  - -  Deferred tax on remeasurement 58,448  - - 23,587 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notes to the Financial Statements (continued) MD & CEO presenting a cheque to Strathmore KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 211 STATISTICS STATISTICS KENYA ELECTRICITY GENERATING COMPANY PLC 212 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Historical Financial Performance (Restated) 214 Installed vs Effective Capacity (MW) 219 Units Sent Out (Gwh) 220 Weighted Factors (%) 221 KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 213 Company's Ten Years Financial Review 214 Plant Performance 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 Units Sold(GWh) 7,989  7,819 7,027   5,404 4,933  4,339 STATISTICS Average weighted tariff (Shs/KWh)  3.84 3.70  2.78 2.73  2.73 2.79  Statement of Comprehensive Income (Shs’000) Electricity revenue    25,307,784   14,900,488  10,030,234  Steam revenue  5,189,072     - - - - Fuel charges    7,238,204 13,142,391    5,835,258  Water charges 159,172  329,079 375,341 459,722 215,141 91,470 - - - 45,289,660 43,431,919 39,301,288 36,610,690 30,691,577 25,414,468 27,584,304 19,639,692 15,865,492 19,384,236 Reimbursable expenses Fuel costs       (7,129,037) (12,870,395)   (12,232,498)   (5,824,143)   Water costs (159,172)   (329,079) (375,341) (459,722) (215,141) (91,470) - - - Revenue less reimbursable expenses 35,883,633 34,452,483 35,710,749 29,106,312 17,361,460 16,795,725 15,260,336 13,681,023 10,041,349 11,523,798 KENYA ELECTRICITY GENERATING COMPANY PLC Other income 274,771 553,148 1,945,524 515,418 378,914 308,723 124,784   453,192 Other( losses)/gains (1,049,948)  (7,384,454) (333,151)  (4,314,571) (1,779,133) 8,139,947 4,001,118 1,149,540 35,108,456 35,348,899 30,271,819 29,288,579 19,759,741 12,789,877 13,605,987 21,915,661 14,145,035 13,126,530 Expenses Depreciation   (9,244,422) (10,223,370)   (4,727,937) (4,578,728) (4,883,237) (4,581,339) (3,829,198) (3,847,124) Employee expenses   (5,754,748) (4,951,535) (4,508,522) (4,040,489)     (3,355,713) (3,015,129)   Steam costs (3,549,428) (2,795,798)     (192,707)   - - - - Plant operation and maintenance   (1,554,480)     (1,393,792)       (830,407) (859,901) expenses INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Other expenses       (2,552,803)         (883,714) (1,173,584) 11,441,638 13,545,305 7,840,430 10,672,867 7,754,561 2,090,153 3,339,965 11,902,154 5,586,587 4,879,531 Historical Financial Performance (Restated) 3TIVEXMRK4VS½X Compensating tax - - (2,431,022) - - - - - - - Finance income 3,341,383 1,333,325 8,893,845 1,027,804 (1,009,094) 4,937,573       Finance costs (3,037,554) (3,417,442) (3,132,187)   (2,587,519) (3,000,802) (2,972,308)   (741,491)   4VS½X&IJSVI8E\ 11,745,467 11,461,188 11,171,066 8,690,012 4,157,948 4,026,924 4,045,190 3,651,307 2,484,953 4,556,281 Taxation (charge)/credit (3,854,834) (2,454,972)   2,827,315   1,197,780 (1,222,590)   801,534   4VS½X%JXIV8E\ 7,890,633 9,006,216 6,678,407 11,517,327 2,826,323 5,224,704 2,822,600 2,080,121 3,286,487 2,070,913 Other Comprehensive Income/(Loss)   (528,500)    1,243,851          Total Comprehensive Income 7,267,712 8,477,716 6,326,839 65,763,763 4,070,174 5,207,982 1,085,915 1,446,623 4,649,937 1,943,807 Number of Shares Issued           Earnings per share - Basic and diluted (Shs) 1.20 1.37 1.08 5.24 1.29 2.38 1.28 0.95 1.49 0.94 Dividends per share(Shs) 0.40 - -  0.40   0.50 0.50 0.50 Number of Employees 2,508 2,476 2,406 2,407 2,209 2,063 1,829 1,663 1,658 1,581 6WDWHPHQWRI¼QDQFLDOSRVLWLRQ 6KV³ 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 ASSETS Non-current assets Property, plant and equipment   320,932,980  209,235,821 153,201,471   102,230,784  Prepaid leases on land 4,170,183 4,229,783   1,048,372 439,957  1,373 1,417  Intangible assets   1,181,241 1,122,452      543,893 Financial asset at fair value 10,490,415  13,890,353   5,238,710 9,808,295 12,919,737  4,220,359 Non-current receivables 987,875 1,032,014   1,084,900  1,401,133 1,472,503 1,220,570  Treasury bonds 2,407,047 2,414,108   2,431,799  8,050,919    6IXMVIQIRXFIRI½XEWWIX   1,098,771 1,792,214 1,407,411 - - - - - 347,940,938 347,090,213 344,821,946 321,151,022 222,574,881 163,545,472 140,856,807 141,454,256 117,717,472 100,075,479 Current assets Inventories 1,149,180 1,082,044   788,333    1,443,374  Trade receivables 21,883,279 15,751,937 9,347,411 8,082,805 7,913,895  7,221,777  3,590,525 5,195,179 Non-current Financial asset at fair  888,457   357,395  405,477 523,554 250,378 120,922 value Other receivables and prepayments 3,359,793 3,741,225 3,925,727 8,119,110  11,219,744 11,395,172   805,955 Asset held for sale 344,053 - - - - - - - - - Corporate tax receivable  - - - - - 231,154 385,857  141,383 Treasury bonds   322,031 341,803  2,550,345  391,127 519,201  Historical Financial Performance (Restated) Cash and cash balances 3,383,402 7,831,103  3,292,307 9,429,358  435,719 3,115,598  4,221,990 31,412,067 29,639,369 21,916,420 21,368,973 27,630,643 25,127,810 22,288,066 19,539,034 32,849,414 12,869,681 TOTAL ASSETS 379,353,005 376,729,582 366,738,366 342,519,995 250,205,524 188,673,282 163,144,873 160,993,290 150,566,886 112,945,160 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 215 6WDWHPHQWRI¼QDQFLDOSRVLWLRQ 6KV³ (continued) 216 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 STATISTICS EQUITY AND LIABILITIES Capital and reserves Share capital    5,495,904 5,495,904 5,495,904 5,495,904 5,495,904 5,495,904 5,495,904 Share premium 22,151,131 22,151,131  5,039,818 5,039,818 5,039,819 5,039,818 5,039,818 5,039,818 5,039,818 Other reserves 71,805,994 74,588,305 77,248,387 79,912,755      31,383,772 Retained earnings     39,884,740   30,513,173 28,429,454  190,103,625 182,835,913 172,385,381 141,594,091 76,709,673 73,958,516 70,069,551 69,418,587 70,530,868 66,980,112 Non-current liabilities KENYA ELECTRICITY GENERATING COMPANY PLC Borrowings    137,191,309 122,324,111 73,934,313    25,793,197 Non-current liabilities 1,000   1,119,400 1,428,100 1,501,300 - - - - Deferred income tax   40,073,728 35,924,900    15,032,183 12,001,274 12,802,808 Long term Contract payables   9,940,189 5,329,722  8,591,032 - - - - 168,369,902 173,800,472 176,162,926 178,445,931 148,299,622 97,042,137 78,074,365 80,318,110 73,066,203 40,097,305 Current liabilities Borrowings due within one year  10,829,802 10,757,003 9,427,225 13,790,779 7,000,387  4,480,481  1,399,880 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Trade and other payables   4,943,371    4,539,132 3,852,291 2,939,340 3,082,895 Historical Financial Performance (Restated) Compensating Tax 2,331,022 2,431,022 2,431,022 - - - - - - - Tax Payable -   140,843  278,453 - - - - Dividends payable - - - 4,735,174    2,923,821 2,154,394  20,879,478 20,093,197 18,190,059 22,479,973 25,196,229 17,672,629 15,000,957 11,256,593 6,969,815 5,867,743 TOTAL EQUITY AND 379,353,005 376,729,582 366,738,366 342,519,995 250,205,524 188,673,282 163,144,873 160,993,290 150,566,886 112,945,160 LIABILITIES Capex  13,509,704 27,545,275    9,020,497   4,731,000 STATISTICS Historical Financial Performance (Restated) Financial Ratios 2018 2017 2016 2015 2014 2013 4VS½X1EVKMR 40.11% 39.27% 38.13% 33.94%  24.48% Return on investment 4.28% 4.02% 4.38% 3.45% 3.39% 3.21% Current Ratio 1.50 1.48 1.20 0.95 1.10 1.42 Debt Service Coverage 2.08 1.95 2.58  0.99 1.24 Ratio Self Financing Ratio 125% 88.91%  41% 17% 27% Debt/(Debt+Equity) 40% 42% 43% 47%  51% Return on Equity 4% 5% 4% 8% 4% 7% KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 217 EBITDA and EBIT Review for the last Ten Years (Kshs ‘000) 218 2018 2017 2016 2015 2014 2013 2012 2011 2010 2009 STATISTICS Revenue  43,431,920 39,301,288    27,584,304    Reimbursable expenses   (8,979,437) (3,590,539) (7,504,378) (13,330,117)      (5,824,143)   Revenue less 35,883,633 34,452,483 35,710,749 29,106,312 17,361,460 16,795,725 15,260,336 13,681,023 10,041,349 11,523,798 reimbursable expenses Other income 274,771 553,148 1,945,524 515,418 378,914 308,723 124,784   453,192 Other (losses)/gains (1,049,948)  (7,384,454) (333,151)  (4,314,571) (1,779,133) 8,139,947 4,001,118 1,149,540 KENYA ELECTRICITY GENERATING COMPANY PLC Operating expenses (13,518,931) (12,559,172) (12,208,019)  (7,277,243)   (5,382,785)   (4,729,250) (4,399,875) EBITDA 21,589,525 22,789,727 18,063,800 17,151,812 12,482,498 6,668,881 8,223,202 16,483,493 9,415,785 8,726,655 Depreciation &  (9,244,422) (10,223,370   (4,727,937) (4,578,728) (4,883,237) (4,581,339) (3,829,198) (3,847,124) Amortisation EBIT 11,441,638 13,545,305 7,840,430 10,672,867 7,754,561 2,090,153 3,339,965 11,902,154 5,586,587 4,879,531 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Historical Financial Performance (Restated) Compensating tax - - (2,431,022) - - - - - - - Finance income 3,341,383 1,333,325 8,893,845 1,027,804 (1,009,094) 4,937,573       Finance costs (3,037,554) (3,417,442) (3,132,187)   (2,587,519) (3,000,802) (2,972,308)   (741,491)   3UR¼W%HIRUH7D[ 11,745,467 11,461,188 11,171,066 8,690,012 4,157,948 4,026,924 4,045,190 3,651,307 2,484,953 4,556,281 Taxation (charge)/credit (3,854,834) (2,454,972)   2,827,315   1,197,780 (1,222,590)   801,534   3UR¼W$IWHU7D[ 7,890,633 9,006,216 6,678,407 11,517,327 2,826,323 5,224,704 2,822,600 2,080,121 3,286,487z 2,070,913 Installed Capacity in MW as at June .... 2018 2017 2016 2015 2014 Plant Installed Effective Installed Effective Installed Effective Installed Effective Installed Effective Hydro Tana 20 20 20 20 20 20 20.0 20.0 20.0 20.0 Masinga 40 40 40 40 40 40 40.0 40.0 40.0 40.0 Kamburu 94.2 90 94.2 90 94.2 90 94.2 90.0 94.2 90.0 Gitaru 225  225  225  225.0  225.0  Kindaruma 72 70.5 72 70.5 72 70.5 72.0 70.5 72.0 70.5 Kiambere           Turkwel  105  105  105  105.0  105.0 sondu Miriu           Sang'oro 21.2 20 21.2 20 21.2 20 21.2 20.0 21.2 20.0 Small Hydros 11.75 11.3 11.75 11.30 11.75 11.30 11.75 11.30 13.70 11.75 Hydro Total 818.15 796.8 818.15 796.8 818.15 796.8 818.15 796.8 818.15 796.6 Thermal Kipevu 1 73.50 52.83 73.50  73.5  73.5  73.5  Kipevu III 120 115 120 115 120 115 120.0 115.0 120.0 115.0 Muhoroni GT1 30 28 30 28 30 27 30.0 27.0 30.0 27.0 Muhoroni GT2 30 0 30 28 30 28 30.0 27.0 30.0 27.0 Installed vs Effective Capacity (MW) Garissa & Lamu 0 0 0 0 8.98 8.2 8.98 8.2 8.7 7.7 Thermal Total 253.5 195.8 253.5 231.0 262.5 238.2 262.5 237.2 262.2 236.7 Geothermal Olkaria I 45 44 45 44 45 44 45.0 44.0 45.0 44.0 Olkaria I AU 150.5 140 150.5 140 150.5 140 150.5 140.0 0.0 0.0 Olkaria II 105 101 105 101 105 101 105.0 99.3 105.0 101.0 Olkaria IV 149.8 140 149.8 140 149.8 140 149.8 140.0 73.0 70.0 Eburru 2.5 2.1 2.5 0 2.5 2.3 2.5 2.3 2.5 2.3 Wellhead 37 15.5 15.00 15.5 9.40 10.50 9.40 5.50 4.40 5.00 4.40 Wellhead 43 12.8 11.40 12.8 12.40 12.80 12.40 12.80 12.80 12.80 12.80 Wellhead 914 27.8 25.00 27.8 25.78 27.80 25.78 27.80 27.80 12.80 12.80 Wellhead 915 10.0 10.00 20.0 18.90 20.00 18.90 10.00 10.00 0.00 0.00 Wellhead 919 5.0 5.00 0 0 Wellhead 905 5.0 5.00 5.0 4.70 Wellhead 39 5.0 5.00 5.0 4.70 Geothermal Total 533.90 503.5 533.90 523.90 523.9 493.8 509.0 480.6 256.1 247.3 Wind Ngong I Phase I&II 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 5.1 5.1 Ngong II         0.0 0.0 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC Wind Total 25.5 25.5 25.5 25.5 25.5 25.5 25.5 25.5 5.1 5.1 KenGen TOTAL 1,631.1 1,521.6 1,631.1 1,556.5 1,630.1 1,554.3 1,615.2 1,540.1 1,341.9 1,285.7 219 * Active/Reactive power -RWXEPPIHGETEGMX]GSVVIGXIHXSVI¾IGXXLIEGXYEP1EGLMRIVEXMRK Units Generated and Sold as at 30 June .... 220 2018 2017 2016 2015 2014 HYDRO Generated Sales Generated Sales Generated Sales Generated Sales Generated Sales Sagana   4.18 4.18   8.20 7.55 9.05 9.05 Mesco   1.98  2.79 2.78 2.48 2.47 1.90 1.90 Wanjii 17.11  32.10 31.97 45.23 44.92 44.07 43.73 42.21 42.12 Tana 97.81  72.81 70.97 112.02 109.27 111.08 108.23 71.11  Masinga 107.52 107.49      137.72   Kamburu 322.03 321.31 384.54 383.79 434.78 434.03  357.98 421.91 420.87 Gitaru 725.24 724.12  775.27   711.41 709.88 831.72 829.95 Kindaruma 179.95 179.23 184.05 183.20 209.47 208.27   201.89 201.23 Kiambere  750.98 939.38 938.47 997.93  718.40  980.35  Turkwel  457.90 404.29 402.10 428.37  554.10 551.22 721.05 718.59 Sondu Miriu 388.99 388.03 282.08 281.55 419.52 418.59  375.54 351.74  Sangoro 129.32 128.98  90.31 140.59 140.31 124.89 124.54 109.54 109.32 Units Sent Out (Gwh) Gogo 7.29 7.20 5.27 5.21     5.83 5.83 Sosiani 0.72 0.71   1.17 1.15 0.87  0.99 0.98 KENYA ELECTRICITY GENERATING COMPANY PLC Total Hydros 3,197.95 3186.40 3,348.20 3,339.05 3,795.75 3,784.24 3,320.03 3,308.22 3,956.10 3,945.71 THERMAL Kipevu I 243.81   211.28     228.41 219.93 Kipevu III 593.71 583.81 521.04 512.13  181.39 304.47 299.03  524.22 Embakasi/Muhoroni Gas Turbine (Active)*  111.17 108.21   4.20 4.10   Embakasi/Muhoroni Gas Turbine (Re - Active) 0.00  39.91   84.97 84.97 25.39 25.39 Total Thermal 837.52 887.56 888.03 871.53 416.85 407.93 554.81 544.61 814.93 796.48 GEOTHERMAL INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Olkaria I  247.35 200.59  345.52     352.49 Olkaria I AU 1138.40 1133.13   1,088.21    - - Olkaria II 852.70 831.50 833.92  857.18 814.38 798.29  754.25 712.38 Olkaria IV 1131.70 1131.71  852.33 1,021.03 975.51   172.20 172.20 Eburru   0.00 0.00  9.85 12.48 10.99 9.38  Wellhead 37 & 39  127.12 99.49 89.78 17.08 15.51 10.49 9.50   Wellhead 43   78.93 74.39 79.02 74.91  78.42 29.28 29.28 Wellhead 914,919,905 & 915 344.70 324.84 331.12 311.81 272.85  114.98 108.49 7.24 7.24 Wellheads Total 549.43 518.10 509.54 477.28     53.27 53.27 Total Geothermal 3,935.00 3,867.96 3,448.30 3,282.04 3,691.54 3,542.18 3,249.66 3,104.21 1,356.84 1,297.06 ISOLATED THERMALS Garissa 0.00 0.00 0.00 0.00 25.51 24.75 25.82 25.77  20.29 Lamu 0.00 0.00 0.00 0.00   7.07  7.30 7.24 Total Isolated 0.00 0.00 0.00 0.00 31.97 31.09 32.89 32.72 27.97 27.53 WIND TURBINE Ngong' I Phase I &2 22.23 21.57 28.92 28.50 25.47 25.04   17.59 17.59 Ngong' II 25.89 25.89 34.75  31.88  20.48 20.45 - - Total Wind 48.12   63.18 57.35 56.66 37.16 37.11 17.59 17.59 TOTAL KenGen 8,018.59 7989.39 7,748.20 7,556.09 7,993.46 7,819.09 7,194.55 7,026.87 6,173.43 6,084.37 Notes: 1) The difference between the units generated and sold out is due to system losses and auxilliary consumption 2) System losses comprise of technical and non-technical losses 2017/2018 2016/2017 2015/2016 2014/2015 2013/2014 2012/2013 2012/2011 Effective Load Load Load POWER STATION Availability Load factor Availability Load factor Availability Load factor Availability Load factor Availability Availability Availability Capacity Factor Factor Factor Hydro 69.348619 Sagana 1.50 59.4 43.30 58.20 31.82  52.79 87.70 57.45 99.42  82.59 73.87   Mesco 0.43 98.0   52.04       8.04 0.00 0.00 0.00 Wanjii 7.40 81.5  79.24 49.32 85.21    91.39    89.52  Tana 20.00  55.83 97.53 40.51 97.15  89.83  40.95 39.34 77.85  71.31 50.11 Masinga 40.00   83.14  99.83   39.25  58.93  42.27 98.77 10.42 Kamburu 90.00  40.85 93.91  98.31 52.54  45.41 90.59 53.38 94.71   48.83 Gitaru   38.33 94.84 40.97 95.85  97.94 37.52 97.15   54.73 84.98 40.14 Kindaruma 70.50 87.1 29.14 90.29  99.58 35.07   90.81 32.58 71.98  85.18 47.09 Kiambere  97.0 52.38 97.29     49.95   99.13 78.58   Turkwel 105.00 98.1 50.18  43.72 98.90    98.08 78.12   90.59 51.09 Sondu Miriu  98.3 74.01 97.05 53.57 99.59  97.58 71.45 97.95  81.29 74.75  77.72 Sangor'o 20.00  73.81 81.72 51.54 99.72 75.50 95.49  94.01  80.20  0.00 0.00 Gogo 1.70  48.93    38.70    37.00  32.12  32.53 Sosiani 0.30 41.7 27.40 49.97 23.81  33.25  57.82 93.44 55.82 84.20 44.30 91.25  Weighted Factors (%) Total Effective Capacity 796.83 Weighted Factors - Hydros 93.92 45.81 94.06 47.84 98.04 52.76 85.75 45.00 93.55 56.53 91.03 63.64 88.64 48.24 Thermal Kipevu I     40.20 75.39 24.21    41.84 89.18 35.23  48.55 Kipevu III 115.00  58.93 93.05 50.84 97.84  95.57   52.04 93.85  92.92 51.82 Total Effective Capacity 175.00 Weighted Factors - Thermal 79.89 54.63 84.95 47.19 89.09 20.21 87.00 31.28 86.83 48.54 92.25 32.82 83.75 50.70 Geothermal Olkaria I 45.00 70.71  55.75 74.08 93.21  91.05  97.15 99.23 88.31  73.11 74.10 Olkaria I AU 140.00  92.82 93.37  88.37 88.49 89.52 73.77 Olkaria 2 101.00 94.44  94.33 89.37  93.19 90.71 85.49 79.70 92.20 78.79  85.50 94.50 Olkaria IV 141.52 98.03 91.29 95.38  94.78 83.04 91.05  Eburru 2.40 58.34 0.00 0.00 0.00 73.89   54.54 43.73    0.04 Wellhead 37 & 39 17.20 95.33 48.45  48.45  23.23 29.74 31.89  43.45  0.53  Wellhead 43 12.80  70.39  70.39 91.75 70.47 85.77 75.23 30.48 52.22 0.00 0.00 0.00 0.00 Wellhead 914,919,905 & 915 47.80 94.85    90.53 78.12   Total Effective Capacity 507.72 Weighted Factors - Geothermal 91.46 92.92 87.18 81.29 80.66 87.36 86.36 82.88 79.65 88.38 78.01 82.77 78.60 84.10 Gas Turbines Gas Turbine 28.00   87.04  80.51  73.09 0.87 87.14 17.18  11.24 42.00  Total Effective Capacity 28.00 86.04 22.66 87.04 22.66 80.51 20.66 Weighted Factors - GT's 86.04 22.66 87.04 22.66 80.51 20.66 73.09 0.87 87.14 17.18 36.94 11.24 42.00 6.28 Isolated Thermals Garissa (KenGen) 0.00 0.00 0.00 0.00 0.00  45.45 94.31 19.29 90.17 37.35  38.08 74.00 39.30 Garissa (Aggreko) 0.00 0.00 0.00 0.00 0.00 93.73  99.10  Lamu 0.00 0.00 0.00 0.00 0.00  47.58 87.30 44.04 87.27 48.04 90.98 35.84 88.29 39.21 Total Effective Capacity 0.00 Weighted Factors - Thermals 0.00 0.00 0.00 0.00 92.15 51.83 94.47 45.36 89.52 39.74 76.83 37.58 85.10 39.23 Wind Turbine Ngong I Phase I 5.10 55.19 29.01 71.83 29.01 82.03 29.70 74.90   39.38 70.00 31.15  38.05 Ngong I Phase II      84.58  84.34 27.74 Ngong II  73.82 21.73  29.11 81.23  89.50 32.97 Total Effective Capacity 25.50 Weighted Factors - Wind 74.72 24.54 79.03 28.47 82.28 25.29 85.20 28.85 91.63 39.38 70.00 31.15 69.30 38.05 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 KENYA ELECTRICITY GENERATING COMPANY PLC Notes. %ZEMPEFMPMX]ERH0SEH*EGXSVMWE4IVGIRXEKI 221 SHAREHOLDERS CALENDAR SHAREHOLDERS CALENDAR KENYA ELECTRICITY GENERATING COMPANY PLC 222 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Notice of the Annual General Meeting 224 6KDUHKROGHU1RWL¼FDWLRQV  Proxy Form 229 Bank Details 231 Unclaimed Dividends 231 Declaration of Dormancy on Inactive CDS Accounts 231 Notes 232 KenGen 2016 Shareholders Tour at Ngong Wind Farm KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 223 SHAREHOLDERS CALENDAR Notice of the Annual General Meeting NOTICE IS HEREBY GIVEN THAT THE SIXTY-SIXTH ANNUAL GENERAL MEETING of the Company will be held at the Kasarani Gymnasium, Thika Road, Nairobi on Tuesday, 11 December 2018 at 11.00 a.m. to conduct the following business: ORDINARY BUSINESS 1. To table the proxies and note the presence of a quorum. 2. To read the Notice convening the meeting.  8SGSRWMHIVERHMJETTVSZIHEHSTXXLI'SQTER]´WEYHMXIH½RERGMEPWXEXIQIRXWJSVXLI]IEVIRHIH.YRI together with the Chairman’s, Directors’ and Auditors’ Reports thereon.  8SETTVSZIXLITE]QIRXSJE½REPHMZMHIRHSJ SV/WLWTIVSVHMREV]WLEVISJ/WLWWYFNIGXXS [MXLLSPHMRKXE\[LIVIETTPMGEFPIMRVIWTIGXSJXLI½RERGMEP]IEVIRHIH.YRI 5. To approve payment of Directors’ fees for the year ended 30 June 2018.  %YHMXSVW To note that the audit of the Company’s books of accounts will continue to be undertaken by the Auditor-General SVEREYHMX½VQETTSMRXIHF]LMQMREGGSVHERGI[MXL7IGXMSRSJXLI4YFPMG%YHMX%GX  8SEYXLSVMWIXLI(MVIGXSVWXS½\XLIVIQYRIVEXMSRSJXLI%YHMXSVW 8. To elect Directors: (i) Mr. Henry Rotich, who retires on rotation in accordance with Article 104 of the Articles of Association of the Company and being eligible, offers himself for re-election as a Director of the Company. (ii) Mr. Joseph Sitati, who retires on rotation in accordance with Article 104 of the Articles of Association of the Company and being eligible, offers himself for re-election as a Director of the Company. (iii) Mr. Maurice Nduranu who retires on rotation in accordance with Article 104 of the Articles of Association of the Company and being eligible, offers himself for re-election as a Director of the Company.  -REGGSVHERGI[MXLXLITVSZMWMSRWSJ7IGXMSRSJXLI'SQTERMIW%GXXLIJSPPS[MRKHMVIGXSVWFIMRK members of the Audit, Risk & Compliance Committee of the Board be elected to continue to serve as members of the said Committee: (i) Mr. Joseph Sitati (Subject to his re-election to the Board as per Agenda item 8 (ii)) (ii) Mr. Humphrey Muhu, Alternate to Henry Rotich (Cabinet Secretary - The National Treasury) (iii) Mrs. Ziporah Ndegwa (iv) Mrs. Phyllis Wakiaga (v) Mr. Kairu Bachia 10. To consider any other business for which due notice has been given. By Order of the Board Paul K. Ndungi Company Secretary 19 November 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 224 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 NOTES: 1. A member entitled to attend and vote at the meeting and who is unable to attend is entitled to appoint a proxy to attend and vote on his or her behalf. A proxy need not be a member of the Company.  %4VS\]*SVQQE]FISFXEMRIHJVSQXLI'SQTER]´W[IFWMXIEX[[[OIRKIRGSOIVIKMWXIVIHSJ½GISJXLI 'SQTER]4IRWMSR4PE^E/SPSFSX6SEH4EVOPERHW2EMVSFMSVSJ½GIWSJXLI'SQTER]´WWLEVIWVIKMWXVEV½VQ Image Registrars Limited, Barclays Plaza 5th Floor, Loita Street, Nairobi. 3. To be valid, the Proxy Form, must be duly completed by a member and must either be lodged at the registered SJ½GIWSJXLI'SQTER]´WWLEVIWVIKMWXVEV½VQ-QEKI6IKMWXVEVW0MQMXIH&EVGPE]W4PE^EXL*PSSV0SMXE7XVIIX43 &S\+432EMVSFMSVFITSWXIHSVWGERRIHERHIQEMPIHXSMRJS$MQEKIGSOIMR4(*JSVQEXWSEWXS reach Image Registrars not later than Friday, 7 December 2018 at 11.00 a.m. 4. In the case of a member being a Limited Company, the Proxy Form must be completed under its Common Seal SVYRHIVXLILERHSJERSJ½GIVSVEXXSVRI]HYP]EYXLSVMWIHMR[VMXMRK 5. In accordance with Article 137 of the Articles of Association of the Company, a copy of the entire Annual Report & Accounts may be viewed on the Company’s website at www.kengen.co.ke or a printed copy may be obtained JVSQXLI6IKMWXIVIH3J½GISJXLI'SQTER]/IR+IR4IRWMSR4PE^E/SPSFSX6SEH4EVOPERHW2EMVSFM43&S\ +432EMVSFM KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 225 SHAREHOLDERS CALENDAR Ilani ya Mkutano Mkuu wa kila Mwaka ILANI INATOLEWA KWAMBA MKUTANO MKUU WA KILA MWAKA WA SITINI NA SITA wa Kampuni utaandaliwa katika Kasarani Gymnasium, Thika Road, Nairobi, jumanne, Decemba kumi na moja, 2018 saa tano asubuhi kuendesha shughuli zifuatazo: SHUGULI ZA KAWAIDA 1. Kuwasilisha majina ya wawakilishi na kutambua kuwepo kwa idadi ya kutosha ya wanachama kuendesha shughuli. 2. Kusoma Ilani ya kuandaa mkutano. 3. Kuchunguza na iwapo itaidhinishwa, kupitisha taarifa za kifedha za Kampuni zilizokaguliwa kwa mwaka uliomalizika 30 Juni 2018, pamoja na Ripoti za Mwenyekiti, Wakurugenzi na Wahasibu zilizoambatanishwa. 4. Kupitisha malipo ya mgao wa mwisho wa asilimia 33% au senti 0.40 kwa kila hisa ya kawaida ya shilingi mbili senti hamsini ikitegemea ushuru wa kushikilia inavyohitajika, kuhusiana na kipindi cha matumizi ya fedha kilichomalizika 30 Juni 2018. 5. Kuidhinisha malipo ya ujira ya Wakurugenzi kwa mwaka uliomalizika 30 Juni 2018.  ;ELEWMFY Kutambua kuwa ukaguzi wa vitabu vya hesabu vya Kampuni utaendela kutekelezwa na Mhasibu Mkuu au kampuni ya uhasibu atakayoteua kwa mujibu wa Sehemu ya ishirini na tatu ya Sheria ya Uhasibu ya 2015. 7. Kuidhinisha Wakurugenzi kuamua mshahara wa Wahasibu. 8. Kuchagua Wakurugenzi Kwa mujibu wa Kifungu mia moja na nne cha Katiba ya Kampuni na kwa kuwa Wakurugenzi hawa wanastaafu kwa mzunguko na wanahitimu, wanajitokeza kuchaguliwa tena kama Wakurugenzi wa Kampuni: (i) Bw. Henry Rotich (ii) Bw. Joseph Sitati (iii) Bw. Maurice Nduranu  /[EQYNMFY[EOMJYRKYGLEGLEWLIVME^E/EQTYRM^E[EOYVYKIR^M[EJYEXESEQFESRM[EREGLEQE [EOEQEXM]E&SHM]EYOEKY^MQEHLEVEREQEE½OMERS[EGLEKYPM[IMPMOYIRHIPIEOYLYHYQYOEQE[EREGLEQE[E kamati hiyo: (i) Bw. Joseph Sitati (kutokana na uchaguzi wake tena kwa Bodi kama Agenda item 8 (ii)) (ii) Bw. Humphrey Muhu, Mbadala kwa Henry Rotich (Katibu wa Baraza la Mawaziri - Hazina ya Taifa) (iii) Bi. Ziporah Ndegwa (iv) Bi. Phylis Wakiaga (v) Bw. Kairu Bachia 10. Kungalia shughuli zingine zile ambazo ilani imepeanwa. Amri ya Bodi Paul K. Ndungi /EXMFY[E/EQTYRM 19 Novemba 2018 KENYA ELECTRICITY GENERATING COMPANY PLC 226 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 MAELEZO 1. Mwanachama aliye na haki ya kudhuhuria na kupiga kura kwenye mkutano na ambaye hana uwezo wa kufanya hivyo anaweza kuteua mwakilishi kuhudhuria na kupiga kura kwa niaba yake. Si lazima mwakilishi awe mwanachama wa Kampuni.  *SQY]E9[EOMPMWLMMRE[I^EOYTEXMOEREO[IR]IXSZYXM]E/EQTYRM[[[OIRKIRGSOIE½WMOYY^E/EQTYRM4IRWMSR 4PE^E/SPSFSX6SEH4EVOPERHW2EMVSFMEYE½WM^EWLMVMOEPELMWE^E/EQTYRM-QEKI6IKMWXVEVW0MQMXIH&EVGPE]W Plaza Ghorofa ya Tano, Loita Street, Nairobi.  -PMOY[ELEPEPM*SQY]E9[EOMPMWLMRMPE^MQEMNE^[IOMOEQMPMJYREQ[EREGLEQEREOY[EWMPMWL[EO[EE½WM^EWLMVMOE la hisa za Kampuni, Image Registrars Limited, Barclays Plaza Ghorofa ya tano, Loita Street, SLP 9287, 00100 GPO, 2EMVSFMEYOYXYQ[EO[ERNME]EFEVYETITIO[EMRJS$MQEKIGSOIO[EQYYRHS[E4(*MPMOY½OME-QEKI6IKMWXVEVW kabla ya Ijumaa, 7 Decemba 2018 saa tano asubuhi. 3. Iwapo ni mwanachama wa kampuni ya dhima yenye kikomo, hii fomu ni lazima ijazwe chini ya nembo yake au QFIPI]EE½WEEY[EOMPMEQFE]IEXEMHLMRMWL[EO[EQEERHMWLM 4. Kwa mujibu wa Kipengee 137 cha Katiba ya Kampuni, nakala ya Ripoti nzima ya Kila Mwaka na Hesabu inaweza OYTEXMOEREO[IR]IXSZYXM[[[OIRKIRGSOIEYREOEPEMPM]SGLETMWL[EMTEXMOERIO[IR]IE½WMOYY^E/EQTYRM7XMQE Plaza, Kolobot Road, ParklanHW2EMVSFM704¯+432EMVSFM KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 227 SHAREHOLDERS CALENDAR 7LEVILSPHIV2SXM½GEXMSRW )LQDO'LYLGHQGIRUWKH¼QDQFLDO\HDUHQGHG-XQH Closure of Register and Date of Payment The Register of Members will be closed from 13 to 14 December, 2018 both dates inclusive. If approved, the dividend will be paid, less withholding tax where applicable on or about Thursday, 7 February 2019 to the shareholders whose names appear in the Register of Members at the close of business on Tuesday, 11 December 2018. Update of Particulars • For all CDS accountholders, please update your postal address, email address and bank account details at the CDSC through your Stockbroker or Custodian Bank. • *SVEPP7LEVI'IVXM½GEXILSPHIVW please update your postal address, email address and bank account details at the SJ½GIWSJ-QEKI6IKMWXVEVW0XH&EVGPE]W4PE^EXL*PSSV0SMXE7XVIIX43&3<+432EMVSFM Taarifa ya Mwenyehisa Mgao wa Mwisho kwa Kipindi cha Matumizi ya Fedha kilichomalizika Juni 30, 2018 Kufungwa kwa Rejista na Tarehe ya Malipo Rejista ya wanachama itafungwa kuanzia 13 hadi 14 Decemba, 2018 siku zote zikiwemo. Ikiwa itaidhinishwa, mgao wa faida utalipwa baada ya kuondoa ushuru wa kushikilia mnamo au karibu 7 Februari, 2019, kwa wenyehisa ambao majina yao yamo 11 Decemba, 2018. Kuteng’eneza Upya/Kurekebisha Maelezo • Kwa wote walio na akaunti za CDS, tafadhali toa maelezo mapya kuhusu anwani yako, barua pepe na akaunti ya benki katika CDSC kupitia wakala wako wa hisa au Benki Angalizi. • Kwa wote walio na vyeti vya kumili hisa, tafadhali toa malezo upya kuhusu anwani yako ya posta, barua pepe na QEIPI^SOYLYWYEOEYRXM]EOS]EFIROMOEXMOEE½WM^E-QEKI6IKMWXVEVW&EVGPE]W4PE^EKLSVSJE]EXERS1EQE2KMRE Street, SLP 9287-00100 GPO Nairobi. KENYA ELECTRICITY GENERATING COMPANY PLC 228 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Proxy Form P.O. Box 47936 – 00100 GPO NAIROBI I/WE………………………………………………....of ……………………………..…… being a member of the above Company, hereby appoint: ………………………………..……of………………………………………….………. or failing him/her ………………….………..….. of ………………………………………... failing whom, the Chairman of the Meeting, as my/our proxy, to vote for me/us and on my/our behalf at the Annual General Meeting of the Company to be held on Tuesday, 11 December 2018 and at any adjournment thereof. As witness my/our hand this ……………………. day of …………………………….2018. Signed …………………………………………………………………… Notes: 1. A member entitled to attend and vote is entitled to appoint one or more proxies to attend and vote in his stead and a proxy need not be a member of the Company. 2. In the case of a member being a Limited Company this form must be completed under its Common Seal or under XLILERHSJERSJ½GIVSVEXXSVRI]HYP]EYXLSVMWIHMR[VMXMRK 3. The Proxy Form must be delivered to Image Registrars Limited not later than Friday, 7 December 2018 at 11.00 a.m. Proxy Forms should be sent by Post to Image Registrars of P O Box 9287, 00100 Nairobi. Alternatively, duly signed proxies can be scanned and emailed to info@image.co.ke in PDF format. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 229 SHAREHOLDERS CALENDAR Fomu ya Uwakilishi S.L.P. 47936 – 00100 GPO NAIROBI MIMI/ SISI …………………………………………………… wa ……………………………………………………… kama mwanachama wa Kampuni iliyotajwa hapa juu, namteua: …………………………………………………… wa …………………………………………au akikosa …………………………………………………………………… wa …………………………… ……………………. na iwapo hataweza kuhudhuria, mwenyekiti wa Mkutano, kama mwakilishi wangu/wetu, kupiga kula kwa niaba yangu/yetu katika Mkutano Mkuu wa Kila Mwaka wa Kampuni utakaoandaliwa mnamo 11 Decemba 2018 au wakati wowote ule endapo utaahirishwa. Kama mashahidi sahihi yangu/yetu………… ………………………. siku ya …………………… 2018 Sahihi …………………………………………………………………… Maelezo: 1. Mwanachama aliye na haki ya kuhudhuria na kupiga kura ana haki ya kuteua mwakilishi mmoja au zaidi kuhudhuria na kupiga kura kwa niaba yake na sio lazima mwakilishi awe mwanachama wa Kampuni. 2. Iwapo ni mwanachama wa kampuni ya dhima yenye kikomo, hii fomu ni lazima ijazwe chini ya nembo yake au QFIPI]EE½WEEY[EOMPMEQFE]IEXEMHLMRMWL[EO[EQEERHMWLM 3. Fomu ya Uwakilishi ni lazima iwasilishwe kwa Image Registrars kabla ya Ijumaa, 7 Decemba 2018 saa tano asubuhi. Fomu za Uwakilishi zinapasa kutumwa kwa Posta kwa Image Registrars wa SLP 9287, 00100 Nairobi. Badala yake, fomu za uwakilishi zilizojazwa na kutiwa sahihi zinaweza kutolewa nakala na kutumwa kwa baruapepe info@image. co.ke kwa umbo la PDF. KENYA ELECTRICITY GENERATING COMPANY PLC 230 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 Bank Details ;IIRGSYVEKIEPPWLEVILSPHIVW[LSLSPHGIVXM½GEXIWERH[LSWIHMZMHIRHWEVITEMHZMEGLIUYIWXSTVSZMHIXLIMVFERO HIXEMPWXSSYV'SQTER]´WWLEVIWVIKMWXVEV½VQ-QEKI6IKMWXVEVW0MQMXIH&EVGPE]W4PE^EXL*PSSV0SMXE7XVIIX2EMVSFM43 &S\+432EMVSFM8IP email: info@image.co.ke to enable us post the future dividends directly to their bank accounts. Also, we encourage all shareholders who hold CDSC accounts and whose dividends are paid via cheques to provide their bank details through their stockbrokers to enable us post the future dividends directly to their bank accounts. Unclaimed Dividends Further to the Unclaimed Financial Assets Act 2011, we are appealing to Shareholders who have unclaimed dividends to do so with immediate effect to avoid the dividends being surrendered to the Unclaimed Financial Assets Authority. (MZMHIRHIRUYMVMIWGERFIQEHIEXXLI7LEVIW 7IGYVMXMIW3J½GI/IR+IR4IRWMSR4PE^E/SPSFSX6SEH4EVOPERHW 2EMVSFM43&S\2EMVSFM8IPIQEMPWLEVIW$OIRKIRGSOISVSJ½GIWSJXLI 'SQTER]´WWLEVIWVIKMWXVEV½VQ-QEKI6IKMWXVEVW0MQMXIH&EVGPE]W4PE^EXL*PSSV0SMXE7XVIIX2EMVSFM43&S\ +432EMVSFM8IPIQEMPMRJS$MQEKIGSOI Declaration of Dormancy on Inactive CDS Accounts The Central Depository and Settlement Corporation Limited (CDSC) has formulated, and the Capital Markets Authority has approved, the CDS Accounts Dormancy Rules and Procedures. The declaration of dormancy is intended to safeguard investors’ holdings in CDS accounts. An investor will not be able to carry out any transactions in a CDS Account that has been declared dormant. CDSC has granted a grace period of seven (7) months beginning June 1st 2018 to December 31st 2018 before the declaration of dormancy is effected. Pursuant to the Dormancy Rules, CDS Accounts (Individual or Corporate, Local or Foreign) with no activity for a continuous period of twenty four (24) months as at December 31st 2018 will be declared dormant on January 1st 2019. CDS account holders are advised that one may re-activate a dormant account by submitting a duly completed re- EGXMZEXMSRVIUYIWXERHMHIRXM½GEXMSRHSGYQIRXWXSXLIMV'(%SVWXSGOFVSOIV%GGSYRXLSPHIVWEVIJYVXLIVEHZMWIHXS visit their CDAs or stockbrokers to update their account details and ensure that names, ID or passport number, postal address, email address, mobile phone number(s) and other information is accurately recorded. KENYA ELECTRICITY GENERATING COMPANY PLC INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 231 SHAREHOLDERS CALENDAR Notes KENYA ELECTRICITY GENERATING COMPANY PLC 232 INTEGRATED ANNUAL REPORT & FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2018 HEAD OFFICE KenGen Pension Plaza 2 Kolobot Road, Parklands P. O. Box 47936, 00100 GPO Nairobi, Kenya Tel: +254-20-3666000 Mobile: +254-711-036000 / +254-732-116000 Fax: 254-20-2248848 E-mail: pr@kengen.co.ke ADDRESSES OF STATIONS Olkaria Geothermal Power Stations P.O. Box 785 - 20117, Naivasha Tel: 050 - 20233/4 / 050 - 2021223 Fax: 050 - 2021223 Mobile: 0722 202894 / 0722 202895 Western Hydro Power Stations P.O. Box 874 - 40100, Kisumu Tel: 057 - 2023800 Fax: 057 - 2023855 Mobile: 0728 608203 / 0738 600078 Eastern Hydro Power Stations P.O. Box 205 - 60100, Embu Tel: 020 - 2310323 Fax: 020 - 2310324 Mobile: 0722 509500 / 0735 826344 Thermal Power Stations P.O. Box 80801 - 80100, Mombasa Tel: 041 - 3435000/1 / 041 - 3434876 Fax: 041 - 3435431 Mobile: 0722 2653900 / 0734 600377 HEAD OFFICE KenGen Pension Plaza 2 Kolobot Road, Parklands P. O. Box 47936, 00100 GPO Nairobi, Kenya www.kengen.co.ke KenGenKenya KenGenKenya