The Kenya Power & Lighting Co. Ltd.

Our Vision
To achieve world class status as a quality service business enterprise so as to be the first choice supplier of electrical energy in a competitive environment.

Our Mission
To efficiently transmit and distribute high quality electricity throughout Kenya at cost effective tariffs; to achieve the highest standards of customer service; and to ensure the company's long term technical and financial viability.

KPLC Quality Policy

The Kenya Power and Lighting Co. Ltd. is committed to providing high quality customer service by efficiently transmitting and distributing electricity that is safe, adequate and reliable at cost effective tariffs.

The Board, Management and staff of KPLC are committed to effective implementation and continual improvement of the Quality Management System that complies with ISO 9001:2000 in order to consistently meet its customers and other stakeholders requirements and expectations.

www.kplc.co.ke

Contents
2 Board of Directors 3 Corporate Information

Biographies of Directors

M a n a g e m e n t Te a m

Notice of the Annual General Meeting

Ilani ya Mkutano

Chairmans Review

10

Mtazamo wa Mwenyekiti

12

Management Report

17

Ta a r i f a y a Wa s i m a m i z i

22

Corporate Social Responsibility Report

24

Ta a r i f a K u h u s u U s h i r i k i a n o n a J a m i i

27

Corporate Governance Statement

32

Ta a r i f a y a M w o n g o z o w a K a m p u n i

37

Report of the Directors

38

Statement of Directors Responsibilities

39

Report of the Controller and Auditor- General

40

Income Statement

41

Balance Sheet

42

Statement in Changes in Equity

43

Cash Flow Statement

44

Notes to the Financial Statement

65

Statistical Information

KPLC Annual Report An D ACCOUNTS 2005-2006

KPLC BOARD OF DI RECTORS

Seated left to right: Zachary O Ayeiko, Patrick Nyoike, Eng. Alfred Sambu, Don Priestman and Dr Susan M Musyoka. Standing left to right: Laurencia K Njagi*, Aram M Mbui, Solomon Kitungu, Ngugi Kiuna, Eng. Swaleh S Imu, Nganga Munyu, Fidesius M Nyagah and Edwin Wasunna. *L Njagi Company Secretary

THE KENYA POWER & LIGHTING COMPANY LIMITED CORPORATE INFORMATION

Directors Eng. Alfred W Sambu Eng. Jasper Oduor Zachary Ayieko Joseph Kinyua Patrick M Nyoike Edwin Wasunna Dr. Susan M Musyoka Fidesius M Nyaga Eng. Swaleh S Imu Ngugi Kiuna Aram M Mbui Solomon Kitungu Nganga Munyu Secretary Laurencia K Njagi P O Box 30099-00100 Nairobi Stima Plaza Kolobot Road P O Box 30099-00100 Nairobi Standard Chartered Bank Kenya Limited Harambee Avenue P O Box 20063-00200 Nairobi Kenya Commercial Bank Limited Moi Avenue P O Box 30081-00100 Nairobi Cooperative Bank of Kenya Limited P O Box 48231-00100 Nairobi Stanbic Bank Kenya Limited Kenyatta Avenue P O Box 30550-00100 Nairobi Auditors Ernst & Young, Nairobi On behalf of The Controller and Auditor-General P O Box 30084-00100 Nairobi Principal Legal Advisers Hamilton Harrison & Mathews, Advocates ICEA Building P O Box 30333-00100 Nairobi Chairman Managing Director (Left in June 2006) Managing Director (Appointed in June 2006)

Alternate to Joseph Kinyua Alternate to Patrick Nyoike

Registered Office

Main Bankers

KPLC Annual Report An D ACCOUNTS 2005-2006

DIRECTORS BIOGRAPHIES
The biographies of Directors holding office as at the date of this Report are shown below:
1.

6.

Dr. Susan Mbinya Musyoka, MB, CHB, MPH Dr. Susan Musyoka was born in 1956. She holds a Bachelors degree in medicine and surgery and a Masters degree in public health. She has over 20 years experience in medical health practice and community leadership.

Eng. Alfred Wekesa Sambu, BSc (Eng.), R. Eng., MIEE, MIEK - Board Chairman Alfred Sambu was born in 1944. He holds a Bachelor of Science degree in electrical engineering and has experience in both public and private sectors, having worked in the telecommunications industry for the previous East African Community for over ten years rising to the position of Chief Long Range Planning & Resource Co-ordinator in charge of World Bank funded projects; in private sector for over five years as commercial director of International Aerodio, and thereafter in private business.

7.

Mr. Edwin Wasunna, BSc (Eng.) Mr. Edwin Wasunna was born in 1938 and holds a Bachelor of Science degree in electrical engineering. He has over 30 years experience in the power sector. Mr. Wasunna worked in senior management positions in the Company until 1997, when he was appointed Managing Director of Kenya Electricity Generating Company Limited (KenGen), a position he held until 2002.

2. Zachary Ogamba Ayieko BCom, CPA (K) Managing Director Mr. Zachary Ayieko was born in 1955 and holds a Bachelor of Commerce degree. He has experience, which spans over 27 years in the power sector. Mr. Ayieko is also a Certified Public Accountant and a member of the Institute of the Certified Public Accountants of Kenya. He joined the Company in 1979 and rose through the ranks until his appointment as Managing Director in June 2006. Prior to his appointment as Managing Director, Mr. Ayieko was Chief Manager, Finance, of the Company. 3. Mr. Patrick Mwaura Nyoike, BSc (Econ.), B.Phil (Math) Mr. Patrick Nyoike is the Permanent Secretary, Ministry of Energy. He was born in 1947 and holds Bachelors degrees in mathematics and economics. He has over 30 years experience in public service. Prior to his appointment as Permanent Secretary in 2003, he was the Chief Economist and Co-ordinator of World Bank funded projects in the Ministry of Energy. 4. Mr. Joseph Kinyua, BSc (Econ.), MA (Econ.) Mr. Joseph Kinyua, who was born in 1951, is the Permanent Secretary to the Treasury. He has Bachelors and Masters degrees in economics. Mr. Kinyua has wide experience in financial and public sector management, having worked in senior positions with the International Monetary Fund, the Central Bank of Kenya and in Government. 5. Mr. Ngugi Kiuna, BSc (Eng.) Mr. Ngugi Kiuna, BSc (Eng.), was born in 1949. He holds a Bachelor of Science degree in mechanical engineering. He has wide experience spanning over 30 years in private sector financial and strategic management. Mr. Kiuna is the Managing Director of Johnson Diversey E.A. Ltd.

8.

Eng. Swaleh Salim Imu, MSc (Power Eng.), R. Eng., MIEK Eng. Swaleh Imu was born in 1948. He holds a Master of Science degree in power engineering and has experience gained over 28 years working in KPLC, KenGen and Kenya Pipeline Company Limited.

9.

Mr. Fidesius Muchira Nyaga, BA (Econ & Acc), CPA(K), CPS (K), FCIS Mr. Fidesius Nyaga was born in 1944. He holds a Bachelor of Arts degree in accounting and economics and is a Certified Public Accountant and Secretary with over 30 years experience in financial management.

10.

Mr. Aram Mutema Mbui, BSc, (Eng.), Mem. ASAE:MKIM Mr. Aram Mbui was born in 1953. He holds a Bachelor of Science degree in mechanical engineering and has post-graduate training in irrigation engineering. Mr. Mbui worked for over ten years in public and private sectors and is the Managing Director of the Rift Valley Machinery Services Limited. He has served as Chairman of the Society of Agricultural Engineers and is currently National Chairman of the Federation of Kenya Employers.

11.

Mr. Solomon Kitungu, BSc (Econ), MA (Econ) - Alternate Director to Mr. Joseph Kinyua
Mr. Solomon Kitungu was born in 1961. He holds Bachelors and Masters degrees in economics. He has immense experience in enterprise supervision and reforms and is the Director of Reforms, Department of Government Investments and Public Enterprises in the Treasury.

12.

Mr. Nganga Munyu, BSc, MSc Alternate Director to Mr. Patrick Nyoike
Mr. Nganga Munyu was born in 1957. He has Bachelors and Masters degrees in science. Mr. Munyu has experience spanning over 20 years as a planner in the Ministry of Energy.

KPLC Annual Report AnD ACCOUNts 2005-2006

MANAGEMENT TEAM

General Manager & Chief Executive Officer (From 1st July 2006) Don Priestman. MSc. Eng. (Economic Planning), B.A. Sc.(Civil), P. Eng. (Canada)

Managing Director (From June 2006) Zachary Ayieko, BCom, CPA (K)

Deputy General Manager, Distribution & Customer Service (From 1st July 2006) Shahid Muhammad, MBA (Finance), MSc (Electrical), P. Eng. (Canada)

Deputy General Manager, Finance & Corporate Services (From 1st July 2006) H. Mack Kast, BCom, C.A.

Company Secretary Laurencia K Njagi, LLB, Dip. in Law, CPS (K)

Chief Manager, Distribution and Customer Service Eng. John Ombui, BSc (Eng.), MBA, R. Eng., MIEK, MIEE

Chief Manager, Energy Transmission Eng. Richard Muiru, BSc (Eng.), MSc (Eng.), R. Eng., MIEK

Chief Manager, Supplies, Stores & Transport Eng. Benson Muriithi, BSc (Eng.), R. Eng.

Chief Manager, Information Technology and Telecommunications Eng. Johnson ole Nchoe, BSc (Eng.), R. Eng.

Chief Manager, Finance Lawrence Yego, CPA (K)

Chief Manager, Human Resources & Administration Ben Chumo, BA

Chief Manager, Planning, Research and Performance Monitoring Eng. David M. Mwangi, BSc (Eng.) R. Eng., MIEK

Chief Manager, Nairobi Region Eng. Joseph K. Njoroge, BSc (Eng.), MBA, R. Eng., C. Eng., MIEE, MIEK

Regional Manager, Coast Joseph Mkomba, BSc (Eng.)

Regional Manager, West Joseph Masibo, BSc (Eng.)

Regional Manager, Mount Kenya Rosemary K. Gitonga, BSc (Eng.)

KPLC Annual Report An D ACCOUNTS 2005-2006

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN THAT THE EIGHTY-FIFTH ANNUAL GENERAL MEETING of Members of the Company will be held at Stima Members Club, Thika Road, Nairobi, on Friday 8th December 2006 at 11:00 a.m. to transact the following business:1. 2. 3. To table the Proxies and note the presence of a quorum. To read the Notice convening the Meeting. To receive and consider the Companys audited financial statements for the year ended 30th June 2006, together with the Chairmans, Directors and Auditors Reports thereon. To approve payment of a first and final dividend of 7.5% or Shs.1.50 per ordinary share of Shs.20, subject to withholding tax where applicable, in respect of the year ended 30th June 2006. To elect Directors: (i) Mr. Ngugi Kiuna retires by rotation in accordance with Article 120 of the Memorandum and Articles of Association of the Company and, being eligible, offers himself for re-election; (ii) Mr. Joseph Kinyua retires by rotation in accordance with Article 120 of the Memorandum and Articles of Association of the Company and, being eligible, offers himself for re-election; (iii) Mr. Edwin Wasunna retires by rotation in accordance with Article 120 of the Memorandum and Articles of Association of the Company and, being eligible, offers himself for re-election. 6. To approve payment of fees to non-executive Directors for the year ended 30th June 2006 within the limits set by the Government of Shs.360,000 per Director, totalling Shs.3,200,000. Auditors: To note that the audit of the Companys books of accounts will continue to be undertaken by the Controller and Auditor-General or an audit firm appointed by him in accordance with Section 11 of the State Corporations Act, (as amended by the Miscellaneous Law Amendment Act, 2002) and Sections 14 and 39 (i) of the Public Audit Act, 2003. 8. To authorise the Directors to fix the Auditors remuneration.

4.

5.

7.

By Order of the Board

Laurencia K. Njagi Company Secretary P. O. Box 30099-00100 Nairobi, Kenya 3rd November, 2006

NOTES: A member entitled to attend and vote at the above meeting may appoint one or more proxies to attend and, on a poll, to vote instead of him. A proxy need not be a member of the Company. A Form of Proxy is enclosed with this booklet. To be valid, the Form of Proxy must be duly completed and lodged at the registered office of the Company, Stima Plaza, or posted in time to be received not later than 11.00 a.m. on 6th December 2006

KPLC Annual Report AnD ACCOUNts 2005-2006

ILANI YA MKUTANO MKUU WA KILA MWAKA

ILANI IMETOLEWA KWAMBA MKUTANO MKUU WA THEMANINI NA TANO WA KILA MWAKA wa wanachama wa kampuni utafanywa katika Stima Club, barabara ya Thika, Nairobi ijumaa tarehe 8 Desemba, 2006 saa tano asubuhi kujadili yafuatayo: 1. 2. 3. Kuorodhesha majina ya wawakilishi na kujua idadi ya waliohudhuria mkutano. Kusoma ilani ya kuitisha mkutano. Kupokea, kujadili na kuidhinisha taarifa za ukaguzi wa vitabu vya hesabu kwa kipindi kilichomalizikia tarehe 30 Juni 2006, pamoja na Mtazamo wa Mwenyekiti, Ripoti ya Wakurugenzi na Taarifa ya Mkaguzi Mkuu wa Uhasibu. Kuidhinisha malipo ya mgao wa kwanza na wa mwisho wa faida itakayotozwa ushuru ya shilingi 1.50 kwa kila hisa ya kawaida ya shilingi 20 katika kipindi kilichomalizikia tarehe 30 Juni 2006. Kuwachagua Wakurugenzi: (i) Bw. Ngugi Kiuna anajiuzulu kufuatana na kifungu cha 120 cha Kanuni za Kampuni na kwa kuwa anastahili, anajitolea kuchaguliwa tena. (ii) Bw. Joseph Kinyua anajiuzulu kuambatana na kifungu cha 120 cha Kanuni za Kampuni na kwa kuwa anastahili anajitolea kuchaguliwa tena. (iii) Dr. Edwin Wasunna anajiuzulu kuambatana na kifungu cha 120 cha Kanuni za Kampuni na kwa kuwa anastahili anajitolea kuchaguliwa tena. 6. Kuidhinisha malipo ya wakurugenzi wasio na mamlaka makuu ya mwaka unaomalizika 30 Juni 2006, bila kupitisha kiwango ambacho kimewekwa na serikali cha shilingi elfu 360 kwa kila mkurugenzi jumla ikiwa ni shilingi 3,200,000. Wakaguzi wa hesabu: Kufahamu kwamba ukaguzi wa vitabu vya uhasibu vya kampuni utaendelea kufanywa na mkaguzi mkuu wa hesabu au kampuni ya ukaguzi wa vitabu aliyoiteua kuambatana na kifungu cha 11 cha sheria ya mashirika ya serikali (kama ilivyorekebishwa na sheria ya marekebisho madogo ya mwaka 2002) na vifungu nambari 14 na 39 (i) vya sheria ya ukaguzi wa vitabu vya hesabu za umma ya mwaka 2003. 8. Kuidhinisha wakurugenzi kuamua malipo ya wakaguzi wa vitabu vya hesabu.

4.

5.

7.

Kwa agizo la Halmashauri

Laurencia K. Njagi Katibu wa Kampuni P. O. Box 30099-00100 Nairbi, Kenya 3 Novemba, 2006

KUMBUKA:

Mwanachama anayeruhusiwa kuhudhuria na kupiga kura kwenya mkutano uliotajwa hapo juu huenda akamteuwa wakala mmoja au zaidi kuhudhuria na kupiga kura baadala yake. Wakala sio lazima awe mwanachama wa Halmashauri ya kampuni. Fomu ya wakala inapatikana pamoja na kijitabu hiki. Ili ikubaliwe, fomu ya wakala lazima ikamilishwe na kuandikishwa katika ofisi ya usajili ya kampuni, Stima Plaza, au itumwe kwa wakati ufaao na kupokewa hapo tarehe 6 Decemba 2006 kabla ya saa tano asubuhi.

KPLC Annual Report An D ACCOUNTS 2005-2006

CHAIRMANS REVIEW
projects by development agencies under the Energy Sector Recovery Project. Release of the project funds aimed at enhancing the transmission and distribution system, reducing system losses and improving the quality of supply, commenced in July 2006 with the Power Purchased by Source (GWh) engagement of the management services contractor, 6,000 Manitoba Hydro International Limited. The implementation plans also include increasing the 4,000 number of customers. Under the management services contract, KPLC is expected to benefit from 2,000 exposure to international best practices.
0

The strategies in place, combined with the expected continued growth in the economy, gives the Board cause for optimism that your Company is poised for improved performance. Tribute

2001

2002

2003
HYDRO

2004

2005

2006
Sales

GEOTHERMAL

THERMAL

Finally, I wish to thank my fellow Directors, management and staff of the Company for their hard work which has enabled the impressive trading results during the year. I also thank our valued customers for their support and loyalty and assure them of our determination to continually improve the quality of our services.

ENG. ALFRED SAMBU CHAIRMAN

Working on a transformer: Constant investment in the distribution system improves quality of supply

KPLC Annual Report An D ACCOUNTS 2005-2006

MTAZAMO WA MWENYEKITI

ENG. ALFRED SAMBU

MTAZAMO KWA JUMLA Kipindi cha 2005/6 kilikuwa cha mafanikio makubwa ya utendakazi katika kampuni. Mwakani huo, kampuni iliweza kurekodi faida kabla ya kulipa ushuru ya shilingi milioni 2,498, ikilinganishwa na shilingi milioni 1,979 zilizopatikana mwaka uliotangulia. Hili ni ongezeko la asilimia 20%. Mauzo ya umeme yaliongezeka kwa asilimia 5.4 kutoka 4,215 GWh mwaka uliopita hadi 4,444 GWh. Ongezeko hili lilisababishwa na kuimarika kwa hali ya uchumi ambapo mapato kwa jumla ya nchi (GDP) yaliongezeka kutoka asilimia 4.3 mwakani 2004 hadi asilimia 5.8 mwakani 2005, na pia kutokana na ongezeka la idadi ya wateja wetu la asilimia 9 ikilinganishwa na asilimia 7.2 mwaka uliopita. kilichopatikana kutokana na ongezeko hilo kililipwa kwa wauzauji wa umeme wakubwa. Kiwango cha ununuzi wa nguvu za umeme zisizotumia mafuta kilishuka kwa kiasi cha shilingi milioni 159 hadi kufikia shilingi milioni 11,514, ikilinganishwa na cha shilingi milioni 11,673 cha mwaka uliotangulia. Haya yalitokana na kushuka kwa ada za malipo ya kampuni ya Iberafrica Power E.A. mwakani, kusimamishwa kwa kiwanda cha kampuni ya Westmont Power katika mwaka wa 2004-05, kupunguzwa kwa ununuzi wa nguvu za umeme kutoka Uganda, pamoja na kuimarika kwa shilingi ya Kenya dhidi ya dola. Malipo kwa wagawaji wa nguvu za umeme yaliongezeka kutoka shilingi milioni 5,277 hadi shilingi milioni 11,962, ambalo ni ongezeko la shilingi milioni 6,685 mwaka huo. Gharama ya usambazaji pamoja na ugawaji iliongezeka kwa zaidi ya shilingi milioni 460 kutoka shilingi milioni 9,274 hadi shilingi milioni 8,814 mwaka huo. Ongezeko la mwaka huo lilisababiswa na gharama kubwa ya kuwahudumia wafanyikazi, shughuli za utendaji kazi pamoja na gharama ya usimamizi. Bei kubwa ya mafuta na ya usambazaji pamoja na ugawaji ilichangia kwa kiasi kikubwa katika gharama za utendaji kazi kwa asilimia 20 kutoka shilingi milioni 27,172 mwaka huo hadi shilingi milioni 32,750. Mapato kutoka fedha yaliongezeka kutoka shilingi

UTENDAKAZI WA KIFEDHA Mapato ya umeme mwakani yaliongezeka hadi shilingi milioni 22,494 ikilinganishwa na shilingi milioni 21,755 mwaka uliopita. Hili ni ongezeko la shilingi milioni 739 au asilimia 3 ambalo lilitokana na
Power Purchased by Source (GWh)

6,000 4,000 2,000 0

2001 2002 2003
HYDRO

2004

2005

2006
Sales

GEOTHERMAL

THERMAL

ongezeko katika kiwango cha umeme kilichouzwa. Gharama ya mafuta iliongezeka kwa asilimia 74 kutoka shilingi milioni 6,586 hadi shilingi milioni 11,473 kutokana na ongezeko la bei ya mafuta katika masoko ya kimataifa na pia katika ongezeko la uzalishaji wa umeme kupitia mitambo inayotumia mafuta. Hata hivyo, kiwango chote cha fedha

10

KPLC Annual Report AnD ACCOUNts 2005-2006

MTAZAMO WA MWENYEKITI
milioni 138 mwaka uliotangulia hadi shilingi milioni 292 kutokana na malipo ya pesa za akiba yaliyoimarika na kuboresha kiwango cha riba. Ushuru Kampuni ilirekodi faida ya shilingi milioni 1,644 ikilinganishwa na shilingi milioni 1,270 mwaka uliotangulia, baada ya kulipa kodi ya shilingi milioni 854. Mgao wa Faida Wakurugenzi wanapendekeza malipo ya mgao wa kwanza na wa mwisho wa asilimia 7.5 au shillingi 1.50 kwa kila hisa ya kawaida ya shilingi 20 ambazo zitatolewa ushuru katika kipindi kilichomalizika tarehe 30 Juni, 2006. Ikiidhinishwa, mgao wa faida unatarajiwa kulipwa mnamo tarehe 15 Desemba 2006. MTAZAMO WA SIKU ZIJAZO Hali ya kifedha ya kampuni imeendelea kunawili kwa kipindi cha miaka mitatu sasa. Tunatarajia kudumisha utendakazi huo kutokana na kutolewa kwa fedha za kutekeleza mradi wa ESRP wa kuboresha mtandao wa usafirishaji na usambazaji wa nguvu za umeme na wafadhili. Kutolewa kwa fedha hizo za kuboresha mtandao wa usafirishaji na usambazaji, kupunguza upotevu wa nguvu za umeme kwenya mtandao na kuboresha hali ya nguvu za umeme kulianza Julai 2006 wakati msimamizi mpya kutoka kampuni ya Manitoba Hydro International alipochukua uongozi. Utekelazaji wa mradi huu pia utahusu kuongeza wateja zaidi. Pia, wakati wa kandarasi hiyo, inatarajiwa kwamba KPLC itanufaika kutokana na mbinu za kisasa za kufanya kazi. Binu bora za usimamizi ambazo tayari zimewekwa pamoja na ukuaji wa u c h u m i z i n a w a p a Wakurugenzi moyo kwamba kampuni yenu itazidi kunawili. Shukurani Mwisho, ningependa kutoa shukurani zangu kwa wakurugenzi wenzangu, wasimamizi na wafanyikazi wa kampuni kwa kujitolea katika kufikia malengo ya shirika katika mwaka wa ukaguzi. Pia nawashukuru wateja wetu tunaowadhamini kwa kutuunga mkono na kwa imani yao, na tunawahaki-kishia j u h u d i z e t u z a kuendelea kuboresha ubora wa huduma zetu.

ENG. ALFRED SAMBU MWENYEKITI

Customers in the banking hall: A more customer-friendly connection policy has been put in place.

KPLC Annual Report An D ACCOUNTS 2005-2006

11

MANAGEMENT REPORT

MR. DON PRIESTMAN GENERAL MANAGER & CEO

MR. ZACHARY AYIEKO MANAGING DIRECTOR

THE ELECTRICITY NETWORK The Energy Sector Recovery Project (ESRP)

Management Services Contractor

Significant milestones were achieved under the largely donor-funded US$153 million Distribution System Reinforcement and Upgrade component of the Energy Sector Recovery Project (ESRP), which is aimed at improving the efficiency, reliability and quality of supply, as well as increasing access to electricity. In June 2006, the Company signed a

Distribution & Customer Service) and Mr. H. Mack Kast (Deputy General Manager, Finance & Corporate Services). MHI has also provided other specialists in specified areas on short-term basis to carry out studies in identified priority areas with a view to improving performance. MHI is required to achieve defined stringent performance targets within the two years, which include connection of 120,000 new customers per annum; reduction of system losses by 4% over two years, reduction of electricity supply outages from 11,000 to 3,000 per month and improvement of operational efficiency. We are pleased to note that the performance during the current financial year against targets is satisfactory. In addition, the management contractor will implement the distribution system upgrade projects being financed under the Energy Sector Recovery Project and carry out staff training and management development. Engagement of the management contractor satisfied one of the major conditions for the release of funds for the distribution system upgrade by the World Bank and other lenders participating in financing of the Energy Sector Recovery Project. Consequently, the implementation of the project has already commenced. The management contract arrangement is expected to enhance the operational and financial performance of the Company, improve the quality of the electricity supply to customers, while at the same time inculcating international best practices in the Company. The distribution system reinforcement and upgrade component of the ESRP is funded by the International Development Association (US$43.5 million), Agence francaise de Developpement (US$25 million), European Investment Bank (Euros 41 million) and Nordic Development Fund (Euros 10 million).

General Manager, Don Priestman, exchanges contracts for upgrade of the Mt Kenya radio system with Motorolla Israel Area Manager for East Africa, Mr Jossef Levy.

management contract with Manitoba Hydro International (MHI) following a competitive bidding process for provision of management services for a period of two years with effect from 1st July 2006. The Management Contract satisfied the condition precedent for disbursement under the ESRP financing arrangements. Under the contract, MHI has provided three full time staff, namely, Mr. Don Priestman (General Manager & Chief Executive Officer), Mr. Shahid Muhammad (Deputy General Manager,

12

KPLC Annual Report AnD ACCOUNts 2005-2006

MANAGEMENT REPORT
Consultancy contracts for the upgrade of the supervisory control and data acquisition/energy management system (SCADA/EMS) and the distribution system reinforcement were signed with Fichtner and Norconsult AS of Norway, in September and July 2005, respectively. The contract for supply, installation and commissioning of the 66kV CathedralNairobi West cable has been awarded to Socabelec SA of Belgium, and the work is expected to be completed by end of April 2007. The contract for supply and installation of Mt Kenya radio equipment has been awarded to Motolora Israel Ltd. and work is expected to be completed by the end of October 2007. The bidding process for the other components is at the final stages of completion and the execution of works is expected to commence within the current financial year. Meanwhile, the environmental impact assessment of all the projects under the ESRP is complete and approved by the National Environment Management Authority (NEMA). Transmission System Expansion and Upgrade In January 2005, the Company obtained a concessionary loan from the Government of the Peoples Republic of China through the Government of Kenya of about US$ 20 million to finance the construction of a 132kV 115 km line between Kamburu and Meru and a 61 km 132kV transmission line between Chemosit and Kisii. Implementation of these two projects by Messrs China CAMC Engineering Company commenced in July 2006 and will be completed by August 2008. These projects will reduce system losses and significantly improve the quality of power supply in the respective areas. In the meantime, work on a 132kV line to connect the 60MW Sondu Miriu Hydro Power Station, which is under construction, to the national grid, commenced during the year. The project, which is expected to be completed by December 2007, is being undertaken by Kinden Corporation of Japan and is financed by the Japanese Government. MombasaNairobi Line In view of the additional thermal generation expected in the Coast, a feasibility study on the Mombasa to Nairobi transmission line is being carried out by Vattenfall of Sweden with funding from Agence francaise de Developpement. The study is expected to be completed by December 2006. Distribution System Expansion and Upgrade Garsen District Headquarters received electricity from the national grid for the first time following construction of a 70km 33kV line from Malindi. Three other 33kV lines - Musaga-Simbembe, Nakuru-Elburgon and LanetNyahururu were constructed and completed during the same period at a cost of Shs.254 million. Construction of Bahati and Baba Dogo in Nairobi has been completed at a cost of Shs.425 million, and Mogogosiek sub-station in West Kenya was upgraded at a cost of Shs.19.3 million. In order to improve the quality of electricity supply and enable connection of new customers, construction of four new sub-stations at Mweiga and Marima (both in Mt. Kenya), Kisumu East (West Kenya) and Kapsabet (North Rift) commenced during the year. The four projects are scheduled to be completed within the 2006 - 2007 financial year at an estimated cost of Shs.225 million. CUSTOMER SERVICE E-Bill Service The Company continues to take advantage of appropriate modern technology to enhance customer convenience in electricity billing services. In August 2005, we launched an electronic bill query system, branded E-Bill, which enables customers to access their account balances electronically through email. This was followed by the E-bill SMS service which was launched in June 2006. This facility enables customers to obtain their electricity account balances through their mobile phones. The facility has enhanced bill

Managing Director, Zachary Ayieko, launches the E-Bill SMS account query service, which has greatly enhanced customer service.

KPLC Annual Report An D ACCOUNTS 2005-2006

13

MANAGEMENT REPORT
payments as well as reduced queues in the banking halls. Customer Charter During the year, the Company drafted a Customer Charter, which describes in a clear, concise and simplified way, the service standards customers can expect from us. The formulation of the Charter is a demonstration of the great importance we place on the provision of the highest quality service to customers. The charter expresses KPLCs commitment to giving a courteous, efficient, professional, high quality customer service. The Charter was discussed with customers and other stakeholders at a meeting in June 2006 and will be issued once it is approved by the Electricity Regulatory Board. Customer Connection Policy In June 2004, the Company developed a new market-friendly and customer focused connection policy, aimed at reducing costs and accelerating power supply connections to new customers. The salient features of the policy included reduction and standardisation of certain categories of connection charges, proactive marketing targeting group schemes, creation of a revolving fund from which economically viable group schemes are financed and the money so advanced recovered afterwards. The policy is currently under review by a consultant Electricite de France (EDF) - of France with a view to enhancing the Companys capacity to increase the customer base, which will increase sales and profitability, while at the same time contributing towards the Governments objective of increasing electricity access to Kenyans. In the meantime, the Company has addressed some identified challenges which have previously adversely constrained acceleration of customer base expansion. The twopronged approach entails enhancement of capacity of internal construction teams, appointment of more external contractors, improvement of availability of materials in our stores and proactive marketing. These strategies have achieved remarkable success. GENERATION CAPACITY During the year, the generation capacity adequately met energy demand. The maximum daily peak demand recorded was 916MW compared to 884MW the previous year, an increase of 3.6%, against an effective generation capacity of 1,094MW, and a reserve capacity margin of 19%. Because the long rains during the year were not evenly distributed, the storage dams at the Kenya Electricity Generating Company Limited (KenGen) hydro power stations did not fill to capacity. To avert power shortages, the Government, through KenGen contracted additional 100MW of diesel power capacity from Aggreko Ltd., which was installed at KPLCs 132/66kV Industrial Area sub-station under emergency arrangement. Supply from the Aggreko plant commenced in June 2006. In the meantime, an additional 393MW of power capacity is planned for installation in the country at different times by December 2008 in line with the Governments National Power Development Plan. Out of this, KenGen will develop 248MW, and private sector investors 145MW. As part of this arrangement, KPLC is at an advanced stage of concluding evaluation of tenders for an independent power plant for development of a diesel plant with a capacity of between 80 - 90MW. The plant will be located at Rabai, Mombasa and is projected to be operational by June 2008. REGIONAL INTERCONNECTION Kenya-Ethiopia Inter-connector During the year, the governments of Kenya and Ethiopia reached an agreement to cooperate on the joint development of a high voltage transmission line to interconnect the national grids of the two countries and the joint development of electricity generation facilities in Ethiopia. As part of this cooperation, KPLC and the Ethiopian Electric Power Corporation (EEPCO) signed a memorandum of understanding in May 2006, containing a work plan for the projects implementation. Currently, the two countries plan to carry out a feasibility study for the transmission line inter-connector. The African Development Bank (ADB) and Development Bank of Southern Africa (DBDA) have been approached for funding of the study. At the same time, KenGen and EEPCO signed a memorandum of understanding on joint development of some hydro resources in Ethiopia. Kenya-Tanzania Inter-connector Project Commercial negotiations were completed in July 2006, for a project to import electricity from Tanzania. The project involves construction of a 260 km 330kV transmission line between Arusha and Nairobi. Project funds are expected to be available by April 2007 and the project is expected to be completed by 2010.

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MANAGEMENT REPORT
Nile Basin Initiative A 21 month study, which will culminate in preparation of tender documents for four interconnection projects under the Nile Equatorial Lakes Subsidiary Action Programme (NELSAP), commenced in February 2006. The interconnection projects are: Kenya-Uganda; Uganda-Rwanda; Rwanda-Burundi; and Rwanda-Democratic Republic of Congo. The study is expected to be completed by November 2007. The interconnection projects will facilitate trade in electricity among the countries involved, depending on which country has capacity at any one time. The feasibility study includes the Jinja-Lessos 220kV line, which is required after 2010 when Uganda is expected to export firm electricity to Kenya. RURAL ELECTRIFICATION A total of Shs.834 million was spent on various projects under the Governments Rural Electrification Programme (REP) during the year. This brought the cumulative capital expenditure since inception of the programme in 1973 to Shs.9,331 million. The amount spent during the year included Shs.211 million and Shs.18 million on the French and Stabex funded projects, respectively. A total of Shs.1,085 million was collected from the Rural Electrification Levy during the year compared to Shs.1,046 million the previous year. The number of customers connected under the programme grew by 8.8% to 110,724 up from 101,793 the previous year. Units sold increased by 13.4% from 164 million to 186 million, and revenue realised grew by 27.4% from Shs.1,208 million the previous year to Shs.1,539 million. system expansion programme and for the schemes covered under French Phase I-funded distribution system expansion project were also completed during the year. The tender for procurement of a contractor for the schemes covered under Phase III of the Spanish funded distribution system expansion programme was completed and the commercial agreement signed between the Company and the contractor. Implementation of this phase is now awaiting execution of a financial agreement between the governments of Kenya and Spain. A consultant for the implementation of schemes covered under Phase II of the French funded distribution system expansion project, was identified during the year. The procurement of the other contractors and the subsequent commencement of works is expected during the current financial year. HUMAN RESOURCES As at 30th June 2006 the Company had a total staff complement of 6,202 and a staff productivity ratio of 129:1. This compares with a total staff complement of 6,130 and a staff productivity ratio of 120:1, as at 30th June 2005. The Company continues to invest in its human capital through comprehensive staff training and development programmes. During the year under review, over 6,000 employees attended various training programmes both locally and overseas. Industrial harmony was maintained throughout the year under review. In this regard, the Collective Bargaining Agreement (CBA) for calendar years 2005 and 2006 was signed on 1st July 2005. In recognition of long service and dedicated accident free driving, the Company held a ceremony during which 262 long serving employees and 731 accident-free drivers received various awards and bonuses. HIV/Aids In view of the devastating effect that HIV/Aids pandemic has caused on the family 2006 unit, our business and the economy, the Company launched an HIV/Aids policy in June 2005. Consequently, employees and their immediate families can now access free antiretroviral drugs through the various Company appointed Medicare service providers.

REP Customers

100000 80000 60000 40000 20000

2001

2002

2003

2004

2005

Survey and design works for factories shortlisted for Coffee Factories Rural Electrification Programme (COFREP) Phase II were completed during the year. The service line connections for the schemes covered under Phase II of the Spanish-funded distribution

KPLC Annual Report An D ACCOUNTS 2005-2006

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MANAGEMENT REPORT
INFORMATION COMMUNICATION TECHNOLOGY (ICT) SERVICES Information Communication Technology (ICT) Services continued to support the business by maintaining and enhancing efficiency in billing and customer care, revenue collection, supply chain management, power systems operations and maintenance. ICT was also instrumental in the development of the E-bill facility and is working on other innovations that will enable customers to pay their bills through mobile telephony as well as through other partners, such as selected supermarket chains. An upgrade of the ICT infrastructure commenced during the year, which will enable the Company to enhance customer service and satisfaction. CONCLUSION As we look into the future, our resolve is to continually strive to enhance shareholders value, expand our customer base and improve the quality of supply to our customers. The Company will continue to refine and implement the strategies applied during the last three years, which have so far achieved remarkable success in improving the financial sustainability of the Company.

DON PRIESTMAN GENERAL MANAGER & CEO

ZACHARY AYIEKO MANAGING DIRECTOR

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KPLC Annual Report AnD ACCOUNts 2005-2006

TAARIFA YA WASIMAMIZI

BW. DON PRIESTMAN GENERAL MANAGER & CEO

BW. ZACHARY AYIEKO MANAGING DIRECTOR

MFUMO WA UMEME Mradi wa Ufufuzi wa Sekta ya Kawi (ESRP)

Zabuni ya huduma za usimamizi

Utekelezaji, uboreshaji, na uimarishaji wa mitambo ya ugawaji umeme chini ya mpango wa ufufuzi wa sekta ya kawi (Energy Sector Recovery Project (ESRP)) ni mradi utakaogharimu dola milioni 153 kutoka kwa wadhamini. Lengo lake ni kuimarisha usambazaji bora na wakutegemewa wa umeme, na vile vile kuongeza upatikanaji wa umeme. Mnamo Juni 2006, kampuni iliweka sahihi mkataba wa usimamizi na kampuni ya Manitoba Hydro International (MHI) baada ya zabuni iliyoshindaniwa, ili kuwatafuta wasimamizi wa kuhudumu kwa kipindi cha miaka miwili kuanzia Julai mosi, 2006. Hatua ya kuteua wasimamizi ilitimiza matakwa yakuwezesha fedha za kugharamia mradi wa ESRP kutolewa. Chini ya mkataba huo, kampuni ya Manitoba ilitoa wafanyikazi wa kulipwa watatu, wao

Kampuni ya Manitoba inatarajiwa kutimiza utendakazi katika kipindi cha miaka miwili ijayo, ambao utajumuisha kuunganishwa kwa wateja wapya 120,000 kila mwaka; kupunguza upotevu wa nguvu za umeme katika mitambo kwa asilimia 4; kupunguza visa vya kukatizwa kwa nguvu za umeme kutoka mara 11,000 hadi mara 3,000 kila mwezi; na uboreshaji wa huduma za utendaji kazi. Niko na furaha kutambua juhudi za utendaji kazi katika kipindi hiki. Matumizi ya pesa ni jambo ambalo limelengwa ipasavyo na la kuridhisha. Pamoja na hayo, msimamizi wa zabuni za utendakazi atatekeleza mradi wa ESRP wa dola milioni 153 wa kuboresha ugawaji, na kuendeleza mpango wa kuwafunza wafanyikazi katika taaluma mbali mbali za utendaji kazi. Kuteuliwa kwa msimamizi wa kampuni kwa mda wa miaka miwili, kulishangia ufunguzi wa fedha za mradi wa ESRP kutoka kwa wadhamini, ikiwemo Banki ya Dunia. Mradi huo tayari unaendelea. Maafikiano ya kandarasi ya usimamizi wa kampuni unatarajiwa kuimarisha juhudi za utendakazi ikiwa ni pamoja na kuimarisha maswala ya kifedha katika kampuni, uboreshaji ulioimarika wa utoaji nguvu za umeme kwa wateja wetu, na wakati huo huo tukisisitiza umuhimu wa kudumisha utendakazi wa hali ya kimataifa katika kampuni. Sehemu ya ESRP ambayo itajumuisha uboreshaji wa mtandao wa usambazaji wa nguvu za umeme unadhaminiwa na shirika la International Development Association kwa dola milioni 43.5, Agence francaise de Developpement kwa dola milioni 25, European Investment Bank kwa Euro milioni 41 na Nordic Development Fund kwa Euro milioni 10. Zabuni ya ustawishaji wa mtandao wa kuwezesha kampuni kunakiri habari na matukio kwenye mitambo na pia kuiendesha mitambo hiyo kwa kifupi SCADA/EMS, na pia ile ya uboreshaji wa huduma ya

wakiwa ni Bw. Don Priestman ( Meneja mkuu na pia afisa mkuu msimamizi), Bw. Shahid Muhammad (Naibu meneja mkuu anayesimamia ugawaji na huduma za wateja) na Bw. H Mack Kast (Naibu meneja mkuu anayesimamia hazina na huduma za kampuni). Kampuni ya Manitoba vile vile inatoa wataalamu katika nyanja tofauti kwa vipindi vifupi ili kufanya utafiti wa kutambua maeneo ambayo yanafaa kupewa kipao mbele ili kuboresha utendakazi.

KPLC Annual Report An D ACCOUNTS 2005-2006

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TAARIFA YA WASIMAMIZI
usambazaji ziliwekwa sahihi na kampuni za Fichtner na Norconsult AS za Norway, mnamo Septemba na Julai 2005. Zabuni ya kuleta na kuweka nguzo za umeme chini ya ardhi za 66kV kutoka kituo kidogo cha Nairobi West hadi kile cha Cathedral ndani ya mji wa Nairobi tayari imetolewa kwa Socabelec SA ya Belgium, na kazi inatarajiwa kukamilika mwishoni mwa Aprili, 2007. Zabuni ya kuweka mtambo wa redio katika eneo la mlima Kenya umetolewa kwa kampuni ya Motolora Israel Ltd. na kazi inatazamiwa kukamilishwa mwisho wa Octoba 2007. Mpango wa maagizo ya zabuni zilizosalia uko katika hatua za mwisho, na kuanzishwa kwa kazi kunatarajiwa katika kipindi kilichopo sasa cha mwaka. Utafiti wa athari za kimazingira katika miradi yote ilio chini ya ESRP umekamilika na kuidhinishwa na wasimamizi wakuu wa mazingira wa National Environment Management Authority (NEMA). Upanuzi na uboreshaji wa mitambo ya usafirishaji wa nguvu za umeme Mnamo Januari 2005, kampuni ilipokea mkopo wa riba ya chini kutoka serikali ya jamhuri ya China kupitia serikali ya Kenya wa kiasi cha dola milioni 20 kugharamia ujenzi wa laini ya usafirishaji wa nguvu za umeme ya 132kV ya ubali wa kilomita 115 kati ya Kamburu na Meru na ingine ya kilomita 61 kati ya Chemosit na Kisii. Utekelezaji wa miradi hiyo miwili na Kampuni ya China CAMC Engineering Company Ltd. ulianza mnamo Julai 2006, na unatazamiwa kukamilishwa mnamo Agosti 2008. Miradi hiyo itapunguza upotevu wa umeme kwa kiwango kikubwa na kuboresha ustahilifu wa Taking a emergency calls at the Stima Plaza Call Centre: KPLC is nguvu za umeme katika maeneo husika. committed to good customer service. Wakati huo huo, kazi ya kujenga laini ya 132kV ya kuunganisha kiwanda cha Ili kuboresha ustahili wa nguvu za umeme megawati 60 cha Sondu Miriu Hydro Power Station zinazotolewa na kufanikisha uunganishaji wa wateja na mtandao wa kitaifa iliyoanza mwakani ingali wapya, ujenzi wa vituo vya stima vidogo vipya huko inaendelea. Mradi huo, ambao unatarajiwa Mweiga na Marima (Mt Kenya), Kisumu East ( West kukamilika ifikapo Desemba 2007, unatekelezwa na Kenya ) na Kapsabet (North Rift) ulianza mwakani. Kinden Corporation ya Japan na unadhaminiwa na Miradi hiyo minne inatazamiwa kukamilika katika serikali ya Japan. kipindi cha mwaka huu wa kifedha kwa gharama ya shilingi milioni 225. Laini ya usafirishaji nguvu za umeme ya Nairobi-Mombasa Kutokana na ongezeko la utoaji wa nguvu za umeme kutokana na mitambo ya kutumia mafuta linalotarajiwa huko pwani, utafiti wa laini ya usafirishaji kutoka Mombasa hadi Nairobi unafanywa na kampuni ya Vattenfall ya Sweden kupitia udhamini kutoka Agence francaise de Developpement. Utafiti huo unatarajiwa kukamilika Desemba 2006. Upanuzi na uboreshaji wa mpango wa ugawaji Makao makuu ya wilaya ndogo ya Garsen yalipata umeme kwa mara ya kwanza baada ya kujengwa kwa laini ya 33kV ya ubali wa kilomita 70 kutoka Malindi. Laini zingine tatu za 33kV za MusagaSimbembe, Nakuru-Elburgon na Lanet-Nyahururu zilijengwa na kukamilishwa katika kipindi hicho, kwa gharama ya shilingi milioni 254. Ujenzi wa vituo vidogo vya stima vya Babadogo na Bahati mjini Nairobi ulikamilika mwanzo wa kipindi cha mwaka huu wa kifedha kwa gharama ya shilingi milioni 425. Kituo kidogo cha Mogogosiek magharibi mwa Kenya kiliboreshwa kwa gharama ya shilingi milioni 19.3.

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KPLC Annual Report AnD ACCOUNts 2005-2006

TAARIFA YA WASIMAMIZI
HUDUMA KWA WATEJA Barua pepe ya E-Bill Kampuni imeendelea kuzindua binu zinazotumia teknolojia ya kisasa kuimarisha namna wateja watakavyoendelea kupokea bili zao. Kwenye kipindi hicho, tulianzisha mpango wa kuulizia bili za umeme kwa njia ya barua pepe (e-mail) inayoitwa E-Bill, ambayo ilizinduliwa rasmi mwezi Agosti 2005. Mpango huo humwezesha mteja kupata ujumbe kwenye kompyuta yake unaomjulisha kiasi cha pesa anachodaiwa kwa ajili ya matumizi ya umeme. Huduma hii ilifuatiliwa na ile ya ujumbe mfupi ama SMS kwenye simu ya rununu ambayo mteja anatumia kuulizia pesa anazohitaji kulipia matumizi ya nguvu za umeme, ambao ulianzishwa Juni 2006. Mkataba na Wateja Mwaka uliopita, kampuni iliandikiana mkataba na wateja wake, ambao unaelezea kwa kina na kwa njia ya kueleweka, kiwango cha huduma ambazo wanaweza kutarajia kutoka kwetu. Utekelezaji wa mkataba huo ni dhihirisho kamili la kujitolea kwa kampuni kutoa kiwango cha juu cha huduma bora kwa wateja wetu. Mkataba huu unaelezea kujitolea kwa kampuni yetu kutoa huduma za kuridhisha na za hali ya juu kwa wateja wake. Mkataba huu ulijadiliwa na wateja wetu na washikadau wengine katika mkutano uliyofanyika Juni 2006 na utatekelezwa unachunguzwa na wataalamu kutoka Electricite de France (EDF) ya Ufaransa, ukiwa na lengo la uimarishaji wa idadi ya wateja ili kuongezea mapato na faida ya kampuni, na wakati huo huo kuchangia katika malengo ya serikali ya kuongeza upatikanaji wa nguvu za umeme kwa umma. Hivi sasa, kampuni imetambua vizingiti vingine na inajishughulisha kuvikwamua, ambazo hapo awali zilikuwa ni pingamizi kubwa katika upanuzi wa idadi ya wateja. Suluhisho ni kuimarishwa kwa vikundi vya ujenzi vya kampuni, pamoja na kuwaajiri makampuni ya wanakandarasi wa kutoka nje, na pia kustahilisha upatikanaji wa vitu na vyombo vya ujenzi katika maghala yetu, hizi zote zikiambatana na kuimarisha ushawishi wa watu. UZALISHAJI WA NGUVU ZA UMEME Hapo mwakani, kiwango cha utoaji wa nguvu za umeme kilitosheleza mahitaji yote ya kawi. Kilele cha megawati 916 cha mahitaji ya umeme kilirekodiwa katika mwaka kikilinganishwa na megawati 884 mwaka uliyotangulia, hii ikiwa ni ongezeko la asilimia 3.6, dhidi ya uwezo wa utoaji wa kiwango cha megawati 1,094 ikiwa na hifadhi ya asilimia 19. Kwa sababu mvua ya vuli ilionyesha mwakani haikunyesha kila mahali kama ilivyotarajiwa, vidimbwi vya kuhifadhia maji vya Kenya Electricity Generating Company Limited (KenGen) vya nguvu za umeme havikujaa maji kiwango kinachotakikana. Ili kuepukana na upungufu wa nguvu za umeme, serikali ilitoa zabuni ya nyongeza ya megawati 100 kutoka mitambo ya kutumia diseli ya Aggreko Limited, ambayo iliwekwa kando ya kituo kidogo cha KPLC cha 132/33kV kilichoko viwandani jijini Nairobi kupitia mpango maalum wa dharura. Utoaji kutoka kiwanda cha Aggreko ulianza mnamo Juni 2006. Wakati huo huo, nyongeza nyingine ya megawati 393 ya nguvu za umeme inatarajiwa kuwekwa nchini kufikia Desemba 2008, kufuatia mpango wa serikali wa maendeleo ya nguvu za umeme. Katika nyongeza hiyo, KenGen itatoa megawati 248 na wawekezaji katika sekta ya kibinafsi megawati 145. Kama mshikadau katika mpangilio huu, KPLC imo katika hatua za mwisho za kutamatisha ukaguzi wa zabuni kwa mwekezaji wa kiwanda cha kipekee cha kuendeleza mtambo wa diseli wa kiwango cha kati ya megawati 8090. Mtambo huu utawekwa huko Rabai, Mombasa, na unatazamiwa kuanza kufanya kazi mnamo Juni 2008.

mara tu utakapoidhinishwa na halmashauri inayosimamia shuguli zote za umeme ya ERB.

Mpango wa kuunganisha wateja Mnamo Juni 2004, kampuni ilianzisha mpango mpya wa kuunganisha wateja wapya kwa kuwaleta pamoja, ambao unalenga kupunguza ada zinazotozwa na kuongeza idadi ya wateja wapya. Cha muhimu katika mpangilio huu ni pamoja na kupunguzwa kwa malipo mbali mbali ya uunganishaji ambao madhumuni yake yanalenga miradi ya vikundi, na kubuniwa kwa hazina maalum ambayo inadhamini miradi ya vikundi hivyo. Mpango huo tayari

KPLC Annual Report An D ACCOUNTS 2005-2006

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TAARIFA YA WASIMAMIZI
Utekelezaji wa mpango huu utaanza punde tu Kenya na Uhispania zikifikia mkataba wa kifedha. Mshauri wa utekelezi wa miradi katika awamu ya pili ya mpango uliogharamiwa na Ufaransa wa upanuzi wa mtandao wa usambazaji umeme ambayo itaanza mbele ya ile miradi ya awamu ya tatu, aliteuliwa katika mwaka huo. Uteuzi wa wanakandarasi watakaotekeleza miradi mingine utakamilika wakati wa kipindi cha matumizi cha mwaka huu. WAFANYIKAZI Kufikia 30 Juni 2006 kampuni ilikuwa imewaajiri wafanyikazi wapatao 6,202 na uzalishaji wa kima cha asilimia 129:1 ikilinganishwa na idadi ya wafanyikazi 6,130 na uzalishaji wa kima cha 120.1 kufikia 30 June 2005. Kampuni iliendelea kudumisha wafanyikazi wenye ujuzi mkubwa ili kukabiliana ipasavyo na malengo ya Kampuni, kwa kuwapa mafunzo na kuwastawisha kama njia ya kuhakikisha kwamba wana ujuzi na uwezo unaohitajika kufanya kazi zao. Katika mwaka huu wafanyikazi 6,000 walihudhuria mipango mbali mbali ya masomo na warsha muhimu, humu nchini na ngambo. Uhusiano mwema na wafanyikazi ulidumishwa mwaka huo wote. Makubaliano ya kikazi baina ya wafanyikazi na kampuni ya mwaka wa 2005 na 2006 yalipitishwa na kuwekwa sahihi Julai 2005. Kama ishara ya kutambua wafanyikazi wetu ambao wamehudumu kwa kipindi kirefu na wengine kwa kuendesha magari ya kampuni bila kusababisha ajali, kampuni iliwatuza wafanyikazi 262 ambao wamefanya kazi kwa muda mrefu, pamoja na madereva 731 ambao hawakusababisha ajali. Wote hawa walipewa zawadi mbali mbali pamoja na malipo ya ziada. Masilahi ya wafanyikazi Kutokana na madhara ambayo yamesababishwa na ugonjwa hatari wa ukimwi na virusi vya HIV yanayoadhiri jamii nyingi, biashara yetu, na uchumi wote kwa jumla, kampuni ilianzisha mpango wa HIV/Aids mnamo Juni 2005. Katika mpango huu, wafanyikazi pamoja na jamii zao za karibu sasa wanaweza kupata madawa ya kukabiliana na ukimwi ya bure ya ARVs kupitia madaktari ama hospitali zilizoorodheshwa na kampuni. HUDUMA ZA TEKNOLOJIA YA MAWASILIANO YA HABARI - ICT. Teknolojia ya mawasiliano na habari, ICT, iliendelea kuchangia shughuli za kampuni mwaka huo. ICT ilichangia kudumisha na kuongeza ubora wa kudai malipo pamoja na maslahi mengine ya wateja, ukusanyaji wa mapato, ununuzi wa bidhaa muhimu, mpangilio wa mtandao wa umeme na ukarabati wake. Idara ya ICT vile vile ilikuwa ni kiini cha kubuniwa kwa huduma ya E-Bill na inaendelea kutayarisha miradi mingine mipya ambayo itawawezesha wateji wetu kulipa bili zao kupitia simu ya rununu, na pia kupitia washiriki wengine kama vile maduka kadhaa makubwa. Uimarishaji wa mtandao wa ICT ulianza mwakani, na utaiwezesha kampuni kutoa huduma bora na za kuridhisha kwa wateja. MWISHO Tukiangazia macho matarajio yalio mbele yetu, makusudio yetu hasa ni kuendelea kufanikisha ongezeko la mapato ya wenye hisa, kuongeza idadi ya wateja wetu na kuboresha huduma kwa wateja wetu. Kampuni itaendelea kustawisha na kutekeleza mbinu zilizoanzishwa miaka mitatu iliopita, ambazo zimeleta mafanikio makubwa katika uimarishaji na udumishaji wa hali ya kifedha ya kampuni.

DON PRIESTMAN GENERAL MANAGER & CEO

ZACHARY AYIEKO MANAGING DIRECTOR

KPLC Annual Report An D ACCOUNTS 2005-2006

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CORPORATE SOCIAL RESPONSIBILITY REPORT

In recognition of its obligations as a responsible corporate citizen, the Board of Directors and management sustained the Companys participation in corporate activities that enhance the social, economic and environmental interests that affect its internal and external stakeholders. The Environment Our business has been a major beneficiary of wood products. We have, therefore, undertaken to contribute towards national afforestation initiatives in collaboration with the Forest Department. Since 1999, the Company has sustained a tree-planting programme at Timboroa Government Forest, with seedlings propagated at our own tree nursery in Eldoret, which has a capacity of 300,000 seedlings. Presently, we have replanted 52 hectares of forest, 10 of them during the period under review. The first 8,500 trees will be ready for harvesting in 2007. At the same time, we distributed over 100,000 free seedlings during the year, to farmers and members of the public in the region, as our initiative to encourage tree growing on private land. Also, as further encouragement to individual farmers to grow trees for domestic and commercial use, we have developed a procurement system that enables them to sell raw wood poles to wood curing plants, for eventual use in construction of electricity distribution lines. Society We are conscious of the needs of the society in which we operate and, consequently, we have endeavoured to contribute to initiatives that impact on improvement of their social well-being. We particularly target the less privileged members of the society, and in this connection the Company together with staff donated Shs.2 million in 2006 towards the National Famine Relief Fund, to assist hunger stricken communities across the country. Also, the Kenya Paraplegic Organisation was the beneficiary of a Shs.30,000 donation from the Company, to assist it offer better quality care to its charges. The Company also donated Shs.120,000 towards the Dettol-Mater Heart Run, which collects funds to facilitate heart operations for children from deprived backgrounds. We also supported causes that address community needs such as the Standard Chartered Nairobi Marathon, which raises funds to facilitate provision of medical assistance and health education to communities in various parts of our country, by sponsoring a corporate team at Shs.75,000 during the year under review. In December 2005, staff made various donations to worthy causes, with the largest donation of Shs.140,000 being made by Nairobi Region staff to the Nairobi Womens Hospital. Stakeholders As a service provider that is well aware of its obligations to its customers, we drafted a Customer Charter detailing our obligations to them. We invited customers under the umbrella of resident associations and other interest groups to a meeting to debate and suggest how to enhance our services. Consequent to this interaction and in recognition of

A stakeholder makes a point during a consultative meeting

the value of partnerships and dialogue in order to better understand the needs of our customers, we subscribed to membership of the Kenya Association of Resident Associations (KARA) and facilitated a quarterly meeting for members at a cost of Shs.300,000, where important issues relating to utility services delivery were discussed. We also partnered with umbrella organisations whose activities impact on the wellbeing of our customers and business community. We contributed Shs.25,000 to the Energy Management Awards, which is organised by the Kenya Association of Manufacturers to assist its members to maximise utilisation of electricity in their production processes. We donated a further Shs.20,000 to ICPAK for the Financial Reporting (FIRE) awards, which is a programme to encourage public and private enterprises to observe high standards and transparency in their financial reporting and disclosure. Being a valued member of the Federation of Kenya Employers, we facilitated a major meeting of employers during the period at a cost of Shs.150,000. We also facilitated the first centenary event for Africa of the International Electromechanical Commission at a cost of

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CORPORATE SOCIAL RESPONSIBILITY REPORT

Shs.267,510, as the main sponsors. It was hosted by the Kenya committee of the commission in which a number of Company employees are involved, and the Kenya Bureau of Standards. In the knowledge that many Kenyans living in urban, peri-urban and rural areas have not connected to the grid due to financial outlay required on their part, the Company has developed a more customer friendly scheme dubbed Umeme Pamoja that enables groups of people in the same locality to enjoy economies of scale by making joint applications. The Company has also reduced connection charges for potential customers within 600-meter radius of a transformer, which has encouraged many people to pay up and get connected. Stakeholder Awareness In order to facilitate awareness and understanding of various aspects and nature of our service, we carried out various awareness campaigns through print and electronic media and also organised face-to-face meetings with a view to reach a wide cross section of our customers and other stakeholders. Our Human Capital It is in our interest to continue investing in the development of our human capital as a prerequisite to meeting expectations of our employees and customers. Consequently, we continued to offer various groups of our employees training opportunities to learn new skills and develop careers, locally and abroad. All employees also undergo an annual performance appraisal, which includes identification of training and development needs. Also, our commitment to provide them with competitive working conditions remained a cardinal tenet of our corporate policy, and employees enjoy basic pay, medical care and membership to a pension scheme in addition to various other allowance packages, where applicable. Some employees are also shareholders of the Company. Various formal and informal interaction forums have been provided to enable dialogue between employees and the management such as regular meetings, in-house publications, internal e-mail and team briefing. Special facilities like dedicated e-mail addresses, telephone lines and suggestion boxes, which staff may use to whistle blow about sensitive issues, are available in all regions. During the period under review, we launched a comprehensive HIV/Aids policy, and circulated a booklet on the policy to all staff. It advocates behavioural change and outlines expanded care that is now available to affected staff, through a Shs.5 million annual package for anti-retroviral intervention under our medical care scheme. Education Our support to education-related initiatives stems from the fact that the pool of skilled manpower that help to drive the success of our Company are a product of the countrys education system. We, therefore, continued to provide opportunities for attachment for university students and those from tertiary institutions, to enable them acquire a handson experience and fulfil a requirement for graduation. During the year under review, 201 students went through the attachment programme at KPLC.

KPLC Chairman, Eng. Alfred Sambu, launches the KPLC HIV/Aids Policy, which supports members of staff and their families.

ENG. ALFRED SAMBU CHAIRMAN

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TAARIFA KUHUSU USHIRIKIANO NA JAMII

Katika kutambua jukumu lake kama shirika ambalo linawajibika kijamii, Halmashauri ya wakurugenzi pamoja na wasimamizi waliendelea kudumisha mfumo wa kampuni wa kushiriki katika miradi ya kijamii, ambayo iliendeleza moyo wa kuzingatia mambo yote ambayo yanajumuisha washikadau wote wa jamii, uchumi, pamoja na mazingira. Mazingira Biashara yetu huwa hasa inategemea kwa wingi bidhaa zinazotokana na miti. Kwa hivyo, tumeamua kuchukua jukumu la kuchangia mradi wa kitaifa wa huu itakuwa tayari kuvunwa 2007. Vile vile, kama njia nyingine ya kuwapa motisha wakulima tofauti wakuze miti kwa matumizi ya nyumbani na ya kuuza, tumeanzisha mpango mpya wa ununuzi ambapo wakulima wanaweza kuuzia kampuni miti iliyokatwa ikiwa mbichi. Baadaye, miti hiyo mbichi itatayarishwa ipasavyo katika viwanda mbali mbali, kwa matumizi ya hapo baadaye kwa ujenzi wa laini za usambazaji wa umeme.

Nairobi Region staff gave Shs140,000 to the Nairobi Womens Hospital in December, 2005.

kujitolea katika kupanda miti tukishirikiana na idara ya misitu. Tokea mwaka 1999, kampuni imedumisha mradi wa kupanda miti kwenye msitu unaosimamiwa na serikali huko Timboroa na miche ambayo imekuzwa katika bustani ya miche yetu huko Eldoret, ambayo iko na nafasi ya miche 300,000. Kufikia sasa, tumepanda hekta 52 za msitu, 10 ambazo zimepandwa mwaka huu. Wakati huo huo, tulipeana bure zaidi ya miche 100,000 mwakani kwa wakulima na wananchi ambao wanaishi katika eneo hilo. Hiyo imekuwa njia mwafaka ya kuwatia motisha katika upandaji miti katika ardhi za kibinafsi. Kiasi cha miti 8,500 iliyopandwa mwanzo wa mradi

Jamii Tunatambua mahitaji ya jamii ambazo tunashirikiana na kukaa pamoja nazo. Kwa hivyo, tumejitolea kuchangia katika jukumu ambazo zinawahusu. Kwa kawaida sisi hulenga wale ambao ni wanyonge katika jamii. Kufuatia hatua hii, kampuni ikishirikiana na wafanyikazi walitoa mchango wa shilingi milioni 2 mnamo mwaka 2006 kwa mchango wa kitaifa kuwasaidia wale wote ambao waliadhiriwa na baa la njaa nchini kote. Vile vile, chama cha walemavu nchini, Kenya Paraplegic Organization, kilifaidika kwa mchango wa shilingi elfu 30 kutoka kwa kampuni, ili kukisaidia kutoa huduma bora kwa

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TAARIFA KUHUSU USHIRIKIANO NA JAMII

wanachama. Kampuni pia ilichanga shilingi elfu 120 za kusaidia mbio za Dettol-Mater Heart Run, ambazo hukusanya pesa za kusaidia upasuaji wa watoto wadogo walio na magonjwa ya moyo kutoka kwa jamii ambazo haziwezi kujimudu kimaisha. Vile vile tulijitolea katika kuunga mkono jukumu ambazo zinahusu jamii kama vile mashindano ya mbio za nyika mjini Nairobi yaliotayarishwa na benki ya Standard Chartered, ambayo hukusanya pesa za kusaidia kutoa huduma za matibabu pamoja na masomo ya afya kwa jamii katika sehemu mbali mbali humu nchini. Kampuni ilidhamini kikundi cha wafanyikazi kwa shilingi elfu 75 ili kushiriki katika mbio hizo. Mnamo Desemba 2005, wafanyikazi katika maeneo yote ya kampuni walichangia mipango kadhaa ya kijamii. Kiasi kikubwa cha mchango wa shilingi elfu 120 kilitolewa na tawi letu la Nairobi kwa hospitali ya wanawake ya Nairobi - Nairobi Womens Hospital. Washikadau Kama mtoaji huduma ambaye anafahamu kwa dhati majukumu yake kwa wateja wake, tulitayarisha kielelezo cha mkataba na wateja, ambacho kilielezea majukumu yetu kwao. Tuliwaalika wateja chini ya vuli la ushirikiano wa wakaazi wa maeneo mbali mbali nchini ya Kenya Alliance of Resident Associations (KARA) na makundi mengine ambayo yalitaka kuhusishwa kwa mkutano, ili kujadili na kutoa maoni jinsi tunavyoweza kuendeleza huduma zetu. Kufuatia majadiliano hayo na kwa kutambua umuhimu wa kushirikiana pamoja na wateja ili kuelewa zaidi mahitaji yao, tulijiandikisha kama kwenye wanachama wa KARA, na tulihusika udhamini wa mkutano wa katikati ya mwaka wa chama hicho wa kiasi cha shilingi elfu 300, ambapo maswala muhimu yanayolenga utoaji wa huduma kwa jumla yalijadiliwa. Vile vile, tuliungana na mashirika ambayo kazi zake zina uzito mkubwa kwa wateja wetu pamoja na jamii yote ya kibiashara. Tulitoa mchango wa shilingi elfu 25 kwa hazina ya tuzo la usimamizi mwema wa kawi, (Energy Management Awards) ambalo hutayarishwa na shirika la watengenezaji bidhaa la Kenya Association of Manufacturers, ili kuwasaidia wanachama kutumia umeme kwa hekima wakati wanapofanya kazi zao. Tulichanga mchango mwingine wa shilingi elfu 20 kwa chama cha wahasibu, ICPAK, kukiwezesha kutoa tuzo kwa mashirika ambayo yanachapisha taarifa zao za kifedha kwa njia ya wazi. Tukiwa mwanachama aliyethaminiwa na chama cha muungano wa waajiri hapa nchini, Federation of Kenya Employers, tulihusika na utayarishaji wa mkutano mkubwa wa waajiri katika kipindi hicho, kwa gharama ya shilingi elfu 150. Vile vile, tulichangia katika maandalizi ya sherehe ya kwanza ya miaka mia moja katika kanda ya Afrika ya Tume ya mafundi wa umeme duniani kwa gharama ya shilingi elfu 267.5 kama wadhamini wakuu. Mkutano huo uliandaliwa na kamati ya tume hiyo hapa nchini inayojumuisha wafanyikazi wa kampuni na shirika la ukadiriaji wa ubora wa bidhaa nchini, Kenya Bureau of Standards. Tunafahamu kwamba wananchi wengi wanaoishi katika miji, sehemu zilozo kando ya miji na maeneo ya sehemu za mashambani bado hawajaunganishiwa nguvu za umeme kutokana na kiwango cha fedha ambacho wanatakiwa kutoa. Kutokana na hayo kampuni ilibuni mradi ambao unarahisisha malipo kwa wateja wake, ujulikanao kama Umeme Pamoja ambao unawezesha makundi ya watu wanaoishi sehemu moja kuwasilisha maombi ya kuunganishiwa umeme kwa pamoja na hivyo kulipa ada nafuu. Wakati huo huo, kampuni ilipunguza ada inayotoza wateja walio umbali wa mita 600 mwa transfoma wanaotarajia kuunganishiwa umeme. Hatua hii imechangia kuongezeka kwa wateja wapya. Elimu kwa washikadau Ili kueneza ufahamu wa maswala mbali mbali kuhusu biashara yetu, tulitayarisha kampeni kadhaa za ufahamishaji kupitia vyombo vya kuchapisha pamoja na vya utangazaji. Pia tulitayarisha mikutano ya ana kwa ana tukiwa na lengo la kuwafikia makundi mengi ya washikadau wetu. Wafanyi kazi raslimali yetu kubwa Kwa manufaa ya kampuni, tumeendelea kutumia pesa nyingi ili kuwaendeleza wafanyi kazi wetu kwa kuwa wao ndio raslimali yetu kubwa mno. Pia, hii inatuwezesha kutimiza matarajio ya wafanyikazi wetu pamoja na kutoa huduma za kiwango kile wateja wetu wanatarajia. Kutokana na hayo, tunaendelea kutoa mafunzo mbali mbali kwa wafanyikazi wetu ili kujifunza mbinu mpya na uimamarishaji wa ujuzi wao, humu nchini na pia ngambo. Wafanyikazi wote hupitia mpango unaokadiria kazi waliofanya kila mwaka, ambao pia unahusu kutambua mahitaji yao ya mafunzo pamoja na njia nyinginezo za kujiendeleza kazini. Vile vile, kujitolea kwetu kuwapatia masharti ya kupendeza ya kufanya kazi lingali ni jambo ambalo tunazingatia sana katika wito wa kampuni, na wafanyikazi wote wanafurahia mshahara wa kila

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TAARIFA KUHUSU USHIRIKIANO NA JAMII

mwezi, masilahi ya matibabu pamoja na kuwa mwanachama wa mpango wa malipo ya uzeeni (pension) pamoja na marupurupu mengine wakati ambapo yanafaa kulipwa. Wafanyikazi wengine vile vile ni wanahisa wa kampuni. Vikao tofauti vya majadiliano ya kawaida na yasiokuwa ya kawaida huitishwa mara kwa mara ili kufanikisha mazungumzo kati ya wafanyikazi na wasimamizi kama vile mikutano iliyopangwa ya kila mara, uchapishaji wa makala, matumizi ya mtandao wa internet na mazungumzo ya vikundi. Kuna mtandao wa kipekee wa internet na simu, pamoja na visanduku maalum ambazo wafanyikazi wanaweza kutumia kufichua jama ama mambo ya ulaghai ambayo wamekumbana nayo katika matawi yote ya kampuni. Wakati wa kipindi cha ukaguzi, tulianzisha mpango madhubuti wa kukinga ugonjwa hatari wa ukimwi na virusi vya HIV. Tulisambaza kijitabu chenye mpango huo kwa wafanyikazi wote, kinachohimiza kubadili tabia na kuangazia huduma wafanyikazi wale ambao wameadhiriwa wataweza kupewa, kupitia mpango wa madawa ya bure ya ukimwi yenye thamani ya shilingi milioni 5 kila mwaka yapatikanayo chini ya mpango wetu wa matibabu. Elimu Ni dhahiri kwamba wafanyi kazi wetu ambao wanachangia ustawi wa kampuni wametokana na mpangilio wa elimu hapa nchini. Hii inaelezea msimamo wetu kushiriki kwenye mipango mbali mbali ya kufanikisha elimu. Kwa hivyo, tuliendelea kutoa nafasi za kujifahamisha kazi kwa wanafunzi wa vyuo vikuu pamoja na wale wa taasisi za kawaida, ili waweze kupata ujuzi wa hapo hapo na watimize wajibu wao wa kufuzu. Katika mwaka wa ukaguzi, wanafunzi 210 walipitia nafasi hizo za kujifahamisha kazi.

ENG. ALFRED SAMBU MWENYEKITI

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CORPORATE GOVERNANCE STATEMENT

Corporate governance is the process and structure used to direct and manage the business affairs of the Company towards enhancing prosperity and corporate accounting with the ultimate objective of realising shareholders long term value while taking into account the interest of other stakeholders. Directors are responsible for the corporate governance practices of the Company. This statement sets out the main practices in operation during the year under review, unless otherwise indicated. Directors and management of the Company regard corporate governance as pivotal to the success of the business and are unreservedly committed to ensuring that good corporate governance is practiced so that the Company remains a sustainable and viable business of global stature. As part of this commitment, the Board fully supports best practices in corporate governance and has adhered to the Guidelines on Corporate Governance developed by the Capital Markets Authority (CMA), so as to bring the level of governance in line with international standards. We confirm that we comply with the CMAs Guidelines on Corporate Governance. BOARD OF DIRECTORS The Board consists of nine non-executive Directors and a Managing Director. As a state corporation, a representative of the Inspectorate of State Corporations attends Board meetings. The Directors biographies are on page 4. Directors possess a broad range of skills, qualifications and experience required to direct the Company. At least one third of the Board members are required to submit themselves for re-election each year during the Annual General Meeting. Any Director appointed by the Board during the year is required to retire and seek re-election at the next Annual General Meeting. Business transactions with all parties, Directors or their related parties are carried out at arms length. Directors are required to disclose any transaction in which they have interest and which would constitute a conflict of interest and to abstain from voting when such matters are being considered. RESPONSIBILITIES The Board engaged the services of Manitoba Hydro International Limited (MHI) as a Management Contractor for the Company for a period of two years from 1st July 2006. The Management Services Contractor is required to achieve defined performance targets. Pursuant to the Management Contract, MHI has provided three key staff on permanent basis, including the General Manager & Chief Executive Officer. The separate roles of the Chairman, Managing Director and the General Manager & Chief Executive Officer are maintained. The Chairman is primarily responsible for providing leadership of the Board and ensuring that it is supplied in a timely manner with sufficient information to enable it to discharge its duties. The General Manager is the chief executive officer of the Company, is responsible for the day to day management of the Company and is accountable for the performance of the Company. The Managing Director assists the General Manager & Chief Executive Officer on the day-to-day management of the Company. The primary responsibilities of the Board include: establishment of short and long-term goals of the Company and strategic plans to achieve those goals; ensuring preparation of the annual and half-year financial statements; approval and review of the annual budgets; setting and periodically reviewing key performance indicators and management performance; managing risks by ensuring that the Company has adequate systems of internal controls together with appropriate monitoring of compliance activities; and working with management to realise shareholders value. Directors have full access to the advice and services of the Company Secretary. They are also entitled to obtain independent professional advice on any matter at Company expense, should they deem this necessary. To enable the Board to function effectively the Board is given full and timely access to relevant information. New Directors are also inducted through provision of necessary information pertinent to the Companys business, meetings with Management and training so as to enhance their understanding of the Companys legislative framework, its governance processes and the nature of the business and operations of the Company. Continuous training is provided. Towards this, nine Directors have been trained on corporate governance by the Centre for Corporate Governance. The Board meets at least once a month or more often in accordance with requirements of the business.

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CORPORATE GOVERNANCE STATEMENT

BOARD WORK PLAN AND MEETINGS The Board work plan and calendar of meetings is prepared annually in advance. Adequate notice is given for each Board meeting and Directors receive detailed papers on issues to be discussed in good time before the meeting. The Board held a total of 27 meetings during the year, which were very well attended. Board Manual, Charter and Code of Conduct During the year, the Board formulated a Manual, a Board Charter and Code of Conduct. These documents serve as reference guides for Directors. They seek to expound and explain to each Board member the collective and individual powers, duties, obligations, responsibilities and liabilities of Directors. They also set out the requirements and standards of good corporate governance necessary to bring the level of standards of corporate governance in the Company to international best practice. Board Committees A number of standing committees exist in order to assist the Board and management fulfill their responsibilities. Adhoc committees are constituted to deal with pertinent issues as they arise. Each committee operates within the ambit of defined terms of reference assigned to it by the Board. During the year, the Board had the following standing and adhoc committees. Audit Committee The Audit Committee was constituted in 1999 and its mandate redefined in April 2003, in line with the Capital Markets Guidelines on Corporate Governance. The Committee comprises three nonexecutive Directors and is chaired by a nonexecutive Director. The members of the Committee during the period under review were: Mr. N. Kiuna (Chairman) Mr. E. Wasunna Mr. A. Mbui Mr. S. Maluki, representing the Inspectorate of State Corporations, attends the meetings. The Committee routinely invites the Managing Director, the General Manager and Chief Executive Officer, the Deputy General Manager Finance, and the Internal Audit Manager to its meetings. The external auditors are invited to attend the meetings whenever necessary. The Committees responsibilities include: (i) examination of quarterly, half-year and annual financial statements, discussion with the external auditor before commencement of the annual audit, consideration of issues identified by the external auditors, consideration of audit fees for recommendation to the Board; and review of the function, operations and findings of the Internal Audit Department, and review of risk management strategies in ensuring business continuity and survival. The Committee held a total of nine meetings during the year.

(ii)

(iii)

(iv)

(v)

(vi)

Staff and Remuneration Committee The Board has in place a fully operational Staff & Remuneration Committee whose mandate includes recommending to the Board terms and conditions of service of the Managing Director and staff and recommendations for appointment and disciplinary issues of senior staff. The Committee also recommends to the Board, adoption of human resources policies and corporate organisational structure to support the Companys business. The members who served in the Committee were as follows: Eng. A. Sambu - Chairman Dr. S. Musyoka Mr. E. Wasunna Mr. P. Nyoike Mr. S. Kitungu (Alternate to Mr. J. Kinyua) Mr. D. Priestman Mr. Zachary Ayieko

When appropriate, the Committee invites other members of the Board to its meetings. The Committee held 4 meetings during the year. Central Tender Committee The Central Tender Committee is established pursuant to the requirements of the Exchequer and

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CORPORATE GOVERNANCE STATEMENT

Audit (Public Procurement Regulations) Act, 2001, whose chief functions include approval of award of tenders of goods and services with a value exceeding Shs.500,000. The members of this Committee include three nonexecutive Directors as shown below: Mr. F.M. Nyaga - Chairman Eng. S.S. Imu Mr. N. Munyu (for Mr. P. Nyoike) Other members are the General Manager & Chief Executive Officer and senior management staff in accordance with the Procurement Regulations. The Central Tender Committee held a total of 38 meetings during the year in line with business requirements. Board Strategy Committee The Board Strategy Committee was constituted in February 2005 to devise strategies that would facilitate the Board to give guidance and strategic direction to management. Its members are: Mr. Mr. Mr. Mr. A. Mbui - Chairman N. Kiuna E. Wasunna S. Imu Performance Contracting Committee The Performance Contracting Committee was constituted in August 2004 to negotiate with the Government the annual Performance Contract with the Government. Members constituting the Committee are: Mr. A. Sambu - Chairman Mr. E. Wasunna Mr. Zachary Ayieko The committee held a total of 13 meetings during the year. Management Services Contractor Steering Committee Some members of the Board were members of a Government Steering Committee set up during the year to oversee the procurement process of, and negotiate a Management Contract with, the selected management services contractor. The committee held 17 meetings during the year.

DIRECTORS REMUNERATION Details of Directors remuneration are set out in the report on page 51. For the financial year under review, Directors were not paid monthly Directors fees following guidelines by the Government to all state corporations that Directors fees would be paid annually after approval by shareholders. The Directors fees payable each year would also be within the limits approved by the Government. It is proposed that Directors are paid fees of Shs.360,000 per Director for the financial year ended 30th June 2006, totaling Shs.3,240,000. Directors are also paid sitting allowance for every meeting attended, lunch allowance (in lieu of lunch being provided), accommodation allowance and mileage reimbursement where applicable, all in line with the ceilings approved for state corporations by the Government. Additionally, the Chairman is paid a monthly honorarium. There did not exist any arrangement to which the Company is a party, whereby Directors might acquire benefits by means of acquisition of the Companys shares. There were no Directors loans at any time during the year.

The Committee held 9 meetings during the year. The Committee invites the Managing Director and the General Manager & Chief Executive Officer to its meetings. Committee on IPP Negotiations The Board constituted a committee in May 2003 to re-negotiate the power purchase agreements with the independent power producers. Its members are: Mr. Mr. Mr. Mr. Mr. Mr. F. M. Nyaga - Chairman S. Imu N. Kiuna P. Nyoike S. Kitungu E. Wasunna

The Committee routinely invites management staff with relevant expertise to its meetings. The committee held a total of 21 meetings during the year.

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CORPORATE GOVERNANCE STATEMENT

INTERNAL CONTROLS The Directors acknowledge their responsibility as set out on page 38 for the Companys system of internal financial control, including taking reasonable steps to ensure that the systems are being maintained. Internal control systems are designed to meet the particular needs of the Company, and the risks to which it is exposed with procedures intended to provide effective internal financial control. However, such a system can only provide reasonable, but not absolute, assurance against material misstatement. Directors Shareholding No Director holds shares in his individual capacity that is more than 1% of the Companys total equity. Ethical Standards The Company has a Code of Conduct for the Board and management staff. The Company also ascribes to the ethical standards prescribed by the Public Officer Ethics Act. These require all employees to conduct business with integrity. ACCOUNTABILITY AND AUDIT Directors responsibilities in relation to financial statements Company law requires the Directors to prepare financial statements for each financial year, which give a true and fair view of the state of affairs of the Company as at the end of the financial year, and of the profit or loss of the Company for that period. The Directors are responsible for ensuring that suitable accounting policies are consistently applied, supported by reasonable and prudent judgments and estimates and those applicable accounting standards are followed. The Directors are responsible for ensuring that the Company keeps proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act. They also have general responsibility for the systems of internal control for safeguarding the assets of the Company and to prevent and detect fraud and other irregularities. COMMUNICATION WITH SHAREHOLDERS The Company places a great deal of importance on communication with its shareholders and publishes its financial statements in the local dailies on half year and annual basis. The results are also available on our website at: www.kplc.co.ke. The full report and accounts are distributed to all shareholders on an annual basis. All shareholders are entitled to attend the Annual General Meeting for which notice is posted at least 21 clear days before the meeting. The shareholders are given the opportunity to ask questions on any matter relating to the business of the Company. SHAREHOLDING PROFILES The Company files monthly reports prescribed by the Capital Markets Authority and Nairobi Stock Exchange under the listing regulations on transactions related to shareholders.

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CORPORATE GOVERNANCE STATEMENT

The top 10 major shareholders as at 31st August 2006 were as follows: TOP 10 SHAREHOLDERS AS AT 31ST AUGUST, 2006
Name of Shareholder Permanent Secretary, Treasury Barclays (K) Nominees Ltd. Board of Trustees N.S.S.F. Trans-Century Ltd. Jubilee Insurance Co. Ltd. Stanbic Nominees (K) Ltd. Baloobhai Chotabhai Kenya Commercial Bank Nominees Phoenix E.A. Assurance Ltd. Kestrel Capital Nominees A/C Intentions Ltd. (Foreign) Total No. of shares 32,002,929 7,907,904 6,413,801 2,284,303 2,069,061 1,980,819 1,060,000 1,009,064 764,068 757,264 56,249,213 Percentage (%) 40.44 9.73 8.11 2.81 2.61 2.44 1.34 1.27 0.94 0.94 71.00

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

SHARES DISTRIBUTION FOR ORDINARY SHAREHOLDERS

Range <1,000 1001-10,000 10,001-50,000 50,001-100,000 Over 100,000 Total No. of Shareholders 3,042 1,581 342 55 74 5,091 Shares Held 1,182,049 5,397,129 7,394,394 3,871,198 61,283,230 79,128,000

ENG. ALFRED SAMBU CHAIRMAN

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TAARIFA YA MWONGOZO WA KAMPUNI

Mwongozo wa mashirika ni mwongozo ambao unatumiwa kusimamia shughuli za kampuni katika harakati za kuendeleza mbele ufanisi na uwajibikaji wa shirika, lengo kubwa likiwa kufanikisha ongezeko la manufaa ya wenye hisa pamoja na maslahi ya washikadau wengine. Wakurugenzi wana jukumu la kusimamia shughuli zote za kampuni na arifa hii inatoa mwelekeo kamili ambao uliendelea kutumika kwa kipindi hiki cha ukaguzi, ila tu iwe imeelezwa vingine. Wakurugenzi na wasimamizi wa kampuni wanachukulia jukumu la usimamizi na mwongozo wa kampuni kama kielelezo cha kutimiza mafanikio ya biashara na wanajitolea kwa dhati kuhakikisha kwamba mwongozo mzuri wa kampuni unatekelezwa ili kwamba kampuni iendelee kudumisha biashara ambayo ni ya kutegemewa na ya hali ya kiulimwengu. Kama sehemu moja ya kujitolea, halmashauri inaunga mkono vitendo vyote vizuri vya mwongozo wa usimamizi na imejitolea kuzingatia mashauri ya mwelekeo wa maongozi ya usimamizi kama vile yametolewa na shirika la usimamizi wa masoko ya raslimali, Capital Markets Authority (CMA), kuhusu mwongozo wa usimamizi. Halmashauri ya Wakurugenzi Halmashauri ina mwenyekiti asiye mtendaji, mkurugenzi mtendaji na wakurugenzi wanane wasio watendaji. Kama shirika la serikali, mwakilishi wa idara ya wahasibu wakaguzi wa mashirika ya serikali anahudhuria mikutano ya Halmashauri. Wakurugenzi wote wa kampuni ni wataalamu ambao wako na ustadi, ujuzi na umahiri mkubwa unaowawezesha kufanya kazi vilivyo. Wasifu wa wakurugenzi uko kwenye ukurasa wa 4. Thuluthi ya wakurugenzi inapaswa kujisajilisha kuchaguliwa tena kila mwaka wakati wa mkutano mkuu wa kila mwaka. Mkurugenzi yeyote aliyeteuliwa katika mwaka anahitajika kustaafu na ajisajilishe kuchaguliwa tena kwenye mkutano wa kila mwaka unaofuata. Shughuli za kibiashara na washiriki wote, wakurugenzi au washiriki wao hufanywa kwa njia wazi. Wakurugenzi wanahitajika kufichua shughuli zozote ambazo wana uhusiano nazo na ambazo zinaweza kuleta mgongano na uamuzi wao wakati maswala haya yanapoamuliwa. Wakurugenzi wanapaswa kujiondoa katika uamuzi wowote unaoambatana na biashara ambazo wako na shirika nazo. Habari kuhusu malipo ya wakurugenzi wasiowatendaji na marupurupu ya mkurugenzi mkuu yako katika ukurasa wa 51. JUKUMU ZA WAKURUGENZI NA WASIMAMIZI Wasimamizi wapya waliopewa kandarasi ya usimamizi wanajukumu la kufikia lengo ambalo waliafikia kutimiza katika zabuni. Kufuatia hayo, wanakandarasi hawa wametoa wasimamizi watatu, akiwepo msimamizi mkuu na ndiye pia ofisa mkuu mtendaji. Jukumu tofauti za mwenyekiti na mkurugenzi mkuu zinadumishwa. Mwenyekiti wa Halmashauri anawajibika kuhakikisha kwamba Halmashauri yake inapokea habari za kutosha kwa wakati ufaao ili kuweza kutekeleza kazi zake. Msimamizi mkuu anawajibika kutoa mapendekezo ya mipango ya shughuli za kibiashara na bajeti kwa Halmashauri, na kutekeleza shughuli za kila siku za usimamizi. Mkurugenzi mkuu atamsaidia msimamizi mkuu katika shughuli za kila siku za utendakazi. Jukumu la kimsingi la Halmashauri ni pamoja na kuunda malengo ya kampuni na mipango mahsusi ili kufikia malengo hayo; kutayarisha taarifa za kifedha za kila mwaka na nusu ya mwaka; kupanga na kuchunguza bajeti za kila mwaka; kupanga na kuchunguza hali ya utendakazi na usimamizi; kupunguza hali ya mashaka inayoambatana na utendakazi na usimamizi; na kuunda mipango ya kutosha ya kuthibiti utendakazi na usimamizi ili kufanikisha thamani ya wenyehisa. Wakurugenzi hupata mawaidha na huduma ipasavyo kutoka kwa katibu wa kampuni na kwingineko. Ili kuiwezesha Halmashauri kuifanya kazi yake ipasavyo, wakurugenzi hupewa habari muhimu na za kutosha kila wakati. Wakurugenzi wapya pia wanahamasishwa kwa kupata habari muhimu za shughuli za kampuni kupitia mikutano na mameneja wa usimamizi ili kuimarisha kufahamu kwao kuhusu sheria za kampuni. Mafunzo pia yanatolewa mara kwa mara. Kufuatia hatua hii, wakurugenzi tisa walipewa mafunzo kuhusu usimamizi wa kampuni katika kituo cha mafunzo kuhusu usimamizi wa kampuni katika kituo cha mafunzo cha usimamizi wa mashirika. Halmashauri hukutana mara moja kwa mwezi au mara kwa mara kuambatana na mahitaji ya shughuli za kibiashara za kampuni. Mpango wa kikazi wa Halmashauri Mpango wa kikazi wa Halmashauri na orodha ya mikutano hutayarishwa mapema kila mwaka. Ilani ya kutosha hutolewa kwa kila mkutano wa Halmashauri

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TAARIFA YA MWONGOZO WA KAMPUNI

na wakurugenzi hupokea makaratasi yenye maelezo zaidi kuhusu maswala yatakayojadiliwa kwa wakati unaofaa kabla ya mkutano. Katika mwaka, Halmashauri ilifanya jumla ya mikutano 27 ambayo ilihudhuriwa vyema. Mkataba na Kanuni ya Mwongozo wa Halmashauri Mwaka huu, Halmashauri iliunda mkataba na kielelezo cha kanuni za mwongozo wa kampuni. Hati hizi zitatumiwa kama vielelezo vya kuwasaidia wakurugenzi. Zinaelezea kila mkurugenzi kazi, uwezo, wajibu na vikwazo vyake kibinafsi na za Halmashauri kwa kijumla. Pia hati hizi zinapatiana mwongozo wa usimamizi mwafaka utakaowezesha kampuni kufanikiwa katika lengo la kufikia uhodari wa kimataifa. Kamati ya Halmashauri Kamati kadhaa zimebuniwa ili kusaidia Halmashauri na wasimamizi kutimiza jukumu zao. Kamati za dharura huzinduliwa ili kushughulikia maswala yanayozuka. Kila kamati huendesha shughuli zake katika muda na masharti yaliyoelezewa na Halmashauri hii. Halmashauri ilikuwa na kamati zifuatazo za dharura mwakani: Kamati ya ukaguzi Kamati ya ukaguzi ilibuniwa mwaka wa 1999 na jukumu lake kuelezewa upya mnamo Aprili mwaka 2003 kuambatana na mwongozo wa Halmashauri ya masoko ya hisa za usimamizi wa mashirika. Kamati hii inawajumuisha wakurugenzi watatu wasio watendaji na inaongozwa na mkurungenzi asiye mtendaji. Wanachama wa kamati hii katika kipindi hiki walikuwa ni: Bw. N. Kiuna (Mwenyekiti) Bw. E. Wasunna Bw. A. Mbui Bw. S. Maluki anahudhuria mikutano kuwakilisha idara ya ukaguzi wa mashirika ya serikali. Kamati hii mara kwa mara huwaalika mkurugenzi mkuu, meneja mkuu wa fedha na meneja wa ukaguzi wa kampuni kwenye mikutano yake. Wakaguzi kutoka nje hualikwa kuhudhuria mikutano wakati ipasavyo. Jukumu kuu za kamati ni pamoja na: i) Kuchunguza taarifa za kifedha za kila mwaka, nusu mwaka na robo mwaka ii) Kujadiliana na mkaguzi wa pesa kutoka nje kabla ya kuanza kwa ukaguzi wa pesa wa kila mwaka iii) Kuchunguza maswala yaliyotambuliwa na wakaguzi wa pesa kutoka nje iv) Kuchunguza malipo ya ukaguzi wa pesa ili kupendekezea Halmashauri v) Kuchunguza shughuli, utendakazi na matokeo ya ukaguzi wa pesa za kampuni na vi) Kuchunguza hatua za kukabiliana na hatari inayoweza kuikumba biashara na kuhakikisha inaendelea na kustawi. Kamati hii iliandaa mikutano tisa mwaka huo. Kamati ya ujira na wafanyikazi Halmashauri ina kamati ya kushughulikia maswala ya wafanyikazi na ujira. Jukumu lake ni pamoja na kupendekeza kwa Halmashauri hali ya ujira na mazingira ya ufanyikazi ya mkurugenzi mkuu na wafanyikazi na mapendekezo kwa uteuzi na maswala ya nidhamu ya wafanyikazi wa ngazi za juu. Kamati hii pia hupendekeza kwa Halmashauri kuafikiwa kwa kanuni za wafanyikazi na utaratibu wa muundo wa ngazi za shirika ili kusaidia shughuli za biashara za Kampuni. Wanachama waliohudumu katika kamati walikuwa ni: Eng. A Sambu Mwenyekiti Dr. S. Musyoka Bw. E. Wasunna Bw. P. Nyoike Bw. S. Kitungu (badala ya Bw. J. Kinyua) Bw. Zachary Ayieko hii

Inapolazimu, kamati huwaalika wanachama wengine wa Halmashauri kwenye mikutano yake. Kamati iliandaa mikutano minne katika mwaka huo. Kamati kuu ya zabuni Kamati kuu ya zabuni ilibuniwa kulingana na mahitaji ya sheria ya hazina kuu na mkaguzi mkuu wa pesa ya mwaka 2001. Jukumu lake kuu ni pamoja na kuidhinisha utoaji zabuni wa bidhaa na huduma yenye dhamani ya zaidi ya shilingi 500,000. Wanachama wa kamati hii ni pamoja na wakurugenzi watatu wasio watendaji kama inavyoonyeshwa hapa chini: Bw. F. M. Nyaga Mwenyekiti Eng. S. S. Imu Bw. N. Munyu (kwa niaba ya Bwana P. Nyoike) Wanachama wengine ni maafisa wakuu wa usimamizi wa kampuni kama ilivyo elezewa katika sheria ya ununuzi wa bidhaa. Kamati kuu ya utoaji zabuni ilifanya jumla ya mikutano 38 katika mwaka huo kuambatana na mahitaji ya shunguli za kibiashara.

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TAARIFA YA MWONGOZO WA KAMPUNI

Kamati ya mbinu mahsusi ya Halmashauri Kamati ya mbinu mahsusi za Halmashauri ilibuniwa mnamo mwezi Februari mwaka 2005 kuandaa mbinu ambazo zitarahisisha kazi ya Halmashauri ya kutoa mwongozo na mwelekeo muhimu kwa wasimamizi. Wanachama wake ni: Bw. A. Mbui Mwenyekiti Bw. N. Kiuna Bw. E. Wasunna Eng. S. Imu Kamati hii iliandaa mikutano 9 katika mwaka huo. Kamati huwaalika mkurugenzi mkuu pamoja na meneja mkuu katika mikutano. Kamati ya mashauriano ya IPP Halmashauri ilibuni kamati hii mwezi Mei mwaka 2003 kushauriana upya juu ya mikataba ya ununuzi wa umeme na kampuni za kibinafsi za utoaji nguvu za umeme. Wanachama wake ni: Bw. F. M. Nyaga Mwenyekiti Eng. S. S. Imu Bw. N. Kiuna Bw. P. Nyoike Bw. S. Kitungu Bw. E. Wasunna Kamati mara kwa mara huwaalika maafisa wa usimamizi wa kampuni wenye utaalamu muhimu kwenye mikutano yake. Kamati hii iliandaa jumla ya mikutano 21 katika mwaka huo. Kamati hualika mkurugenzi mkuu na meneja mkuu katika mikutano yake. Kamati ya utendakazi Kamati ya utendakazi ilibuniwa mnamo mwezi Agosti mwaka 2004 kufanya mashauri na serikali kuhusu masharti ya utendakazi ambapo kampuni ilichaguliwa kuwa miongoni mwa mashirika 16 makuu ya serikali kuandikiana masharti ya utendakazi na serikali. Wanachama wa kamati hii ni: Eng. A. Sambu Mwenyekiti Bw. E. Wasunna Bw. Zachary Ayieko Kamati hii ilifanya jumla ya mikutano 13 katika mwaka huo. Kamati ya huduma ya usimamizi Wanachama wengine wa Halmashauri hii walikuwa wanachama wa kamati ya serikali ya kushughulikia huduma ya usimamizi iliyobuniwa mwaka huo kutafuta mhudumu wa usimamizi wa kampuni. Kamati hii ilifanya mikutano 17 katika mwaka huo. Malipo ya wakurugenzi Maelezo zaidi kuhusu malipo ya wakurungenzi yako kwenye taarifa kwenye ukurasa 51. Wakurugenzi wasio watendakazi hawakulipwa malipo yao ya kila mwezi kufuatia agizo mpya kutoka kwa serikali kwa mashirika yote ya serikali. Pesa za malipo ya wakurugenzi yatalipwa kila mwaka baada ya kuidhinishwa na wenyehisa. Wakurugenzi pia wanalipwa marupurupu ya kufanya vikao kwa kila mkutano wanaohudhuria, marupurupu ya mankuli ya mchana badala ya kupata mankuli, marupurupu ya malazi na kulipiwa gharama za usafiri ipasavyo, yote hayo kuambatana na makubaliano yaliyoidhinishwa kwa mashirika ya serikali. Imependekezwa kwamba wakurugenzi walipwe shilingi elfu 360 kila mmoja katika mwaka unaomalizika Juni 30, 2006, zikiwa jumla ya shilingi 3,240,000. Hakuna makubaliano yoyote na kampuni kwamba wakurugenzi huenda wakapata marupurupu kwa njia ya ununuzi wa hisa za kampuni. Hakukuwa na mikopo ya wakurugenzi katika kipindi chote cha mwaka huo. Uthabiti wa ndani Wakurugenzi wanafahamu wajibu wao kama ilivyoelezwa kwenye ukurasa 38 kwa mfumo wa uthibiti wa kifedha, ikiwa ni pamoja na kuchukua hatua mwafaka za kuhakikisha kwamba mifumo ya kampuni inadumishwa. Mifumo ya uthibiti wa ndani ya kampuni imenuiwa kutimiza mahitaji maalum ya kampuni na hatari wanazokabiliana nazo katika taratibu zinazonuiwa kutoa uthibiti ufaao wa kifedha. Hata hivyo mfumo kama huu unaweza tu kutoa hakikisho bora lakini sio kamili dhidi ya kukosekana kwa habari muhimu. Hisa za wakurugenzi Hakuna mkurugenzi anayemiliki hisa kama mtu binafsi zilizozidi asilimia moja 0ya jumla ya hisa za kampuni. Maatarajio ya kimaadili Kampuni inazingatia matarajio ya viwango vya kimaadili vinavyoelezewa kwenye sheria ya maadili ya maafisa wa umma. Hii inawahitaji wafanyikazi kufanya shughuli zao kwa uadilifu.

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TAARIFA YA MWONGOZO WA KAMPUNI

UWAJIBIKAJI NA UKAGUZI WA PESA Wajibu wa wakurugenzi kuhusiana na taarifa za kifedha Sheria ya kampuni inawahitaji wakurugenzi kutayarisha taarifa za kifedha kwa kila kipindi cha mwaka cha matumizi ya pesa zinazotoa ukweli na hali halisi ya shughuli za kampuni kufikia mwisho wa kipindi cha mwaka cha matumizi ya pesa na faida au hasara iliyopata kampuni wakati wa kipindi hicho. Wakurugenzi wanawajibika kuhakikisha kwamba sera nzuri za uhasibu zinatumiwa kila mara kusaidia maamuzi na makisio na viwango vya uhasibu vinavyofaa kufuatwa. Wakurugenzi wanawajibika kuhakikisha kwamba kampuni inaweka kumbukumbu za uhasibu zinazoonyesha kwa hakika hali ya kifedha ya kampuni na za kuwawezesha kuhakikisha kwamba taarifa za kifedha zinaambatana na sheria za kampuni. Pia wana jukumu la ujumla la kuthibiti mifumo ya kulinda mali ya kampuni na kuzuia na kugundua njia za wizi na kasoro nyinginezo. Mawasiliano na wenyehisa Kampuni inachukulia umuhimu mkubwa wa mawasiliano na wanahisa wake na kuchapisha taarifa zake za fedha kwenye magazeti ya humu nchini baada ya kila nusu mwaka. Matokeo pia yanapatikana katika anwani yetu ya mtandao www.kplc.co.ke Ripoti kamili na hesabu hutolewa kwa wanahisa wote kila mwaka. Wanahisa wote wana haki ya kuhudhuria mkutano mkuu wa kila mwaka ambao hutangazwa siku 21 kabla ya mkutano huo. Wanahisa wanapewa fursa ya kuuliza maswali yoyote kuhusu biashara ya kampuni. Wenyehisa wakuu Kampuni hutuma ripoti ya wanahisa 10 wakubwa kila mwezi kwa CMA na soko la hisa la Nairobi.

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TAARIFA YA MWONGOZO WA KAMPUNI

Wana hisa 10 walioongoza kufikia Agosti 2006 walikuwa: WANAHISA KUMI WAKUBWA KUFIKIA AGOSTI 31, 2006
Jina La Mwenyehisa 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Permanent Secretary, Treasury Barclays (K) Nominees Ltd Board of Trustee N.S.S.F Trans-Century Ltd Jubilee Insurance Co. Ltd Stanbic Nominees (K) Ltd Baloobhai Chhotabhai Kenya Commercial Bank Nominees Phoenix E.A. Assurance Ltd Kestrel Capital Nominees A/C Intentions Ltd (Foreign) Total Hisa 32,002,929 7,907,904 6,413,801 2,284,303 2,069,061 1,980,819 1,060,000 1,009,064 764,068 757,264 56,249,213 Asilimia 40.44 9.73 8.11 2.81 2.61 2.44 1.34 1.27 0.94 0.94 71.00

USAMBAZAJI WA HISA ZA KAWAIDA

Hisa <1,000 1001-10,000 10,001-50,000 50,001-100,000 Over 100,000 Jumla Wenye Hisa 3,042 1,581 342 55 74 5,091 Kiwango cha Hisa 1,182,049 5,397,129 7,394,394 3,871,198 61,283,230 79,128,000

ENG. ALFRED SAMBU CHAIRMAN

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REPORT OF THE DIRECTORS FOR THE YEAR ENDED 30 JUNE 2006

The Directors submit their report together with the audited financial statements for the year ended 30 June 2006 which show the state of the Companys affairs. ACTIVITIES The core business of the Company continues to be the transmission, distribution and retail of electricity purchased in bulk from Kenya Electricity Generating Company Limited (KenGen), Independent Power Producers (IPPs), Uganda Electricity Transmission Company Limited (UETCL) and Tanzania Electric Supply Company Limited (TANESCO). RESULTS The results of the Company for the year are set out on page 40. DIVIDENDS Subject to the approval of the shareholders, the Directors recommend a dividend for the year of 7.5% or KShs.1.50 per ordinary share of KShs.20, amounting to KShs.119 million, subject to withholding tax where applicable. The dividend will be paid to shareholders registered in the books of the Company at the close of business on 2 November 2006. The Register of Members will be closed for one day only on 3 November 2006, to facilitate preparation of dividend warrants. By Order of the Board Meanwhile, dividend of KShs.1.93 million payable on the cumulative preference shares has been recognised in the income statement under finance costs. CAPITAL EXPENDITURE During the year, a total of KShs.4,685 million was spent on property and equipment. Capital contributions received from customers amounting to KShs.1,705 million have been netted off against costs of the assets resulting in a net capital cost to the Company of KShs.2,980 million. Net capital work-in progress as at 30 June 2006 amounted to KShs.2,955 million (2005: KShs.1,923 million). DIRECTORS The members of the Board of Directors who served during the year are shown on page 3. In accordance with Regulation 120 of the Articles of Association of the Company, Ngugi Kiuna, Joseph Kinyua and Edwin Wasunna retire by rotation and, being eligible, offer themselves for re-election. AUDITORS The Controller and Auditor-General is responsible for the statutory audit of the Companys books of account in accordance with Sections 14 and 39(i) of the Public Audit Act, 2003, which empowers the Controller and Auditor-General to nominate other auditors to carry out the audit on his behalf. Ernst & Young were nominated by the Controller and Auditor-General to carry out the audit for the year ended 30 June 2006.

Laurencia Njagi Secretary Nairobi 28 September 2006

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STATEMENT OF DIRECTORS' RESPONSIBILITIES ON THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
The Kenyan Companies Act, Cap 486 requires the Directors to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the operating results of the Company for that year. It also requires the Directors to ensure the Company keeps proper accounting records which disclose with reasonable accuracy the financial position of the Company. They are also responsible for safeguarding the assets of the Company. The Directors accept responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards and in the manner required by the Kenyan Companies Act. The Directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the Company and of its operating results. The Directors further accept responsibility for the maintenance of accounting records which may be relied upon in the preparation of financial statements, as well as adequate systems of internal financial control. Nothing has come to the attention of the Directors to indicate that the Company will not remain a going concern for at least the next twelve months from the date of this statement.

.. Director

.. Director

28 September 2006

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KPLC Annual Report AnD ACCOUNts 2005-2006

REPORT OF THE CONTROLLER AND AUDITOR GENERAL ON THE FINANCIAL STATEMENTS OF THE KENYA POWER & LIGHTING COMPANY LIMITED FOR THE YEAR ENDED 30 JUNE 2006.
The financial statements on pages 40 to 64 for the year ended 30 June 2006, which have been prepared on the basis of the accounting policies set out on pages 44 to 47, have been audited on my behalf by Ernst & Young, appointed under section 39 of the Public Audit Act, 2003. The auditors have duly reported to me the results of their audit and on the basis of their report, I am satisfied that all the information and explanations which to the best of my knowledge and belief were necessary for the purpose of the audit were obtained. The financial statements are in agreement with the books of account. RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND THE CONTROLLER AND AUDITOR-GENERAL As stated on page 38, the Directors are responsible for the preparation of the financial statements which give a true and fair view of the state of the affairs of the Company and of its operating results. My responsibility is to express an independent opinion on the financial statements based on my audit. BASIS OF OPINION The audit was conducted in accordance with the International Standards on Auditing. Those standards require that the audit be planned and performed with a view to obtaining reasonable assurance that the financial statements are free from material P.N. Komora Controller and Auditor-General Nairobi misstatement. An audit includes an examination, on a test basis, of evidence supporting the amounts and disclosures in the financial statements. It also includes an assessment of the accounting policies used and significant estimates made by the Directors, as well as an evaluation of the overall presentation of the financial statements. I believe the audit provides a reasonable basis for my opinion. OPINION In my opinion, proper books of account have been kept and the financial statements give a true and fair view of the state of the affairs of the Company at 30 June 2006, and of its profit and cash flows for the year then ended in accordance with International Financial Reporting Standards and comply with the Companies Act, (Cap 486 of the Laws of Kenya).

28 September 2006

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INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2006

2006 KShs000 Note REVENUE Electricity sales Fuel cost recoveries 1(b) 22,493,912 11,472,818 33,966,730 988,681 34,955,411 21,755,274 6,586,082 28,341,356 671,526 29,012,882 2005 KShs000

Other income Total revenue OPERATING EXPENSES Electricity purchase costs Fuel costs Distribution and customer service Energy transmission Administration Total operating expenses OPERATING PROFIT FINANCE INCOME - NET PROFIT BEFORE TAXATION DEFERRED TAXATION PROFIT FOR THE YEAR EARNINGS PER SHARE - BASIC (KShs.) - DILUTED (KShs.) DIVIDENDS PER SHARE (KShs.) 9 9 8(b) 5 7 3(a) 3(b) 4(a) 4(b) 4(c)

11,514,377 11,962,153 4,612,906 1,427,988 3,232,243 32,749,667 2,205,744 292,239 2,497,983 (853,752) 1,644,231 20.78 20.78 1.50

11,673,441 6,684,953 4,294,613 1,405,359 3,113,213 27,171,579 1,841,303 137,973 1,979,276 (709,003) 1,270,273 16.05 16.05 1.50

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KPLC Annual Report AnD ACCOUNts 2005-2006

BALANCE SHEET 30 JUNE 2006

2006 KShs000 ASSETS Note NON-CURRENT ASSETS Property and equipment Prepaid leases on land Unquoted investment Deferred tax Deposits 10 11 12 13 14 22,416,459 132,037 4,300 234,442 22,787,238 CURRENT ASSETS Inventories Trade and other receivables Tax recoverable Short term deposits Bank and cash balances 15 16 8(a) 17(a) 17(b) 2,928,586 6,550,021 251,829 5,936,248 274,990 15,941,674 TOTAL ASSETS EQUITY AND LIABILITIES CAPITAL AND RESERVES Ordinary share capital Preference shares Reserves TOTAL EQUITY NON-CURRENT LIABILITIES Trade and other payables Borrowings Preference shares 18(a) 18(b) 19 1,582,560 15,899,250 3,078,595 20,560,405 1,582,560 15,899,250 1,416,369 18,898,179 38,728,912 20,856,199 132,092 4,300 951,518 340,684 22,284,793 2,155,335 5,863,524 179,097 3,817,003 1,537,731 13,552,690 35,837,483 2005 KShs000

20 21 22

3,298,829 2,701,722 43,000 6,043,551

3,063,741 3,248,936 43,000 6,355,677 7,902,742 1,850,418 357,963 447,697 24,807 10,583,627 35,837,483

CURRENT LIABILITIES Trade and other payables Retirement benefits obligation Provision for leave pay obligation Borrowings Dividends payable

20 23 21 24

9,598,298 1,697,218 357,963 443,904 27,573 12,124,956

TOTAL EQUITY AND LIABILITIES

38,728,912

The financial statements on pages 40 to 64 were approved for release by the board of Directors on 28th September 2006 and were signed on its behalf by:

Eng. Alfred Sambu

Zachary Ayieko

) ) ) Directors )

KPLC Annual Report An D ACCOUNTS 2005-2006

41

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2006

Redeemable 7.85% noncumulative preference share capital KShs'000 15,899,250 15,899,250

Ordinary share capital KShs'000 At 1 July 2004 Transfer of excess depreciation Deferred tax on excess depreciation Profit for the year Proposed dividends for the year At 30 June 2005 1,582,560 1,582,560

Revaluation reserves KShs'000 3,672,057 (455,626) 136,687 3,353,118

Accumulated deficit KShs'000 (3,662,648) 455,626 1,270,273 (118,692) (2,055,441)

Proposed dividends KShs'000 118,692 118,692

Total KShs'000 17,491,219 136,687 1,270,273 18,898,179

At 1 July 2005 Transfer of excess depreciation Deferred tax on excess depreciation Profit for the year Dividends paid Proposed dividends for the year At 30 June 2006

1,582,560 1,582,560

15,899,250 15,899,250

3,353,118 (455,626) 136,687 3,034,179

(2,055,441) 455,626 1,644,231 (118,692) (74,276)

118,692 (118,692) 118,692 118,692

18,898,179 136,687 1,644,231 (118,692) 20,560,405

42

KPLC Annual Report AnD ACCOUNts 2005-2006

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2006

2006 KShs000 Note OPERATING ACTIVITIES Cash generated from operations Interest received Interest paid Dividends paid Taxation paid Cash generated from operating activities INVESTING ACTIVITIES Purchase of property and equipment, net of capital contributions Proceeds from disposal of property and equipment Loan receivable repayments Net cash used in investing activities FINANCING ACTIVITIES Loans received Repayment of amounts borrowed Net cash used in financing activities INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 25(b) 25(b) 215,666 (756,236) (540,570) 32,914 (307,415) (274,501) 25(a) 4,220,021 519,096 (198,917) (117,856) (72,732) 4,349,612 5,634,277 159,572 (63,919) (363,485) (20,372) 5,346,073 2005 KShs000

(2,979,564) 27,026 (2,952,538)

(1,846,965) 6,501 22,360 (1,818,104)

856,504

3,253,468

5,354,734

2,101,266

25(c)

6,211,238

5,354,734

KPLC Annual Report An D ACCOUNTS 2005-2006

43

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
1. ACCOUNTING POLICIES (a) Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs). The financial statements have been prepared on a historical cost basis, except for the measurement at revaluation amounts of certain property and equipment. (b) Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must be met before revenue is recognised:(i) Sale of electricity Income is recognised upon supply of electricity and represents amounts billed excluding Value Added Tax and other Government levies.

(ii) Interest Interest income is accrued on a time proportion basis, by reference to the principal outstanding and at the effective interest rate applicable. (iii) Dividends Dividend income is recognised when the shareholders right to receive the payment is established. (iv) Rental income Rental income is accounted for on a straight-line basis over the lease term. (c) Inventories Inventories are stated at lower of cost and net realisable value. The cost of inventories comprise purchase price, import duties, transport and handling charges and is determined on moving average price. Property and equipment Property and equipment are stated at cost or as professionally valued less accumulated depreciation. The frequency of revaluations depends upon the movements in the fair values of the items of property and equipment but are limited to a period of not more than five years. Revaluation surplus arising from the revaluations of property and equipment is dealt with in the revaluation surplus account. A decrease in carrying amount arising on the revaluation is charged in the income statement to the extent that it exceeds the balances, if any, held in the revaluation reserve relating to a previous revaluation of that asset. Additions to power distribution lines during the year are capitalised net of customers contributions. No depreciation is provided on freehold land. Depreciation on other assets is calculated to write off their cost or valuation of property and equipment to their residual values on a straight-line basis over their expected useful lives. The depreciation rates used are: Buildings Transmission and distribution lines Machinery Motor vehicles Furniture, equipment and fittings Computers and photocopiers The greater of 2% and the unexpired period of the lease. 2.5 - 20% 2.85 - 6.66% 25% 6.66 - 20% 30%

(d)

Excess depreciation, representing the additional depreciation based on revalued amounts over depreciation based on historical costs, is transferred annually from revaluation to revenue reserves.

44

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
(e) Taxation Current taxation is provided on the basis of the results for the year as shown in the financial statements, adjusted in accordance with tax legislation. Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the unused tax losses and unused tax credits can be utilised. (f) Leases Leases of assets under which all the risks and benefits of ownership are effectively retained by the Company as the lessor are classified as operating leases. Payments made by the Company under operating leases are charged to the income statement on the straight-line basis over the term of lease. Payments made to acquire leasehold land are treated as prepaid operating leases and are amortised on the straight line basis over the term of lease. Assets acquired under finance leases and hire purchase agreements are capitalised at the dates of the agreements. The interest element of each instalment is charged to the income statement at the time each instalment falls due. (g) Foreign currencies Monetary assets and liabilities denominated in foreign currencies are translated into Kenya Shillings at the rate of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rates ruling at the date of the transaction. Exchange gains and losses arising during the period of construction of a project are capitalised as part of the cost of the project. Other exchange gains and losses are dealt with in the income statement. Financial instruments Financial assets and liabilities are recognised on the Companys balance sheet when the Company has become a party to the contractual provisions of the instrument. Trade receivables Trade receivables are recognised and carried at original invoice amounts less allowances for any uncollectable amounts. Borrowings Interest bearing loans and overdrafts are initially recorded at cost, being the fair value of consideration received, net of issue costs associated with the borrowing. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue cost, and any discount or premium on settlement. Finance charges, including premiums payable on settlement or redemption, are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Loan interest accruing during the construction of a project is capitalised as part of the cost of the project. Trade payables Trade payables are stated at their nominal value.

(h)

KPLC Annual Report An D ACCOUNTS 2005-2006

45

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
(h) Financial instruments continued Investments Investments are recognised on a trade-date basis and are initially measured at cost, including transaction costs. At subsequent reporting dates, debt securities that the Company has expressed intention and ability to hold to maturity (held-to-maturity debt securities) are measured at amortised cost, less any impairment loss recognised to reflect irrecoverable amounts. The annual amortisation of any discount or premium on the acquisition of a held-to-maturity security is aggregated with other investment income receivable over the term of the instrument so that the revenue recognised in each period represents a constant yield on the investment. Investments other than held-to-maturity debt securities are classified as either held-for-trading or available-forsale, and are measured at subsequent reporting dates at fair value in cases where the fair value can be reliably established. Gains and losses arising from changes in fair value are included in the income statement for the period. Redeemable preference shares The component of redeemable preference shares that exhibits the characteristics of a liability is recognised as a liability in the balance sheet, net of issue costs. The corresponding dividends on those shares are charged as interest expenses in the income statement. (i) Leave accrual Employees entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave at the balance sheet date. Impairment of tangible and intangible assets excluding goodwill At each balance sheet date, the Company reviews the carrying amounts of its financial assets, 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 amounts of the asset is estimated and an impairment loss is recognised in the income statement whenever the carrying amount of the asset exceeds its recoverable amount. Where it is not possible to estimate the recoverable amount of an individual asset, the Directors estimate the recoverable amount of the cash-generated unit to which the asset belongs. Impairment of transmission and distribution lines A decline in the value of the transmission and distribution lines could have a significant effect on the amounts recognised in the financial statements. Management assesses the impairment of the lines whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors that are considered important which could make an impairment review necessary include the following: (a) Significant decline in the market value beyond that which would be expected from the passage of time and normal use. (b) Evidence from internal reporting which indicates that the performance of the asset is, or will be, worse than expected. In managements judgment, the carrying values of the lines are not impaired as of the date of these financial statements.

(j)

46

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
(k) Retirement benefits obligations The Company operates a defined benefits pension scheme, in addition to a statutory defined contributions scheme. Payments to the defined contributions retirement benefits plans are charged as an expense as they fall due. For the defined benefits retirement plans, the cost of providing benefits is determined using the projected unit credit method. Actuarial gains and losses are recognised as income or expense when cumulative unrecognised actuarial gains or losses exceed 10 per cent of the higher of the defined benefits obligations and the fair value of plan assets. These gains or losses are recognised over the expected average remaining working lives of the participating employees. (l) Segment information The Company business is organised by regions, comprising Nairobi, Mount Kenya, Coast and West Kenya. Business segment is by region as the Company deals in only supply of electricity. There are no inter-segment sales. Segment results include revenue and expenses directly attributable to a segment. Segment assets and liabilities comprise those operating assets and liabilities that are directly attributable to the segment or can be allocated to the segment on a reasonable basis. Capital expenditure represents the total cost incurred during the year to acquire segment assets that are expected to be used during more than one period (property and equipment).

KPLC Annual Report An D ACCOUNTS 2005-2006

47

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
2(a). PRIMARY SEGMENT INFORMATION - GEOGRAPHICAL SEGMENTS For management purposes, the Company is currently organised into four operating regions. These regions are the basis on which the Company reports its primary segment information. The four regions comprise Nairobi, Coast, West Kenya and Mount Kenya. The table below shows the Companys revenue, expenses, segment assets, segment liabilities, capital expenditure and depreciation by the geographical area.

Nairobi Region KShs000 Electricity revenue Other income Energy purchases Other expenses Head office expenses Segment results Net financing income Taxation Profit after taxation Other information Assets Liabilities Capital expenditure Depreciation/ amortisation 21,740,267 19,186,363 1,697,710 18,376,634 617,194 (12,705,498) (3,021,724) (1,474,008) 1,792,598

West Kenya Region KShs000 6,171,873 177,695 (4,277,424) (1,730,324) (496,238) (154,418)

Coast Region KShs000 6,403,217 118,199 (4,512,189) (947,274) (523,474) 538,479

Mount Kenya Region KShs000 3,015,006 75,593 (1,981,419) (850,224) (229,871) 29,085

2006 Total KShs000

2005 Total KShs000

33,966,730 28,341,355 988,681 604,929 (23,476,530) (18,358,394) (6,549,546) (6,098,930) (2,723,591) (2,647,657) 2,205,744 292,239 (853,752) 1,644,231 1,841,303 137,973 (709,003) 1,270,273

6,796,848 5,960,010 569,434

6,927,336 6,044,568 415,344

3,264,461 2,876,816 297,077

38,728,912 34,067,757 2,979,565

35,810,412 32,810,486 1,846,965

856,295

205,434

214,968

106,213

1,382,910

1,436,716

2(b). SECONDARY SEGMENT INFORMATION - BUSINESS SEGMENTS The Companys core business in the four regions continues to be the transmission, distribution and retail of electricity. There is no distinguishable component of the Company that is engaged in providing an individual service that is subject to risks and returns that are different from those of other business segments. The secondary segment information on fixed assets details at net book values are shown below:

Freehold land and buildings KShs000 Transmission Distribution Total 140,044 589,005 729,049

Lines KShs000 12,026,838 4,849,383 16,876,221

Machinery KShs000 40,595 3,471 44,066

Motor vehicles KShs000 129,963 532,470 662,433

Furniture equipment and other KShs000 75,415 1,074,118 1,149,533

Total KShs000 12,412,855 7,048,447 19,461,302

48

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
3. POWER PURCHASE COSTS (a) Power purchase costs The power purchases were sourced from the following companies: KenGen Uganda Electricity Transmission Company Limited Tsavo Power Company Limited Iberafrica Power (E.A) Company Limited Orpower 4 Inc Westmont Power Kenya Limited Mumias Sugar Company Limited Tanzania Electric Supply Company Limited

2006 KShs000 8,275,402 93,134 1,766,724 1,044,475 767,893 20,267 9,772 11,977,667 (463,290) 11,514,377

2005 KShs000 7,792,265 449,896 1,814,000 1,119,260 797,157 136,153 783 12,109,514 (436,073) 11,673,441

Less recharged to Rural Electrification Programme

(b) Fuel costs KenGen Tsavo Power Company Limited Iberafrica Power (E.A) Company Limited Mumias Sugar Company Limited Westmont Power Kenya Limited 6,162,154 3,030,620 3,147,955 8,398 (35,751) 12,313,376 Less recharged to Rural Electrification Programme (351,223) 11,962,153 (c) Units purchased Interconnected power purchases by utility source is analysed as follows in gigawatt-hours (GWh): 2006 GWh KenGen Uganda Electricity Transmission Company Limited Tsavo Power Company Limited Iberafrica Power (E.A) Company Limited Orpower 4 Inc Mumias Sugar Company Limited Westmont Power Kenya Limited Less recharged to Rural Electrification Programme 4,568 15 569 408 117 9 5,686 (214) 5,472 (d) Type of interconnected power sources The interconnected power sources by type of generation are analysed as follows in GWh: Hydro Geothermal Thermal Others Less recharged to Rural Electrification Programme 3,040 1,003 1,633 10 5,686 (214) 5,472 2,967 1,034 1,333 5,334 (192) 5,142 2005 GWh 4,279 99 508 330 115 3 5,334 (192) 5,142 2,927,154 1,840,600 2,166,923 6,934,677 (249,724) 6,684,953

KPLC Annual Report An D ACCOUNTS 2005-2006

49

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
4. OTHER OPERATING COSTS (a) Distribution and customer service 2006 KShs000 Salaries and wages Staff welfare Other consumable goods Depreciation Transport and travelling Provision for bad and doubtful debts Office expenses Obsolete stock provision Advertising and public relations Repairs and maintenance Business development Other costs Recharge of distribution and customer service costs 2,554,593 177,729 449,103 499,645 753,758 586,492 182,619 71,765 82,882 5,583 46,952 (798,215) 4,612,906 2005 KShs000 2,328,798 201,876 327,199 420,071 384,774 151,906 150,702 245,285 26,921 16,323 2,631 38,127 4,294,613

(b) Energy transmission Salaries and wages Depreciation Transport and travelling Office expenses Other costs 423,654 745,700 156,261 886 101,487 1,427,988 (c) Administration Salaries and wages Staff welfare Insurance Other consumable goods Transport and travelling Training expenses and consumer services Other costs Depreciation Other office expenses Consultancy fees Provision for non commercial bad debts Pension deficit and leave provisions Bank charges and other financial costs Recharge of administration costs to RES 1,134,161 217,342 212,089 139,144 (58,075) 51,626 582,877 137,565 200,766 125,462 255,000 166,800 152,567 (85,081) 3,232,243 1,118,003 212,010 189,787 162,425 155,261 36,824 568,817 108,185 237,712 55,194 227,683 151,719 (110,407) 3,113,213 358,347 908,457 109,060 1,378 28,117 1,405,359

50

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
5. OPERATING PROFIT The operating profit is arrived at after charging/(crediting): 2006 KShs000 Staff costs (Note 6) Depreciation Provision for bad and doubtful debts Directors emoluments: - Fees - Other Auditors remuneration Amortisation (Gain)/loss on disposal of property and equipment Rent payable Rent receivable 6. STAFF COSTS Salaries and wages National Social Security Fund contributions Pension costs Company contribution Leave provision Provision for actuarial losses (note 23) 4,217,057 14,249 244,814 166,800 4,642,920 The average number of employees during the year was:Permanent employees Contract employees 5,129 1,073 6,202 7. FINANCE INCOME-NET Interest receivable: On bank and other deposits Iberafrica Power (EA) Ltd loan 485,238 485,238 Exchange gains on loans Exchange losses on deposits Net foreign exchange gains Interest payable: Loans Bank overdrafts Dividends on preference shares (219,482) (580) (1,930) (221,992) 292,239 (59,440) (1,389) (1,930) (62,759) 137,973 31,583 (2,590) 28,993 190,468 310 190,778 36,281 (26,327) 9,954 4,988 1,142 6,130 3,703,491 14,101 226,976 60,883 166,800 4,172,251 4,642,920 1,382,855 586,492 950 20,452 8,000 55 (165,179) 84,455 (38,282) 2005 KShs000 4,172,251 1,436,661 151,906 2,678 27,670 6,950 55 13,535 102,174 (43,343)

KPLC Annual Report An D ACCOUNTS 2005-2006

51

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
2006 KShs 000 8. TAXATION (a) Balance sheet At the beginning of the year Paid during the year 2005 KShs 000

179,097 72,732 251,829

158,725 20,372 179,097

(b) Profit and loss account Current taxation based on the adjusted profit for the year at 30% Deferred tax charge

853,752 853,752

709,003 709,003

(c) Reconciliation of tax expense to the expected tax based on accounting profit:Profit before taxation 2,497,983 1,979,276

Tax at the applicable tax rate of 30% Tax effect of expenses not deductible for tax purposes Tax charge 9. EARNINGS PER SHARE

749,395 104,357 853,752

593,783 115,220 709,003

The earnings per share is calculated on the profit after tax of KShs. 1,644,231,000 (2005-KShs. 1,270,273,000) and the number of ordinary shares in issue during the year of 79,128,000 (2005: - 79,128,000). The diluted earnings per share is the same as the basic earnings per share as there were no potentially dilutive ordinary shares outstanding as 30 June 2006.

52

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
10. PROPERTY AND EQUIPMENT Freehold land and buildings KShs000 COST OR VALUATION At 1 July 2004 Additions Disposals At 30 June 2005 Comprising At cost At valuation-2002 1,065,247 139,464 1,204,711 Furniture, Motor equipment vehicles and other KShs000 KShs000

Transmission Distribution lines lines KShs000 KShs000 11,430,770 3,867,793 5,645,180 286,160 (62,374)

Machinery KShs000

Total KShs000

14,582 1,377,847 4,416,392 23,950,018 180 135,466 625,594 5,054,657 (62,374) 14,762 1,513,313 5,041,986 28,942,301

15,298,563 5,868,966

1,204,711 1,204,711

5,070,807 5,868,966 10,227,756 15,298,563 5,868,966

14,762 14,762

1,513,313 5,041,986 18,714,545 - 10,227,756 1,513,313 5,041,986 28,942,301

DEPRECIATION At 1 July 2004 Charge for the year Eliminated on disposals At 30 June 2005 NET BOOK VALUE At 30 June 2005 Work in progress

412,621 29,944 442,565

1,744,624 858,541 2,603,165

1,759,855 233,164 (42,337) 1,950,682

10,981 1,099,663 3,587,015 169 43,871 270,972 11,150 -

8,614,759 1,436,661 (42,337)

1,143,534 3,857,987 10,009,083

762,146

12,695,398

3,918,284

3,612

369,779 1,183,999 18,933,218 1,922,981 20,856,199

Freehold land and buildings KShs000 COST/ VALUATION At 1 July 2005 Additions Disposals At 30 June 2006 Comprising At cost At valuation-2002 DEPRECIATION At 1 July 2005 Charge for the year Eliminated on disposals At 30 June 2006 NET BOOK VALUE At 30 June 2006 Work in progress

Transmission Distribution lines lines KShs000 KShs000

Machinery KShs000

Furniture Motor equipment vehicles and other KShs000 KShs000

Total KShs000

1,204,711 1,204,711

15,298,563 5,868,966 - 1,245,324 - (127,082) 15,298,563 6,987,208

14,762 40,888 55,650

1,513,313 5,041,986 28,942,301 373,190 287,986 1,947,388 (7,326) - (134,408) 1,879,177 5,329,972 30,755,281

1,204,711 1,204,711 442,565 33,097 475,662

5,070,807 6,987,208 10,227,756 15,298,563 6,987,208 2,603,165 668,560 3,271,725 1,950,682 278,509 (91,366) 2,137,825

55,650 55,650 11,150 434 11,584

1,879,177 5,329,972 20,527,525 - 10,227,756 1,879,177 5,329,972 30,755,281 1,143,534 3,857,987 10,009,083 79,803 322,452 1,382,855 (6,593) (97,959)

1,216,744 4,180,439 11,293,979

729,049

12,026,838 4,849,383

44,066

662,433 1,149,533 19,461,302 2,955,157 22,416,459

Capital work in progress relates to construction works of electricity distribution lines and installations spread across the country.

KPLC Annual Report An D ACCOUNTS 2005-2006

53

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006

10. PROPERTY AND EQUIPMENT (continued) Included in land and buildings, distribution lines, machinery, motor vehicles, furniture and equipment are assets with a cost of KShs 5,644,314,645 (2005-KShs. 4,233,775,276) which were fully depreciated. The normal depreciation charge on these assets would have been KShs 954,130,141 (2005-KShs. 815,072,506). The transmission lines were revalued by Mott MacDonald, Registered Valuers (London) as at 30 June 2002 on a depreciated replacement cost basis. NET BOOK VALUE (COST BASIS)

Freehold Furniture land and Transmission Distribution Motor equipment buildings lines lines Machinery vehicles and other KShs000 KShs000 KShs000 KShs000 KShs000 KShs000 At 30 June 2006 Work in progress 729,049 7,904,366 4,849,383 44,066 662,433

Total KShs000

1,149,533 15,338,830 2,955,157 18,293,987

At 30 June 2005 Work in progress

762,146

7,904,366

3,918,284

3,612

369,779 1,183,999 14,142,186 1,922,981 16,065,167

11. PAID LEASES ON LAND KShs000 COST At 30 June 2005 and 2006 AMORTISATION At 1 July 2005 Amortisation for the year At 30 June 2006 NET BOOK VALUE At 30 June 2006 At 30 June 2005 12. UNQUOTED INVESTMENT The investment is stated at cost less provision for impairment. The investment represents equity shares held in Consolidated Bank of Kenya Limited. The shares were acquired in return for deposits previously held with Jimba Credit Finance Limited, one of the finance houses under rehabilitation from insolvency. 132,037 132,092 1,602 55 1,657 133,694

54

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
13. DEFERRED TAX Deferred tax is calculated on all temporary differences under the liability method using the enacted rate, currently at 30%. The net deferred tax asset at year-end is attributable to the following items:

2006 KShs000 Deferred tax assets: Tax losses Provisions (2,362,209) (1,504,619)

2005 KShs000

(3,766,812) (857,242)

(3,866,828) (4,624,054) Deferred tax liabilities: Accelerated capital allowances Unrealised exchange gains Revaluation surplus 2,272,902 59,119 1,300,365 3,632,386 (234,442) Movement on the deferred tax account is as follows: At 1 July Credit to revaluation reserve Adjustment Income statement charge (note 8(b)) At 30 June (951,518) (1,523,834) (136,687) (136,687) 11 853,752 709,003 (234,442) (951,518) 2,178,731 56,752 1,437,053 3,672,536 (951,518)

The deferred taxation assets have been recognised in the financial statements on the basis of profit forecasts which indicate that the Company will generate sufficient profits in the foreseeable future to facilitate utilisation of the tax losses and provisions. Under the Kenya tax legislation, tax losses can be carried to perpetuity. 2006 KShs000 14. DEPOSITS Standard Chartered Bank Kenya Limited Nil (2005-US$ 2,420,116) Co-operative Bank of Kenya Limited Nil (2005-US$ 2,083,596) 2005 KShs000

184,440

156,244 340,684

The average effective interest rate on the deposits as at 30 June 2006 was 6% per annum (2005 - 7.5%). The above deposits denominated in foreign currency represent amounts held by the Companys bankers as security for guarantees issued by the bankers on behalf of the Company. These are in respect of standby letters of credit issued by the Company to fulfil a contractual agreement under a power supply agreement.

KPLC Annual Report An D ACCOUNTS 2005-2006

55

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
15. INVENTORIES 2006 KShs000 General stores Engineering spares Fuel and oil Transformers Motor vehicle spares Goods in transit 1,991,538 10,029 48,841 740,428 63,915 73,835 2,928,586 2005 KShs000 645,350 21,685 117,648 1,145,404 58,947 166,301 2,155,335

General stores, engineering spares, fuel and oil, transformers and motor vehicle spares are stated at weighted average cost while goods in transit are at cost. 16. TRADE AND OTHER RECEIVABLES 2006 KShs000 Electricity customers Prepayments Recoverable fuel costs VAT recoverable Staff receivables Other receivables 3,978,091 94,099 1,206,716 775,488 143,937 351,690 6,550,021 17. SHORT TERM DEPOSITS, BANK AND CASH BALANCES (a) Short term deposits - maturing within 3 months: Housing Finance Company of Kenya Ltd Standard Chartered Bank Kenya Limited Co-operative Bank of Kenya Limited 216,071 3,167,822 2,552,355 5,936,248 203,524 577,399 3,036,080 3,817,003 2005 KShs000 4,010,821 123,868 788,971 534,975 112,654 292,235 5,863,524

The average effective interest rate on the short-term deposits as at 30 June 2006 was 6% (2005 7.5 %). (b) Bank and cash balances Bank and cash balances comprise:2006 KShs000 263,487 11,503 274,990 18. SHARE CAPITAL (a) Ordinary share capital Authorised: 97,850,000 ordinary shares of KShs. 20 each Issued and fully paid: 79,128,000 ordinary shares of KShs. 20 each (b) Redeemable non-cumulative preference share capital Authorised: 800,000,000 - 7.85% preference shares of KShs. 20 each Issued and fully paid: 794,962,500 - 7.85% preference shares of KShs. 20 each 16,000,000 16,000,000 1,957,000 1,957,000 2005 KShs000 1,526,263 11,468 1,537,731

Cash at bank Cash on hand

1,582,560

1,582,560

15,899,250

15,899,250

56

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
18. SHARE CAPITAL (Continued) The issued and fully paid redeemable non-cumulative preference share capital relates to debts from the Government of Kenya converted into redeemable 7.85% non-cumulative preference shares in the year 2004. The preference shares are redeemable at the option of the Company. 19. RESERVES 2006 KShs000 Accumulated deficit Proposed dividends Revaluation surplus (74,276) 118,692 3,034,179 3,078,595 The revaluation reserve was as result of revaluation of transmission lines as shown in note 10. 20. TRADE AND OTHER PAYABLES 2006 KShs000 KenGen Other electricity suppliers Customers deposits Capital contributions Other suppliers accounts Rural Electrification Programme Levy Electricity Regulatory Board Levy Rural Electrification Programme Schemes Other payables and accruals 3,290,222 1,275,571 2,537,919 760,910 441,537 1,484,910 27,018 1,565,091 1,513,949 12,897,127 Less: Non-refundable and payable after one year (3,298,829) 9,598,298 2005 KShs000 2,387,865 1,897,029 2,283,256 780,485 376,874 1,572,401 46,534 89,125 1,532,914 10,966,483 (3,063,741) 7,902,742 2005 KShs000 (2,055,441) 118,692 3,353,118 1,416,369

The amount due to KenGen represents outstanding amounts arising from power purchases and Sondu Miriu transmission line project as disclosed in note 26 (d). The non-refundable and payable amounts after one year relate to deposits and capital contributions received from customers. Rural Electrification Programme Levy represents levies collected by the Company from electricity customers on behalf of the Government, while Rural Electrification Programme Schemes relate to amount received from Government of Kenya for implementation of Rural Electrification Projects.

KPLC Annual Report An D ACCOUNTS 2005-2006

57

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
21. BORROWINGS (a) Balances 6.125% Kenya Government/Swiss mixed credit 1996-2007 (CHF 2,457,515) 4% Kenya Government/European Investment Bank - Olkaria loan (Euro 25,428,154) 2005 2020 7.83% East Africa Development Bank (Kiambere Nairobi 220KVA line USD 1,601,521) 2003-2007 4% FMO (Kipevu Rabai line USD 2,250,000) 2003-2007 7.7% Kenya Government/IDA 2966 KE loan 1997-2017 4.5% GOK/IDA 3958 KE (ESRP- USD 1,524,913) 2004-2024 Accrued interest 2006 KShs000 2005 KShs000

147,211 2,386,094 118,192 166,050 186,096 112,539 29,444 3,145,626 443,904 2,701,722

162,144 2,801,440 243,457 285,750 163,463 32,081 8,298 3,696,633 447,697 3,248,936

Less: amounts repayable within 12 months Non-current

East African Development Bank Limited and FMO loans are guaranteed by letters of negative pledge. All other loans are guaranteed by the Government of Kenya. (b) Analysis of borrowings by currency

Borrowings in KShs KSh000 2006 Loans 2005 Loans 163,463 200,426

Borrowings in US$ KShs000

Borrowings in CHF KShs000

Borrowings Total in EURO Borrowings in KShs000 KShs000

400,854

147,211

2,397,135

3,145,626

569,586

162,144

2,801,440 KShs000

3,696,633 KShs000

(c) Maturity of borrowings Due within 1 year Due between 1 and 2 years Due between 2 and 5 years Due after 5 years

443,904 608,509 717,262 1,375,951 3,145,626

447,697 700,750 1,171,211 1,376,975 3,696,633

22. PREFERENCE SHARES Authorised and fully issued: 350,000 - 7% cumulative preference shares of KShs. 20 each 1,800,000 - 4% cumulative preference shares of KShs. 20 each 7,000 36,000 43,000 7,000 36,000 43,000

The preference shares are treated as financial liabilities because the Company has a contractual obligation to pay preference dividends on the shares.

58

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
23. RETIREMENT BENEFITS OBLIGATIONS The Company operates a defined retirement benefits scheme for all employees. The scheme is administered by an inhouse team and is funded by contributions from the Company and its employees. AIG Global Investment (EA) Company Limited and Co-optrust Investment Services Limited jointly manage the schemes funds. Under the plan, the employees are entitled to retirement benefits varying between 2 and 3 percent of final pensionable emoluments on attainment of the retirement age of 55. Amounts recognised in income in respect of the defined benefits plan are as follows: 2006 KShs000 Net actuarial losses The charge for the year has been included in staff costs (note 6). The amount included in the balance sheet arising from the Companys obligation in respect of its defined benefits plan is as follows: 2006 2005 KShs000 KShs000 Present value of funded obligations Unrecognised actuarial losses Fair value of plan assets 7,713,400 (1,940,982) (3,695,200) 2,077,218 Movement in the net liability in the current year were as follows: At beginning of the year Amounts paid Amounts charged to income At 30 June Key assumptions used: 2006 Rate of interest Expected return on plan assets Expected rate of salary increases Future pension increases: - Post 31/12/99 service - Pre 31/12/99 service 10% 10% 8% 0% 3% 2005 10% 10% 8% 0% 3% 1,850,418 (320,000) 166,800 1,697,218 1,743,618 (60,000) 166,800 1,850,418 7,713,400 (2,107,782) (3,695,200) 1,910,418 166,800 2005 KShs000 166,800

The Company also contributes to the statutory National Social Security fund (NSSF). This is a defined contribution scheme registered under the National Social Security Act. The Companys obligations under the scheme are limited to specific contributions legislated from time to time and are currently at KShs. 200 per employee per month. 24. DIVIDENDS PAYABLE These relate to unclaimed dividends payable to different stockholders on ordinary shares.

KPLC Annual Report An D ACCOUNTS 2005-2006

59

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
25. NOTES TO THE CASH FLOW STATEMENT (a) RECONCILIATION OF OPERATING PROFIT TO CASH GENERATED FROM OPERATIONS 2006 KShs000 Operating profit Depreciation Amortisation Loss on disposal of property and equipment Net exchange losses Operating profit before working capital changes Increase in inventories Increase in trade and other receivables Increase in trade and other payables (Decrease)/ increase in staff retirement benefits scheme Increase in provision for leave pay obligation Movement in non current deposits Cash generated from operations (b) ANALYSIS OF CHANGES IN LOANS 2,205,744 1,382,855 55 9,390 (2,590) 3,595,454 (773,251) (720,310) 1,930,644 (153,200) 340,684 4,220,021 2005 KShs000 1,841,303 1,436,661 55 13,535 (25,651) 3,265,903 (446,083) (140,410) 2,775,982 106,800 60,883 11,202 5,634,277

At beginning of the year Receipts Repayments Exchange gains Accrued interest At end of the year (c) ANALYSIS OF CASH AND CASH EQUIVALENTS Short term deposits Bank and cash balances

3,696,633 215,666 (764,534) (31,583) 29,443 3,145,625

4,131,914 32,914 (307,415) (169,078) 8,298 3,696,633

5,936,248 274,990 6,211,238

3,817,003 1,537,731 5,354,734

For the purpose of the cash flow statement, cash and cash equivalents include short term liquid investments which are readily convertible to known amounts of cash and which were within three months to maturity when acquired; less advances from banks repayable within three months from date of disbursement or date of confirmation of the advance.

60

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
26. RELATED PARTY TRANSACTIONS The Government of Kenya is the principal shareholder in Kenya Power and Lighting Company Limited (KPLC) and also holds 70% of the equity interest in Kenya Electricity Generating Company Limited (KenGen). The Company is related to KenGen through common control. During the year, the following transactions were carried out with related parties: (a) Government of Kenya 2006 KShs000 Electricity sales to Government ministries Outstanding balances included in trade debtors (b)Staff Electricity sales to staff Outstanding balances included in trade debtors 17,177 3,166 16,985 3,502 1,150,469 414,539 2005 KShs000 815,842 268,631

The tariffs applicable to Government institutions are similar to other ordinary customers while staff are charged at KShs. 2.26 per KWh. (c) Rural Electrification Programme During the year, the Company continued to manage the Rural Electrification Programme (REP) on behalf of the Government of Kenya. The Rural Electrification Programme (REP) was established in 1973 by the Government of Kenya following an agreement between it and East African Power & Lighting Company, a predecessor to Kenya Power & Lighting Company Limited. The programme was established with the specific objective to extend electricity to the sub economic rural areas. The REP is funded by several donors through the Government of Kenya. Any property acquired by REP remains the property of the Government of Kenya. KPLC only acts as a management agent on behalf of the Government. The schemes financial details not included in these financial statements are as follows: 2006 KShs000 Electricity sales Expenditure Net deficit 1,538,526 2,346,726 (808,200) 2005 KShs000 1,208,301 1,912,469 (704,168)

Assets

8,277,243

7,635,968

Other details relating to transactions and balance with the Government of Kenya are disclosed in note 20.

KPLC Annual Report An D ACCOUNTS 2005-2006

61

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
26. RELATED PARTY TRANSACTIONS (Continued) 2006 KShs000 (d)KenGen Electricity purchases Amounts due to KenGen on account of electricity purchases Amounts due to KenGen on account of Sondu Miriu project Electricity sales Amounts due from KenGen on account of electricity sales Transactions with KenGen are at arms length and in the normal course of business. (e) KPLC Staff Retirement Benefits Scheme The Company uses property owned by the staff retirement benefits scheme for office accommodation. Rent paid during the year in this regard amounted to KShs.40,000,000 (2005-KShs. 40,000,000). 27. RISK MANAGEMENT POLICIES The financial risk management objectives and policies are as outlined below: Credit risk The Companys credit risk is primarily attributable to its trade receivable and bank deposits. The amounts presented in the balance sheet are net of allowances for doubtful receivables, estimated by the Companys management based on prior experience and their assessment of the current economic environment. The credit risk on trade receivables is limited as the Company is a monopoly in the distribution of electricity which is a basic necessity for the consumer. In addition, the Company has no significant concentration of credit risk, with exposure spread over a large number of customers. The credit risk on liquid funds with financial institutions is also low, because the counter parties are banks with high credit-ratings. Interest rate risk The interest rate risk exposure arises mainly from interest rate movements on the Companys borrowings. To manage the interest rate risk, management has endeavoured to only sign and obtain borrowings from institutions that offer contracts with fixed interest rates. At year-end, borrowings with no fixed interest rates were minimal. Liquidity risk The risk that the Company will encounter difficulty in raising funds to meet commitments associated with financial instruments has been and continues to be addressed by management through debt rescheduling, conversion of loan into equity and re-negotiating with energy suppliers for tariff reductions. Currency risk The foreign currency risk arises due to change in exchange rates. Exposure due to foreign currency risk is managed by recovering from customers the realised fluctuations in the exchange rates not factored in the retail tariffs. 28. FAIR VALUE The Directors are of the opinion that there is no material difference between the fair value and carrying value of the Companys financial assets and liabilities where fair value details have not been presented. 14,437,556 2,960,342 329,880 52,905 16,393 10,719,419 2,387,865 79,552 17,207 2005 KShs000

62

KPLC Annual Report AnD ACCOUNts 2005-2006

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
29. CAPITAL COMMITMENTS 2006 KShs000 Authorised and contracted for Less: Amount incurred and included in work in progress 3,378,711 (606,817) 2,771,894 (168,494) 2,603,400 30. CONTINGENT LIABILITIES 2006 KShs000 Bank guarantees Claims on the Company 406,826 9,429,803 9,836,629 Included in the claims on the Company are: (i) Some employees whose employment was terminated in the year 2003 went to court seeking additional compensation for termination. The advice from the external lawyers is that the plaintiffs claim cannot succeed against the Company. (ii) KShs.1.355 billion in 2004 relating to a claim by Tana & Athi River Development Authority (TARDA) for Masinga and Kiambere power stations lease hire charges for the period prior to 1998. During the year, the parties together with the parent ministries, Treasury and Office of the President agreed to settle the matter administratively. (iii) Other claims on the Company relate to civil suits lodged against the Company by various parties in the normal course of business. (iv) Kenya Electricity Generating Company Limited (KenGen) has claimed an amount of KShs 826 million relating to an actuarial deficit determined on the separation of the Retirement Schemes in 2004. The likely outcome of these suits cannot be determined as at the date of signing these financial statements. Based on the information currently available, the Directors believe that the ultimate resolution of these legal proceedings would not likely have a material effect on the results of the Companys operations, financial position or liquidity. 31. OPERATING LEASE COMMITMENTS AS LESSEE: The total future minimum lease payments due to third parties under non-cancellable operating leases are as follows: 2006 KShs000 Not later than 1 year Later than 1 year and not later than 5 years 65,956 168,144 234,100 AS LESSOR The future minimum lease payments receivable under non-cancellable operating leases are as follows: 2006 KShs000 Not later than 1 year Later than 1 year but not later than 5 years 38,851 77,414 116,265 2005 KShs000 33,114 53,843 86,957 2005 KShs000 79,339 88,746 168,085 2005 KShs000 441,000 3,973,000 4,414,000 2005 KShs000 8,341,908 (2,171,820) 6,170,088 (1,225,992) 4,944,096

Less: Capital contributions received from customers

KPLC Annual Report An D ACCOUNTS 2005-2006

63

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2006
32. POST BALANCE SHEET EVENT In January 2006, Kenya Power & Lighting Company Limited(KPLC) and Kenya Electricity Generating Company Limited signed a supplemental agreement to the Interim Power Purchase Agreement which among other provisions, increased the bulk tariff to KShs 2.36 per kWh from 1 July 2006. The agreement was approved by Electricity Regulatory Board subject to certain conditions, which were not satisfied, while the Government made a commitment to KPLC that it would implement appropriate measures which would fully mitigate any adverse impact on KPLC occasioned by the increase. Subsequent to this date, the Minister for Energy has directed Kenya Power & Lighting Company Limited and Kenya Electricity Generating Company Limited, that the bulk tariff is to remain at the 30 June 2006 level of KShs 1.76 per kWh, pending the outcome of a tariff study commissioned by the Electricity Regulatory Board. 33. COMPARATIVES Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. 34. INCORPORATION The Company is incorporated in Kenya under the Kenyan Companies Act under certificate of incorporation No. C. 1/22 and is domiciled in Kenya. 35. CURRENCY These financial statements are prepared in Kenya shillings thousands (KShs000).

64

KPLC Annual Report AnD ACCOUNts 2005-2006

STATISTICAL INFORMATION

KPLC Annual Report An D ACCOUNTS 2005-2006

65

TEN YEAR FINANCIAL AND STATISTICAL RECORDS

For year ended 30th June 1997 UNITS SOLD (Millions) Average yield of units sold (cents) 3,406 495.98 Shs '000 Revenue from sale of electricity PROFIT/(LOSS) for the Year Before exceptional item Exceptional item PROFIT/(LOSS) for the Year before taxation TAXATION (CHARGE)/ CREDIT NET PROFIT/(LOSS) AFTER TAXATION Preference dividends (gross) NET PROFIT/ (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS ORDINARY DIVIDENDS (gross) RETAINED PROFIT/(LOSS) FOR THE YEAR FUNDS GENERATED FROM OPERATIONS Profit/(Loss) for the year Depreciation 1,130,082 406,484 1,536,566 CAPITAL EMPLOYED Fixed Assets less depreciation Prepaid leases on land Loan to KenGen Investment Other non-current assets Net current assets/(Liabilities) 6,587,490 146,242 4,300 (340,480) 6,397,552 FINANCED BY: Ordinary shareholders' equity Non-cumulative preference shares Cumulative preference shares Loan capital Deferred taxation Non current liability 5,007,196 43,000 1,347,356 6,397,552 CAPITAL EXPENDITURE Average cost of units sold (cents) Profit/(Loss) for the year before taxation as a percentage of average capital employed Ordinary dividend rates Earnings per share Customers/employees ratio Sales (KWh) per employee 33.76% 40% 29.42 51.52 411,402 27.68% 40% 17 63.20 488,070 17.51% 40% 16.47 66.57 501,672 -26.87% 10% (20.35) 71.31 474,278 -76.39% 0% (36.35) 71.22 473,064 2,223,312 459 5,060,357 43,000 1,153,273 987,168 7,243,798 1,542,191 471 5,730,665 43,000 1,239,483 1,207,550 1,614,442 9,835,140 2,351,083 464 3,962,497 43,000 1,268,999 241,263 4,065,915 9,581,674 4,669,768 803 1,065,785 43,000 2,258,632 (987,940) 2,972,744 5,352,221 1,593,221 1,207 7,548,159 80,871 4,300 (389,532) 7,243,798 9,136,366 4,300 12,022,675 12,343,789 4,300 132,343 4,300 (7,108,211) 5,372,221 922,785 579,494 1,502,279 670,308 748,424 1,418,732 (1,768,168) (2,876,711) 926,201 1,138,686 1,130,082 922,785 670,308 (1,768,168) (2,876,711) 1,552,098 (422,016) 1,344,801 (422,016) 1,303,332 (633,024) (1,609,912) (2,876,711) (158,256) 2,160,099 (606,071) 1,554,028 (1,930) 2,005,343 (658,612) 1,346,731 (1,930) 1,721,924 (2,574,269) (4,103,984) (416,662) 966,287 1,229,203 2,160,099 2,005,343 1,721,924 (4,155,863) (4,103,984) 1,581,594 16,893,149 30th June 1998 3,498 516.67 Shs '000 18,073,232 30th June 1999 3,564 516.91 Shs '000 30th June 30th June 2000 3,365 700.28 Shs '000 2001 3,091 911.95 Shs '000

18,422,731 23,564,466 28,188,525

1,305,262 (1,607,982) (2,874,781) (1,930) (1,930) (1,930)

(841,967) (1,738,025)

694,474 (2,445,301) 9,835,140 9,581,674

66

KPLC Annual Report AnD ACCOUNts 2005-2006

TEN YEAR FINANCIAL AND STATISTICAL RECORDS

For year ended 30th June 2002 UNITS SOLD (Millions) Average yield of units sold (cents) 3,498 709.20 Shs '000 Revenue from sale of electricity PROFIT/(LOSS) for the Year Before exceptional item Exceptional item PROFIT/(LOSS) for the Year before taxation TAXATION (CHARGE)/ CREDIT NET PROFIT/(LOSS) AFTER TAXATION Preference dividends (gross) NET PROFIT/ (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS ORDINARY DIVIDENDS (gross) RETAINED PROFIT/(LOSS) FOR THE YEAR FUNDS GENERATED FROM OPERATIONS Profit/(Loss) for the year Depreciation (1,879,553) 1,101,236 (778,317) CAPITAL EMPLOYED Fixed Assets less depreciation Prepaid leases on land Loan to KenGen Investment Other non-current assets Net current assets/(Liabilities) 19,357,165 132,257 4,300 187,500 1,319,233 21,000,455 FINANCED BY: Ordinary shareholders' equity Non-cumulative preference shares Cumulative preference shares Loan capital Deferred taxation Non current liability 3,516,168 43,000 5,049,326 (110,389) 12,612,135 21,110,240 CAPITAL EXPENDITURE Average cost of units sold (cents) Profit/ (Loss) for the year before taxation as a percentage of average capital employed Ordinary dividend rates Earnings per share Customers/employees ratio Sales (KWh) per employee -13.56% 0% (23.75) 98.25 537,444 -23.49% 0% (38.56) 107.98 582,868 3.94% 0% 5.79 110.62 633,848 8.15% 7.50% 16.05 119.93 687,602 9.48% 7.50% 20.78 129.35 716,543 1,959,535 856 997,475 1,591,969 2,998,929 4,661,155 15,899,250 43,000 2,701,722 (234,442) 3,298,829 26,369,514 2,979,564 736.95 19,011,871 20,599,403 20,856,199 132,202 4,300 325,262 (1,972,253) 132,147 4,300 351,886 1,139,351 132,092 4,300 340,684 2,969,063 22,416,459 132,037 4,300 3,816,718 26,369,514 (3,051,355) 1,569,572 (1,481,783) 457,807 1,518,396 1,976,203 1,151,581 1,436,716 2,588,297 1,525,539 1,382,910 2,908,449 (1,879,553) (3,051,355) 457,807 1,151,581 1,525,539 (1,879,553) (3,051,355) 457,807 1,270,273 (118,692) 1,644,231 (118,692) (2,847,186) 969,563 (1,877,623) (1,930) (4,110,263) 1,060,838 (3,049,425) (1,930) 875,614 (415,877) 459,737 (1,930) 1,981,206 (709,003) 1,272,203 (1,930) 2,499,913 (853,752) 1,646,161 (1,930) (1,868,760) (978,426) (4,110,263) 875,614 1,981,206 2,499,913 24,807,649 30th June 2003 3,654 633.03 Shs '000 30th June 2004 3,940 591.96 Shs '000 30th June 2005 4,215 672.39 Shs '000 30th June 2006 4,444 764.33 Shs '000

23,130,782 23,323,083 28,341,356 33,966,730

17,501,382 22,227,087 24,302,338

- 15,899,250 15,899,250 43,000 5,494,863 43,000 3,769,347 43,000 3,248,936 (951,518) 3,063,741

(1,803,024) (1,523,834) 12,790,747 2,447,355

17,523,061 22,227,087 24,302,338 1,231,937 736 3,111,203 584 1,846,965 644.64

KPLC Annual Report An D ACCOUNTS 2005-2006

67

TABLE 1: POWER SYSTEM OPERATION STATISTICS FOR 6 YEARS

COMPANY Capacity (MW) as at 30.06.2006 Installed Effective1 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06

KenGen Hydro: Tana Wanjii Kamburu Gitaru Kindaruma Small Stations Masinga Kiambere Turkwel Hydro Total Thermal: Kipevu Steam Kipevu I Diesel Fiat - Nairobi South Kipevu Gas Turbines Garissa & Lamu Thermal Total Geothermal: Olkaria I Olkaria II Geothermal Total Wind Ngong KenGen Total

14.4 7.4 94.2 225.0 40.0 6.3 40.0 144.0 106.0 677.3 0.0 75.0 13.5 60.0 5.2 153.7 45.0 70.0 115.0 0.4 946.3

10.4 7.4 88.0 216.0 40.0 4.9 40.0 144.0 106.0 656.7 0.0 60.0 10.0 60.0 4.6 134.6 45.0 70.0 115.0 0.4 906.7

Energy Purchased (GWh) 71 76 65 65 47 52 51 34 181 330 470 470 364 665 945 938 81 162 224 221 20 23 25 28 28 127 206 230 292 703 999 1010 240 264 136 263 1,325 2,402 3,120 3,259 126 449 35 274 10 894 340 0 340 0.1 2,559 94 268 1 77 11 451 377 0 377 0.0 3,230 83 144 0.2 20 12 260 277 0 277 0.3 3,657 56 279 -0.02 4 13 352 266 417 682 0.4 4,294

59 21 381 757 170 23 169 814 475 2,869 48 330 3 97 13 491 371 549 920 0.4 4,280

56 22 399 795 190 20 170 852 520 3,025 0 399 18 194 15 626 324 562 886 0.4 4,538

Government of Kenya (Rural Electrification Programme) Isolated Thermal Stations 6.1 5.1 10 10 Independent Power Producers (IPP) - Thermal & Geothermal Iberafrica 56.0 56.0 348 348 Westmont2 0.0 0.0 277 149 Tsavo 74.0 74.0 7 550 Mumias - Cogeneration 2.0 0.0 6 1 Or Power 4 - Geothermal 13.0 13.0 89 103 IPP Total 145 143 727 1151 Emergency Power Producers(EPP)3 Aggreko 80.0 80.0 303 0 Cummins 174 0 Deutz 111 0 EPP Total 80.0 80.0 587 0 Imports 0.0 198 172 0.0 UETCL 0.0 0.0 0 0 TANESCO Total Imports 0.0 0.0 197.8 172.0 1,177 1,135 4,081 4,563 SYSTEM TOTAL SUMMARY OF KEY STATISTICS 3,091 3,498 SALES - KPLC System (GWh) 121 130 - REP System (GWh) - Export to Uganda (GWh) 3,212 3,628 TOTAL SALES (GWh) 936 System Losses (GWh)4 869 System Peak Demand (MW)5 724 760 69.0% 64.4% System Load Factor Sales % of Energy Purchased 78.7% 79.5% Losses as % of Energy Purchased 21.3% 20.5% -8.5% 10.6% Annual growth - Energy Purchased -KPLC Sales -8.2% 11.5% 8.0% -12.7% -REP Sales

10 251 29 473 0 109 862 0 0 0 0 222 0 222 4,750 3,654 147 3,801 949 786 69.4% 80.0% 20.0% 4.1% 4.5% 12.9%

10 240 15 200 0 105 560 0 0 0 0 171 0 171 5,035 3,940 150 4,090 946 830 69.4% 81.2% 18.8% 6.0% 7.8% 2.0%

11 330 3 508 0 115 956 0 0 0 0 99 0.3 99.0 5,347 4,200 164 15 4,379 968 899 68.4% 81.9% 18.1% 6.2% 6.6% 9.3%

11 408 0 570 9 117 1,103 30 0 0 30 15 0.4 15.0 5,697 4,420 186 24 4,630 1,067 920 70.9% 81.3% 18.7% 6.6% 5.4% 13.5%

Notes: 1) Maximum output from the station under normal operating conditions. 2) Westmont was retired in September 2004 upon expiry of its contract with KPLC. 3) Emergency Power Producers were retired in June 2001. However, Aggrekko was commisioned in June 2006 under a new contract due to shortfall in generation foreseen in the Year. 4) System losses comprise of technical and non-technical losses. 5) The Demand shown includes the export demand. The Country's peak demand was 884MW and 916MW for 2004/05 and 2005/06, respectively.

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KPLC Annual Report AnD ACCOUNts 2005-2006

TABLE 2: REGIONAL MAXIMUM DEMAND (MW)

REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL SYSTEM (SIMULTANEOUS) % INCREASE P.A. 2000/01 401 140 50 75 47 35 724 2.2% 2001/02 385 158 158 76 2002/03 405 145 157 78 2003/04 427 141 166 81 2004/05 453 152 176 86 2005/06 481 164 178 90

760 5.0%

786 3.4%

830 5.6%

884 6.5%

916 3.7%

TABLE 3: SALE OF ELECTRICITY IN GWh BY CUSTOMER CATEGORY

TYPES OF CUSTOMERS TARIFF COVERED BY THIS TARIFF 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06

A0 A1 B

Domestic Small Commercial Commercial (Medium) and Industrial(Medium)

679 385

769 446

834 450

900 476

956 522

1,020 526

609

696

748

819

885

915

Commercial (large) and Industrial (large) 1,361 51 7 3,091 -8.2% 1,513 55 19 3,498 13.1% 1,557 59 7 3,654 4.5% 1,683 55 7 3,940 7.8% 1,776 53 8 4,200 6.6% 1,895 55 9 4,420 5.2%

D E

Off-peak Street lighting TOTAL % INCREASE P.A.

TABLE 4: TOTAL UNIT SALES BY REGION IN GWh

REGION Nairobi Coast Central Rift West Mt. Kenya North Rift KPLC Sales R.E.P. Schemes Export Sales TOTAL %INCREASE P.A. 2000/01 1,684 648 183 318 141 117 3,091 121 3,212 -8.3% 2001/02 1,806 688 685 319 3,498 130 3,628 13.0% 2002/03 1,923 708 702 321 3,654 147 3,801 4.8% 2003/04 2,075 759 741 365 3,940 150 4,090 7.6% 2004/05 2,234 808 792 366 4,200 164 15 4,379 7.1% 2005/06 2,385 851 811 373 4,420 186 24 4,630 5.7%

Note: As part of business restructuring, the Company's operational Areas were reduced from six to four Regions. Central Rift , North Rift and West Kenya Areas were combined to form West Kenya Region while Thika, initially part of Nairobi, was moved to Mt Kenya Region. Consequently, the data for table 2 and tables 4 to 17 will appear in only the four (4) Regions for the Years 2001/02, 2002/03, 2003/04, 2004/05 & 2005/06.

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TABLE 5: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "A0" DOMESTIC LOAD
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 442 127 34 31 27 18 679 -9.3% 2001/02 503 132 87 46 768 13.1% 2002/03 541 142 97 51 831 8.2% 2003/04 582 153 104 54 892 7.4% 2004/05 622 165 112 57 956 7.1% 2005/06 668 179 117 61 1,025 7.2%

TABLE 6: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "A1" SMALL COMMERCIAL LOAD
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 203 59 34 40 33 15 385 -6.1% 2001/02 214 67 105 60 446 15.9% 2002/03 217 65 109 59 450 0.8% 2003/04 230 70 114 62 476 5.8% 2004/05 245 79 120 79 522 9.7% 2005/06 242 82 130 67 521 -0.2%

TABLE 7: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "B0" IRRIGATION LOAD
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 39 1 11 2 2 0 54 21.0% 2001/02 21 1 9 1 33 -40.0% 2002/03 4 0 11 20 36 10.6% 2003/04 5 0 13 19 38 4.7% 2004/05 4 0 16 18 38 0.7% 2005/06 7 0 19 21 47 24.5%

TABLE 8: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "B1" MEDIUM COMMERCIAL AND INDUSTRIAL LOAD (240V or 415V)
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 321 93 52 36 28 26 556 -15.0% 2001/02 353 107 128 54 642 15.4% 2002/03 381 124 133 52 690 7.5% 2003/04 424 126 146 58 754 9.3% 2004/05 459 133 154 64 811 7.6% 2005/06 479 132 162 69 842 3.8%

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KPLC Annual Report AnD ACCOUNts 2005-2006

TABLE 9: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "B2" MEDIUM COMMERCIAL AND INDUSTRIAL LOAD (11kV or 33kV)
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 7.8 3.1 1.7 0.7 0.2 1.3 15 3.8% 2001/02 9.5 3.7 3.0 0.9 17 13.9% 2002/03 13.5 5.2 3.1 1.0 23 34.5% 2003/04 10.1 11.2 2.7 1.4 25 11.2% 2004/05 13 9 3 2 27 7.7% 2005/06 14 5 3 3 25 -8.4%

TABLE 10: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "B3"MEDIUM COMMERCIAL AND INDUSTRIAL LOAD (66kV or 132kV)
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 4.9 0.0 0.0 0.0 0.0 0.0 4.9 539.2% 2001/02 0.9 0.0 0.0 0.0 0.9 -81.3% 2002/03 0.0 0.0 0.0 0.0 0.0 -100.0% 2003/04 0.0 0.0 0.0 0.0 0.0 0.0% 2004/05 2 0 0 0 2.0 100.0% 2005/06 1 0 0 0 1.0 -48.8%

TABLE 11: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "C1" LARGE COMMERCIAL AND INDUSTRIAL LOAD (415V)
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 190 104 32 62 44 12 444 2.9% 2001/02 211 94 127 89 521 17.3% 2002/03 218 91 127 89 526 1.0% 2003/04 227 85 138 99 549 4.4% 2004/05 250 93 134 95 572 4.2% 2005/06 274 107 124 94 599 4.7%

TABLE 12: REGIONAL SALE OF ELECTRICITY IN GWh CATEGORY "C2" LARGE COMMERCIAL AND INDUSTRIAL LOAD (11kV or 33kV)
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 303 210 19 26 6 44 608 -5.4% 2001/02 303 221 96 46 666 9.7% 2002/03 320 217 96 48 681 2.2% 2003/04 370 238 100 49 757 11.1% 2004/05 392 255 119 46 812 7.2% 2005/06 427 271 134 46 878 8.2%

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TABLE 13: REGIONAL SALE OF ELECTRICITY IN GWh CATEGORY "C3" LARGE COMMERCIAL AND INDUSTRIAL LOAD (66kV or 132kV)
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 140 50 0 0 0 0 191 -39.2% 2001/02 147 59 0 0 206 8.1% 2002/03 168 63 0 0 231 11.9% 2003/04 183 72 0 0 256 11.0% 2004/05 193 76 0 0 269 4.9% 2005/06 198 78 0 0 276 2.8%

TABLE 14: REGIONAL SALE OF ELECTRICITY IN GWh CATEGORY "C4" LARGE COMMERCIAL AND INDUSTRIAL LOAD (66kV OR 132kV)
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 0 0 0 0 0 0 0 0% 2001/02 0 0 0 0 0 0% 2002/03 0 0 0 0 0 0% 2003/04 0 0 0 0 0 0% 2004/05 0 0 0 0 0 0% 2005/06 21 0 0 0 21 100%

Note: The first customer under Category C4 was connected in March 2006

TABLE 15: REGIONAL SALE OF ELECTRICITY IN GWh CATEGORY "C5" LARGE COMMERCIAL AND INDUSTRIAL LOAD (66kV OR 132kV)
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 0 0 0 119 0 0 119 987.8% 2001/02 0 0 121 0 121 0.9% 2002/03 0 0 120 0 120 -0.5% 2003/04 0 0 117 0 117 -2.5% 2004/05 0 0 125 0 125 6.4% 2005/06 0 0 121 0 121 -2.8%

Note: Category C5 was introduced on 29th May 2000

TABLE 16: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "D0" OFF- PEAK LOAD
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % INCREASE P.A. 2000/01 46.6 1.1 0.9 0.8 0.9 0.5 51 -31.1% 2001/02 48.6 1.4 2.7 2.7 55 9.1% 2002/03 53.3 1.3 2.1 1.9 59 5.8% 2003/04 51.0 1.0 1.7 1.4 55 -6.0% 2004/05 50.2 0.7 1.2 1.5 53 -2.9% 2005/06 51.0 0.6 1.0 1.3 54 0.8%

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TABLE 17: REGIONAL SALE OF ELECTRICITY IN GWh FOR CATEGORY "E0" STREET LIGHTING
REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % Increase P.A. 2000/01 4.9 1.0 0.3 0.1 0.2 0.1 6.6 -41.6% 2001/02 4.6 0.7 0.5 0.4 6.2 6.5% 2002/03 5.4 0.5 0.5 0.4 6.8 10.1% 2003/04 5.6 0.6 0.5 0.5 7.2 5.3% 2004/05 6.1 0.5 0.5 0.5 7.7 8.0% 2005/06 7.0 0.6 0.9 0.7 9.2 18.9%

TABLE 18: REGIONAL SALES OF ELECTRICITY IN GWh FOR R.E.P. SCHEMES

REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift TOTAL % Increase P.A. 2000/01 35 11 16 20 17 20 121 -12.7% 65 32 130 8.1% 69 45 147 12.8% 75 38 150 2.0% 83 40 164 9.1% 96 44 186 13.7% 2001/02 25 8 2002/03 26 7 2003/04 28 8 2004/05 31 9 2005/06 36 10

TABLE 19: NUMBER OF CUSTOMERS BY REGION

AS AT 30th JUNE REGION Nairobi Coast Central Rift West Kenya Mt. Kenya North Rift KPLC Customers R.E.P. Customers TOTAL % Increase P.A. 2001 270,580 71,153 37,066 35,858 33,454 17,250 465,361 71,718 537,079 6.2% 514,680 78,941 593,621 10.5% 556,099 87,175 643,274 8.4% 592,753 93,442 686,195 6.7% 633,351 101,793 735,144 7.1% 691,525 110,724 802,249 9.1% 98,112 55,905 106,438 60,467 112,753 63,875 118,734 68,148 130,044 74,489 2002 286,004 74,659 2003 308,056 81,138 2004 331,108 85,017 2005 355,673 90,796 2006 388,202 98,790

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TABLE 20: NUMBER OF CUSTOMERS BY TARIFF CATEGORY

TARIFF MAIN TYPE OF CUSTOMERS COVERED BY THIS TARIFF Domestic KPLC REP A0 & D0 Domestic KPLC REP A1 only Small Commercial KPLC REP A1 & D0 Small Commercial KPLC REP B0 Irrigation Load KPLC REP B1 Medium Commercial and Industrial KPLC REP B2 Medium Commercial and Industrial KPLC B3 Medium Commercial and Industrial KPLC C1 Large Commercial KPLC REP KPLC C2 Large Commercial and Industrial KPLC C3 Large Commercial and Industrial KPLC C4 Large Commercial and Industrial KPLC C5 Large Commercial and Industrial Off-peak KPLC DO only REP Street lighting KPLC E0 REP TOTAL (KPLC) TOTAL (R.E.P.) GROSS TOTAL % INCREASE P.A. 1,021 7 465,361 71,718 537,079 6.2% 1,536 12 78,941 593,621 10.5% 1,105 11 87,175 8.4% 1,156 13 93,442 6.7% 1,178 14 1,291 14 523 13 645 13 1,056 12 918 9 734 8 705 10 1 1 1 1 1 1 0 0 0 0 0 1 14 16 19 19 16 18 263 3 128 282 2 124 279 1 126 269 1 135 287 1 142 305 1 155 3 1 1 1 4 2 40 47 58 61 66 68 2,330 54 2,512 56 2,591 48 3,006 76 2,863 46 3,291 78 233 2 225 3 247 2 251 2 226 2 225 2 1,141 108 937 67 1,124 160 1,134 82 1,162 80 1,146 75 78,289 26,876 81,974 28,164 86,923 31,080 90,727 33,190 93,021 35,874 97,236 37,412 46,994 285 46,140 284 49,266 316 50,290 319 50,843 325 52,338 338 334,381 44,370 380,240 50,340 413,303 55,545 444,785 59,750 482,812 65,439 534,743 72,794 2001 AS AT 30TH JUNE 2002 2003 2004 2005 2006

A0 only

514,680 556,099 592,753 633,355 691,525 101,789 110,724 7.1% 9.1% 643,274 686,195 735,144 802,249

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KPLC Annual Report AnD ACCOUNts 2005-2006

TABLE 21: REVENUE (KShs 'MILLION) BY CUSTOMER CATEGORY

TARIFF MAIN TYPE OF CUSTOMERS COVERED BY THIS TARIFF Domestic, small commercial and small industrial B Commercial and industrial (medium) C Commercial (large) Industrial (large) D E Off-peak Street Lighting TOTAL (KPLC) TOTAL R.E.P. Export GROSS TOTAL % INCREASE P.A. 29,329 19.0% 25,787 -12.2% 24,142 -6.4% 24,301 0.7% 11,382 420 80 28,189 1,141 9,682 106 87 24,808 979 8,743 276 51 23,131 1,011 8,816 272 51 23,323 978 10,891 472 83 28,341 1,208 92 29,641 22.0% 13,294 320 95 33,789 1,538 178 35,505 19.8% 5,939 4,910 5,220 5,329 6,509 7,338 10,368 10,023 8,841 8,855 10,386 12,742 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06

TABLE 22: STAFF ANALYSIS

AS AT 30th JUNE 2001 Number of Staff in Each Region Central Office Nairobi Coast West Mt Kenya Total Number of Staff* % INCREASE P.A. Gender: Male Female Ratio- Male/Female 5,704 1,196 5 5,326 1,097 5 5,181 1,088 5 5,156 1,060 5 4,991 1,139 4 5,056 1,146 4 995 2,663 703 1,941 598 6,900 -2.7% 822 2,520 623 1,635 823 6,423 -6.9% 744 2,423 739 1,544 819 6,269 -2.4% 675 2,451 735 1,538 817 6,216 -0.8% 704 2,372 732 1,532 790 6,130 -1.4% 698 2,405 743 1,543 813 6,202 1.2% 2002 2003 2004 2005 2006

* All staff employed in the organization are Kenyan Citizens.

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TABLE 23: TRANSMISSION AND DISTRIBUTION LINES, CIRCUIT LENGTH IN KILOMETERS

AS AT 30th JUNE VOLTAGE 220 kV 132 kV 66 kV 40 kV 33 kV 11 kV TOTAL % INCREASE P.A. 2001 885 2,032 580 126 4,795 10,593 19,011 2.1% 2002 941 2,032 580 58 5,265 13,788 22,664 19.2% 2003 941 2,035 580 58 5,430 13,879 22,923 1.1% 2004 1,323 2,035 600 58 5,973 15,267 25,256 10.2% 2005 1,323 2,035 600 58 6,570 16,794 27,380 8.4% 2006 1,323 2,035 630 58 7,826 18,532 30,404 11.0%

TABLE 24: TRANSFORMERS IN SERVICE, TOTAL INSTALLED CAPACITY IN MVA

2001 Generation Substations 11/220kV 11/132kV 11/66kV 11/33kV 11/40kV 3.3/11/40kV 3.3/40kV 3.3/33kV TOTAL Transmission Substations 132/220kV 220/132kV 220/66kV 132/66kV 132/33kV TOTAL Distribution Substations 66/11kV 66/33kV 40/11kV 33/11kV TOTAL Distribution Transformers 11/0.415kV and 33/0.415kV 2,411 2,531 2,546 2,801 3,081 3,271 675 61 11 512 1,259 675 61 11 512 1,259 675 61 11 512 1,259 743 67 11 563 1,384 743 67 11 619 1,440 966 77 11 666 1,720 540 730 180 375 637 2,462 540 730 180 375 637 2,462 540 730 180 375 637 2,462 620 810 360 255 637 2,682 620 810 360 255 660 2,705 620 810 360 375 621 2,786 388 675 90 263 5 8 4 4 1,437 388 675 90 263 5 8 4 4 1,437 388 675 90 279 5 8 4 4 1,453 472 675 90 279 5 8 4 4 1,537 472 675 90 279 5 8 4 4 1,537 472 675 146 279 5 8 4 4 1,593 AS AT 30th JUNE 2002 2003 2004 2005 2006

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KPLC Annual Report AnD ACCOUNts 2005-2006

Regional Offices
AREA NAIROBI REGION
Nairobi Office HARAMEmergency Office

TEL. NUMBERS
(020) 221251, 312957 020) 375 4000 Pilot Line

ADDRESSES
P.O Box 30177 Nairobi P.O Box 30177 Nairobi

PHYSICAL ADDRESS
BEE AVENUE - NAIROBI ELECTRICITY HOUSE,

Emergency Office Bungoma Office Busia Office Siaya Office Unguja Office Kericho Office Sotik Office Kisii Office Stores Emergency Office Migori Office

Kakamega Office

(056)30023, 31015 (056) 30023 (055) 30516 (055) 22076 (057) 321406 (057) 34071 (052) 20012 (052) 532181 (058) 30559 (058) 30828

P O Box 440, Kakamega

P O Box 467, Bungoma P O Box 526, Busia P O Box 541, Siaya

Emergency Mobiles Training School

(0735) 602200 (0722) 207999 P.O Box 30177 Nairobi (020) 850 1205 (020) 559488 (020) 6761643 (020) 652496 (020) 856316, 856 1916

(0722) 207997/ 8

(0735) 333222/3

P.O Box 30177 Nairobi

P.O Box 30177 Nairobi

Transport Depot Ruaraka

P.O Box 30177 Nairobi

Central Stores, Isiolo Road Eastleigh Revenue Centre Makadara Revenue Office Sarit Centre Dagoretti Office Wilson Airport Limuru Office Juja Control Office

P.O Box 30177 Nairobi P.O Box 30177 Nairobi P.O Box 30177 Nairobi P.O Box 30177 Nairobi P O Box 103 , Limuru

P.O Box 30177 Nairobi

P.O Box 30177 Nairobi

(020) 4449597

P.O Box 30177 Nairobi P.O Box 30177 Nairobi

P O Box 296, Kericho P O Box 328, Sotik P O Box 5, Kisii

(020) 3873190/1

607372

(020) 780775, 781659

Emergency Office Machakos Office Athi-River Sub-station Sultan Hamud Ruiru Transmision Garissa Office Marsabit Office Wajir Office Moyale Office Mandera Office Magadi Office Ongata Rongai

(044) 20139 155 (045) 20061 (044) 52025 (067) 54522

(066) 71068

(066) 71033 103

(058) 30833 P O Box 530, Migori P O Box 117, Homa bay

P O Box 155, Machakos P O Box 155, Machakos P O Box 155, Machakos P.O Box 30177 Nairobi P O Box 9 ,Garissa P O Box 103 , Marsabit P O Box 127, Wajir P O Box 103, Moyale P O Box 76 , Mandera P.O Box 30177 Nairobi P.O Box 30177 Nairobi

Homabay Office Nyamira Office Webuye Office

(058) 20053

(059) 22030 (058) 6144420 (055) 41220

Ruiru Power Station/Emergency (067) 54030

COAST REGION
Mombasa Office (041) 2225564/7 P O Box 90104, Mombasa NKRUMAH ROAD ELECTRICITY HOUSE,

(046) 2043, 2028 (069) 2029 (046) 421020 (069) 52463 (046) 52188 (045) 3000 (0723) 963839

2221153, 2226626 Emergency Office 222461/57 2226598/88/16/08 (0735) 331763/2 (041) 2224533/5, 2220048 P O Box 90104, Mombasa

OPPOSITE AMBALAL HSE

Emergency Mobiles

(0723) 965321

Ukunda Office Kilifi Office Mbaraki Depot Kipevu Office Rabai Office Voi Office Taveta Office Loitoktok office Wundanyi office Lamu office Malindi office Nyali Beach office

(040) 3203021 (041) 25426 (041) 2220362, 2220276/7 (041) 3435000/1 (041) 2229811 (043) 31231 (045) 622077 (043) 42464 (042) 632068 (042) 30200 (041) 54876 (043) 5352056

P O Box 90104, Mombasa P O Box 90104, Mombasa P O Box 90104, Mombasa P O Box 90104, Mombasa P O Box 90104, Mombasa P O Box 144, Voi P O Box 377, Loitoktok P O Box 144, Voi P O Box 72, Lamu P O Box 294, Malindi P O Box 132, Taveta

WEST REGION
Nakuru Office Emergency Office Naivasha Office Emergency Office Nyahururu Office Maralal Office Narok Office Ravine Office Lanet Office Molo Office Lodwar Office Emergency Office (051) 2211594 7, 2213857 (051) 42170, 2216754 (050) 21506/7 P O Box 180 , Naivasha P.O Box 104 , Nakuru MOI ROAD OPPOSITE ELECTRICITY-HOUSE

NAKURU MUNICIPAL HALL

(050) 2020169 (065) 22360 22840 (065) 62048 (050) 22046 (051) 752175 (051) 850050 (051) 721551 (054) 21038 (065) 32068

P O Box 196 , Nyahururu

P O Box 196, Maralal P O Box 469 , Narok P O Box 579 , Eldama Ravine

MT. KENYA REGION

Nyeri Stima House Office Diana Centre office Emergency Office Nanyuki Office Meru Office Emergency Office Emergency Office (061) 2030646/7/8, 2030545 2030770, 2030769 (061)2030546/7 (062) 32558/9 (061) 2030799, 2030800 P O Box 106, Nyeri KAMAKWA ROAD STIMA HOUSE,

P O Box 21, Lodwar

DIANA HSE TEMPLE ROAD

North Rift
Eldoret Office Emergency Office Kitale Office Emergency Office Power station Kapenguria Office Kabarnet Office Ravine Office Lessos Office Iten Emergency Office (053) 2033012-5 2033026, 2031599 (053) 2033011 (054) 30341 (054) 2083 (054) 30341 P O Box 185 , Kitale P O Box 74 , Eldoret BUILDINGS - OLOO STREET KVDA & NATIONAL BANK

(062) 32560 (064) 20588 (060) 30197 (064) 20184

P O Box 80, Nanyuki P O Box 221, Meru

(054) 20073 P O Box 120 , Kabarnet

Muranga Office Isiolo Ofice Embu Office Emergency Office Kerugoya Office Maua Office

P O Box 45, Murang'a P O Box 116, Isiolo P O Box 205, Embu P O Box 1079, Kerugoya P O Box 221, Meru P O Box 202 , Thika THIKA ARCADE, KENYATTA

(064) 52013 (068) 30442 (068) 30068, 30210, 30216

(053) 22089

(053) 22159 (051) 752175 (053) 35004

(060) 21359, 21190 (064) 21358 (067) 22320, 21514, 21207 (067) 31574, 31582, 31636 (044) 22051

Kabsabet Office

(053) 52432 (053) 2295

P O Box 762 , Kapsabet

Thika Office

HIGHWAY OPPOSITE THIKA POLICE STATION

West Kenya
Kisumu office Emergency Office (057) 2020536/7-9 (057) 2020927/6 P O Box 151, Kisumu OGINGA ODINGA STREET ELECTRICITY HOUSE,

Emergency Office Kitui Office

(067) 21614, 22065, 21991

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