1. By Eng. Joseph K. Njoroge, MBS, Managing Director & CEO Kenya Power & Lighting Co. Ltd. By Eng. Joseph K. Njoroge, MBS, Managing Director & CEO Kenya Power & Lighting Co. Ltd. Kenya Power’s Experiences and Challenges as a single off-taker in the Power Sector Presentation to the UPDEA Scientific Committee Meeting Kenya Power’s Experiences and Challenges as a single off-taker in the Power Sector Presentation to the UPDEA Scientific Committee Meeting 4 th July 2011 1

2. OUTLINE Kenya Power’s Vision, Mission and Strategic Pillars Role of Kenya Power in the Economic Vision Power Sub-Sector Reforms Key Statistics Major Developments in the Power Sub Sector Transforming Distribution Infrastructure and Customer Service Delivery Major Sub-Sector Challenges and Responses Future Outlook 2

3. Kenya Power’s Vision, Mission & Strategic Pillars People Innovation Corporate Social Responsibility & Governance Diversification Financial Sources of Power Customer Service & Marketing Mission : Powering people for better lives Core values: Customer First; One Team; Passion; Integrity, Excellence Vision : to provide world class power that delights our customers Robust Network 3

4. In the new constitution consumers have a right to goods & services provided by public and private entities Planning and development of electricity infrastructure will be executed in liaison with national and county governments Vision 2030 envisages major infrastructural development to facilitate economic growth. Kenya Power’s contribution is:  Increasing population access to electricity from the current 29% to 40% by 2020  Planning and implementation of distribution reinforcement and upgrade projects  Procurement of adequate power generation capacity from diverse sources; and maintaining a minimum reserve margin of 15% (and preferably 30%)  Promotion of green energy investments by undertaking the procurement process  Improving power supply quality, reliability and customer service 4

5. Cities & Counties Reformed Electricity Sub-sector Structure 5

6. Reformed Electricity Regulatory Environment KPLC Companies Act (Cap 486) State Corporations Act Energy Act 2006 Capital Markets Authority Act Nairobi Stock Exchange Listing Rules ERC Regulations Environment Management & Coordination Act Public Procurement & Disposal Act The New Constitution of Kenya Grid Code 6

7. Note: Reserve margin is thin at 5.1% as compared to the ideal of 15%. About 112MW of demand is not being met due to insufficient generation capacity, currently occasioned by poor hydrology 7 Key Statistics

8.  Recent creation of REA, Ketraco and GDC  New Energy Scale Up Program targeting 1million new households over 5 yrs at cost of KShs. 84 billion  Planned East African Regional Interconnection projects e.g. Connection to Tanzania, Ethiopia and 2 nd Uganda line totaling 1,780 kms at an estimated cost of US$ 876 million  38 committed transmission projects totaling 3,697 kms and 2,421 MVA of substation capacity being developed within the country between 2011 and 2015 at an estimated US$ 482 million,  Public private partnership framework to facilitate procurement of new projects that augment capacity e.g. geothermal, thermal, wind  Green energy investments through Feed-in-Tariff  A total of 1,789.6MW of new generation capacity is being developed between 2011 and 2015 out of which 857MW will be green energy (hydro, geothermal and wind), 732MW of new thermal plant (MS Diesel and coal) and 200MW of imports. Major Developments Underway in the Power Subsector 8

9. Significant generation potential Geothermal(~ 7,000MW); Hydro (~1,500MW); Wind (~4,400 MW); and Wind (~4,400 MW); and Potentially Coal and Gas. Potentially Coal and Gas. 15% Reserve Margin 15% Reserve Margin Vision 2030 ~ Projected Demand 15,000MW 2026/272018/19 2029/30 2023/242014/152009/10 PROJECTED NATIONAL SUPPLY AND DEMAND – 2011 to 2030 In 2020 Kenya must have at least 40% population access to electricity to reach the Vision 2030 target Vision 2030 demand Forecast of 8-10 % Source: Update of Kenya’s Least Cost Power Development Plan 2010-2030 9

10. TRANSFORMING DISTRIBUTION INFRASTRUCTURE AND CUSTOMER SERVICE DELIVERY 10

11. To connect over 1 million new customers spread countrywide every 5 years. Construction of an additional approximately : 16,000 kms of Medium Voltage distribution lines, 1,000 MVA of distribution substations, 50,000 kms of LV distribution lines, 30,000 (3,000 MVA) of distribution transformers and 1 million service lines connections Distribution Expansion Plan Under Implementation 2010/11 to 2014/15 11

12. Distribution Infrastructure Investment Funding Since 2005 to date, a total of US$ 480 Million (Kshs 38.4 billion) has been mobilised to improve distribution infrastructure as follows: 12

13. Total Number of Customers 13

14. In order to address critical electricity supply quality service challenges facing the company the following new projects are being implemented in the period 2010/11 to 2015/16: Distribution Strategic Initiatives 14

15. Distribution Strategic Initiatives contd. 15

16. Effectively collect revenue while providing efficient and high quality customer handling services. KPLC has developed a core competence of consistently achieving over 98% revenue collection as percent of billing Customer Service Strategic Initiatives 16

17. ThreatMitigation 1. Electricity theft & vandalism of infrastructure Dry type transformers, intruder alarms, relocation of transformers, etc. Community policing, public education Lobbying for stiff penalties for infrastructure vandals 2. Sufficiency of Generation Capacity (delays due to protracted negotiations and lack of guarantees). Emergency generation Raising reserve margin Fast tracking some projects Projects under Feed In Tariffs policy 3. Vagaries of weather including drought and floods. Diversify generation sources Regional Interconnection 4. Affordability of power (new connections, tariffs, fuel costs) Least Cost Generation Planning Promoting green energy sources Credit facilities to customers for connection costs 5. Right of Way for power infrastructure (levies, encroachment, etc.) Public Education Engaging local authorities 6. Uncoordinated urban planning. Engaging local authorities, Government urban planners and other infrastructural developers MAJOR SUB-SECTORAL CHALLENGES MAJOR SUB-SECTORAL CHALLENGES 17

18. FUTURE OUTLOOK Strategies for meeting demand going forward are in place. Support from development partners for network infrastructural investment program in place – Kenya Power’s contribution also in place. Favorable operating environment is expected from a vibrant economy. Accelerated economic activity is expected from large scale expansion of infrastructure. Revised legislation to implement the new constitution will lead to :  Better streamlining of stakeholder interests in power supply  Clearer investment boundaries for players in the electricity subsector 18

19. 19 THANK YOU