OUTLINE. Kenya Power s Experiences and Challenges as a single off-taker in the Power Sector. Kenya Power s Vision, Mission & Strategic Pillars

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1 Kenya Power s Experiences and Challenges as a single off-taker in the Power Sector Presentation to the UPDEA Scientific Committee Meeting By Eng. Joseph K. Njoroge, MBS, Managing Director & CEO Kenya Power & Lighting Co. Ltd. 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 4 th July Kenya Power s Vision, Mission & Strategic Pillars People Diversification Robust Network Vision : to provide world class power that delights our customers Financial Customer Service & Marketing Innovation Corporate Social Responsibility & Governance Sources of Power Mission : Powering people for better lives Core values: Customer First; One Team; Passion; Integrity, Excellence 3 Role of Kenya Power in the Economic Vision 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 1

2 Reformed Electricity Sub-sector Structure Reformed Electricity Regulatory Environment Companies Act (Cap 486) Nairobi Stock Exchange Listing Rules State Corporations Act KPLC The New Constitution of Kenya ERC Regulations Cities & Counties Capital Markets Authority Act Public Procurement & Disposal Act Environment Grid Code Management & Coordination Act Energy Act Key Statistics Installed capacity MW (May 2011) 1,599.9 Available Generation Capacity MW (May2011) 1,359.2 System Peak Demand MW to date* (10 th May2011) 1, Forecasted unconstrained demand MW 1,290 Reserve Margin %(May 2011) * 5.1% Energy Purchased 2009/10 (GWh) 6,692 Total Sales 2009/10 (GWh) 5,624 Sales % of Energy Purchased 2009/ % Losses as % of Energy Purchased 2009/ % Transmission and Distribution Lines, Circuit Length in Kilometers (11kV to 220kV) 47,347 Number of Customers (May 2011) 1,720,868 Population Electricity Access 29% 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 Major Developments Underway in the Power Subsector 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. 8 2

3 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 Total Capacity (MW) Peak Demand (MW) Vision 2030 demand Forecast of 8-10 % Significant generation potential Geothermal(~ 7,000MW); Hydro (~1,500MW); Wind (~4,400 MW); and TRANSFORMING DISTRIBUTION INFRASTRUCTURE AND CUSTOMER SERVICE DELIVERY ,229 1, / / / /272029/ Potentially Coal and Gas. 15% Reserve Margin Vision 2030 ~ Projected Demand 15,000MW Source: Update of Kenya s Least Cost Power Development Plan Distribution Expansion Plan Under Implementation 2010/11 to 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 11 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: PROJECT FINANCIER AMOUNT PROJECT COMPONENTS OBJECTIVES EnergySector Recovery Project (2005 to 2012) IDA US$111.5m EIB Euro51m AFD Euro25m NDF Euro10m KPLC US$34m Kenya Electricity Expansion Project(2010 to 2015) (IDA US $102.2 mill, KPLC US$ 29.8mill) RightsIssue Funding (2011 to 2013) (KPLC) US$ 233 million US$132 million KShs. 9.2 billion Completed 25 substations, 1,250 kms of fibre optic, 540 kms of 66,33 & 11 kv distribution lines, procured 406,000 static energy meters, and installed Mt. Kenya Radio System. Works ongoing at 26 substations, 465 kms of lines and SCADA/EMS system. To date, US $ 102 million has been disbursed. Procuring 26 substations, 1400 kms MV lines and prepaid meters Procuring 17 Distribution substations, 4 transmission substations, 300,000 prepaid meters Enhanced access to electricity Capacity enhancement Supply reliability & power quality improvement Revenue enhancement & protection Enhanced customer satisfaction 12 3

4 Total Number of Customers Projected 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: Project Objective Status 1. Distribution Master Plan Plan for comprehensive improvement Tendered to the entire distribution network 2. Under grounding of electricity To reduce electricity line break downs In progress lines in urban centres as well as to enhance public safety 3. Automation Extension of new technologies such as Pilot projects in smart grid, so as to improve Nairobi and performance of the electricity network Mombasa in progress 4. Auto changeovers Installation of more efficient load switching equipment In progress 5. Dry Type Transformers and Intruder Alarms 6. Joint Venture Transformer Factory Distribution Strategic Initiatives Change from oil type to dry type transformers that are less prone to vandalism Initiate manufacturing of transformers locally in a joint venture arrangement. Alarms being installed Tendered Project Objective Status 7. Reactive Power Compensation 8.Aerial Bundled Conductors To improve voltages and harmonics through installation of capacitors and other equipment. Use of Aerial Bundled Conductors in urban areas or where there is heavyvegetation, as they require much less maintenance work In progress Tendered and expected to cost about Shs 3 billion 9. Concrete Poles Increaseduse of concrete poles in 26,300 concrete poles received power line construction leading to from the supplier to date out of fewer faults and less maintenance which 16,104 have been used 10. Change to Smart Grid System Distribution Strategic Initiatives contd. To realizea grid which has communication linkages between customers and system operators. To improve service delivery, efficiency and effectiveness in operations. Will facilitate leveraging of assets. Prepaid metering being done with adaptable meters, fibre optic installation being done in some parts of the system 15 Customer Service Strategic Initiatives 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 Action Time Frame i. Automatic Meter Reading (AMR) project Pilot 2008/9 Roll-out 2009/10 to ii. Prepaid Meters Pilot Rollout project to retrofit Pilot 2009/10 250,000 per year small to medium customers. Install 200,000 meters per year for new Roll-out 2010/11 to customers iii. Smart metering for 100,000 domestic and Roll-out 2010/11 to small commercial customer iv. Use feeder metering and transformer ring Roll-out 2009/10 to fencing to guide and monitor loss campaigns v. Improve supply to people settlements Roll-out 2010/11 to 16 4

5 Threat 1. Electricity theft & vandalism of infrastructure 2. Sufficiency of Generation Capacity (delays due to protracted negotiations and lack of guarantees). 3. Vagaries of weather including drought and floods. 4. Affordability of power (new connections, tariffs, fuel costs) 5. Right of Way for power infrastructure (levies, encroachment, etc.) MAJOR SUB-SECTORAL SECTORAL CHALLENGES Mitigation Dry type transformers, intruder alarms, relocation of transformers, etc. Community policing, public education Lobbying for stiff penalties for infrastructure vandals Emergency generation Raising reserve margin Fast tracking some projects Projects under Feed In Tariffs policy Diversify generation sources Regional Interconnection Least Cost Generation Planning Promoting green energy sources Credit facilities to customers for connection costs Public Education Engaging local authorities 6. Uncoordinated urban planning. Engaging local authorities, Government urban 17 planners and other infrastructural developers 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 THANK YOU 19 5