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ByEng. Joseph K. Njoroge, MBS,

Managing Director & CEOKenya 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

4th July 2011

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OUTLINE

Kenya Power’s Vision, Mission and Strategic PillarsRole of Kenya Power in the Economic VisionPower Sub-Sector ReformsKey StatisticsMajor Developments in the Power Sub SectorTransforming Distribution Infrastructure and Customer Service DeliveryMajor Sub-Sector Challenges and ResponsesFuture Outlook

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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

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Role of Kenya Power in the Economic Vision

In the new constitution consumers have a right to goods & services provided by public and private entitiesPlanning and development of electricity infrastructure will be executed in liaison with national and county governmentsVision 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

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Cities & Counties

Reformed Electricity Sub-sector Structure

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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

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Installed capacity MW (May 2011) 1,599.9

Available Generation Capacity MW (May2011) 1,359.2

System Peak Demand MW to date* (10th May 2011) 1,191.03 Forecasted unconstrained demand MW 1,290Reserve Margin % (May 2011) * 5.1%Energy Purchased 2009/10 (GWh) 6,692Total Sales 2009/10 (GWh) 5,624Sales % of Energy Purchased 2009/10 84.0%Losses as % of Energy Purchased 2009/10 16.0%

Transmission and Distribution Lines, Circuit Length in Kilometers (11kV to 220kV) 47,347Number of Customers (May 2011) 1,720,868Population 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

Key Statistics

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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 2nd 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

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Significant generation potential

Geothermal(~ 7,000MW);

Hydro (~1,500MW);

Wind (~4,400 MW); and

Potentially Coal and Gas.

• 15% Reserve Margin

Vision 2030 ~ Projected Demand

15,000MW

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1,229

3,1414,659

8,226

12,141

17,764

1,1072,038

3,474

6,768

10,097

15,066Total Capacity (MW) Peak Demand (MW)

2026/272018/19 2029/302023/242014/152009/10

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 demandForecast of 8-10 %

Source: Update of Kenya’s Least Cost Power Development Plan 2010-2030

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TRANSFORMING DISTRIBUTION INFRASTRUCTURE AND CUSTOMER SERVICE DELIVERY

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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

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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

Energy Sector Recovery Project (2005 to 2012)

•IDA–US$111.5m •EIB–Euro51m•AFD–Euro25m •NDF–Euro10m•KPLC–US$34m

US$ 233 million

•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.

•Enhanced access to electricity•Capacity enhancement •Supply reliability & power quality improvement•Revenue enhancement & protection •Enhanced customer satisfaction

Kenya Electricity Expansion Project (2010 to 2015) (IDA US $102.2 mill , KPLC US$ 29.8mill)

US$ 132 million

Procuring 26 substations, 1400 kms MV lines and prepaid meters

Rights Issue Funding (2011 to 2013) (KPLC)

KShs. 9.2 billion

Procuring 17 Distribution substations, 4 transmission substations, 300,000 prepaid meters

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2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11 to date

2011/12

2012/13

2013/14

2014/15

2015/16

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500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

1,720,868

2,000,000

3,000,000 Projected

Total Number of Customers

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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 to the entire distribution network

Tendered

2. Under grounding of electricity lines

To reduce electricity line break downs in urban centres as well as to enhance public safety

In progress

3. Automation Extension of new technologies such as smart grid, so as to improve performance of the electricity network

Pilot projects in Nairobi and Mombasa in progress

4. Auto changeovers Installation of more efficient load switching equipment

In progress

5. Dry Type Transformers and Intruder Alarms

Change from oil type to dry type transformers that are less prone to vandalism

Alarms being installed

6. Joint Venture Transformer Factory

Initiate manufacturing of transformers locally in a joint venture arrangement.

Tendered

Distribution Strategic Initiatives

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Project Objective Status

7. Reactive Power Compensation

To improve voltages and harmonics through installation of capacitors and other equipment.

In progress

8.Aerial Bundled Conductors

Use of Aerial Bundled Conductors in urban areas or where there is heavy vegetation, as they require much less maintenance work

Tendered and expected to cost about Shs 3 billion

9. Concrete Poles Increased use of concrete poles in power line construction leading to fewer faults and less maintenance

26,300 concrete poles received from the supplier to date out of which 16,104 have been used

10. Change to Smart Grid System

To realize a 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

Distribution Strategic Initiatives contd.

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Action Time Framei. Automatic Meter Reading (AMR) project Pilot 2008/9

Roll-out 2009/10 to 2014/15

ii. Prepaid Meters Pilot Rollout project to retrofit 250,000 per year small to medium customers.

Install 200,000 meters per year for new customers

Pilot 2009/10

Roll-out 2010/11 to 2014/15

iii. Smart metering for 100,000 domestic and small commercial customer

Roll-out 2010/11 to 2014/15

iv. Use feeder metering and transformer ring fencing to guide and monitor loss campaigns

Roll-out 2009/10 to 2014/15

v. Improve supply to people settlements Roll-out 2010/11 to 2014/15

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

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Threat Mitigation

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

costs5. 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

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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

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THANK YOU