Kenya Electricity Generating Company PLC · NSEKE:KEGN
Kenya Electricity Generating — Debt Investor Presentation (August 2009)
40 slides from Kenya Electricity Generating's debt investor presentation, Aug 31, 2009
Slide 1: KenGen Ksh.15 Billion Public Infrastructure Bond Offer – Investors/Media Breakfast Briefing
CONFIDENTIAL KenGen Ksh.15 Billion Public Infrastructure Bond Offer (PIBO) – Investors/Media Breakfast Briefing Eddy Njoroge, MD & CEO, KenGen Serena Hotel, Nairobi, 31 August 2009, 7.00am Disclaimer: No part of this report may be circulated, quoted, or reproduced for distribution without prior writ
Slide 2: Key Message
KEY MESSAGE … “… We are here this morning for a quick brief on our KSh. 15 Billion Bond with a KSh. 10 Billion Green- Shoe Option to finance our Capacity Expansion Projects to meet the growing power demand in Kenya… … It is only by working together that we shall achieve our Vision 2030 targets…” 1
Slide 3: Agenda
AGENDA 1 Power Sub-Sector Today 2 KenGen Strategy 3 Performance & Projections 4 The PIBO 5 Discussions/Q&A 2
Slide 4: Kenya Power Sub-Sector Has Continually Evolved Since 1996
1 KENYA POWER SUB-SECTOR HAS CONTINUALLY EVOLVED SINCE 1996… Ministry of Energy (MoE) Kenya Electricity Transmission (responsible for policy matters) Company (KETRACO) and Geothermal Energy Regulatory Commission(ERC) Development Company (responsible for regulating the entire energy sector) (GDC) est
Slide 5: Power Demand Has Continually Grown Reaching a Peak of 1,073MW
1 … POWER DEMAND HAS CONTINUALLY GROWN REACHING A PEAK OF 1,073MW CURRENTLY… OUR CHALLENGE IS TO MATCH SUPPLY WITH DEMAND ESPECIALLY WHEN DROUGHT CONDITIONS OCCUR…. This is a constrained demand and expected to grow at 1100 ~8% annually 1,073 1,036 1050 983 1000 950 916 900 867 MW 828 850 800 780 750
Slide 6: Kenya's Total Installed Capacity Is ~1,416MW With Over 50% From Hydro
1 … KENYA’S TOTAL INSTALLED CAPACITY IS ~ 1,416MW WITH OVER 50% FROM HYDRO… National Installed Capacity (MW) - 2009 National Installed Mix (%) 1,416 9 150 C 12% Geothermal (165MW) 235 1,022 33% Thermal (441MW) B A 55% Hydro (749MW) High dependence on hydro leads to power shortfall 2009 anytime we Ke
Slide 7: Our Generation Capacity – Thermal
2 OUR GENERATION CAPACITY – THERMAL Kipevu Diesel - 74MW KenGen Total Capacity (MW) 1,022 5 152 749 115 Kipevu GTs - 60MW Hydro Geo-ThermalWind Total thermal 6
Slide 8: Our Generation Capacity – Geothermal
2 OUR GENERATION CAPACITY – GEOTHERMAL KenGen Total Olkaria – 115MW Capacity (MW) 1,022 5 152 749 115 Hydro Geo- Thermal Wind Total thermal 7
Slide 9: Our Generation Capacity – Hydro: Sondu, Mesco
2 OUR GENERATION CAPACITY - HYDRO Sondu – 60MW KenGen Total Capacity (MW) 1,022 5 152 749 115 Mesco – 0.4MW (our smallest hydro plant) Hydro Geo- Thermal Wind Total thermal 8
Slide 10: Our Generation Capacity – Hydro: Masinga, Kamburu
2 OUR GENERATION CAPACITY - HYDRO KenGen Total Capacity (MW) Masinga – 40MW 1,022 5 152 749 115 Kamburu – 94MW Hydro Geo- Thermal Wind Total thermal 9
Slide 11: Our Generation Capacity – Hydro: Kindaruma, Kiambere
2 OUR GENERATION CAPACITY - HYDRO Kindaruma – 40MW KenGen Total Capacity (MW) 1,022 5 152 749 115 Kiambere – 156MW Hydro Geo- Thermal Wind Total thermal 10
Slide 12: Our Generation Capacity – Tana Cascade
2 OUR GENERATION CAPACITY – TANA CASCADE Hydro – 749MW Tana Cascade (~60% of our total capacity) … potential for future development but must be in tandem with environmental conservation efforts… 11
Slide 13: Lowest Tana Inflows Ever Recorded in 75 Years
1 … AND THE SITUATION IS UNUSUAL AS THIS IS THE LOWEST TANA INFLOWS EVER RECORDED IN THE LAST 75 YEARS … Average Annual Tana River inflows – cubic meters per second 1997/98 250 (208 cumecs) 1961/62 (174 cumecs) 200 1949/50 150 (31 cumecs) 2008/09 (5 cumecs) 100 50 0 1953… 1965… 1977… 1989… 2001… 194
Slide 14: Power Supply Reduced by About 23% Due to Dry Hydrology
1 … CURRENT POWER SUPPLY HAS REDUCED BY ABOUT 23% DUE TO CURRENT DRY HYDROLOGY THUS OCCASIONING LOAD MANAGEMENT THAT WE ARE NOW EXPERIENCING… Source Energy Mix (%) June 2009 Generation Mix (%) 100 Our challenge 100 is to reduce high 23 26 dependence of hydro energy sources 26 17 57 23% 17 34 Hydro G
Slide 15: Agenda
AGENDA 1 Power Sub-Sector Today 2 KenGen Strategy 3 Performance & Projections 4 The PIBO 5 Discussions/Q&A 14
Slide 16: Grow Supply Significantly to Meet Vision 2030 Demand
1 … AND TO REACH VISION 2030 TARGETS, WE MUST THEREFORE GROW SUPPLY SIGNIFICANTLY TO MEET THIS DEMAND AND MAINTAIN THE REQUIRED RESERVE MARGIN… Vision 2030 demand Forecast of 8-10 % Significant Opportunity Peak Demand (MW) exist for KenGen to grow capacity 3,400 In 2018 Kenya must 3,200 have at leas
Slide 17: Good-to-Great Strategic Goal to Increase Capacity to 3,000MW
2 … OUR GOOD-TO-GREAT (G2G) STRATEGIC GOAL TO INCREASE CAPACITY TO 3,000MW IN TEN YEARS… Horizon 1 Horizon 2 Horizon 3 Great (2008-2012) (2013-2018) Beyond 2018 company 10 yrs+ 5-10 yrs Explore expansion opportunities Next 5 yrs WHILE • Drive expansion beyond Create sustainable Kenya STABILISING pow
Slide 18: Transformation Architecture: Three Strategic Pillars and 15 Focus Areas
2… TO ACHIEVE ITS OUR 10-YEAR TARGET, WE HAS DEVELOPED A TRANSFORMATION ARCHITECTURE REPRESENTING THREE KEY STRATEGIC PILLARS, ANCHORED BY AN EFFECTIVE ORGANISATION AND 15 FOCUS AREAS … +2000MW by 2018 Vision: To be the market leader in the provision of reliable, safe, quality and competitively pric
Slide 19: Horizon I Capacity Expansion Projects
2 …HORIZON I CAPACITY EXPANSION PROJECTS… 2014 Wind ~50MW Capital Planning and Coal Plant ~600MW Execution 2013 Kindaruma ~32MW Olkaria I ~140MW Olkaria IV ~140MW 2012 CP1 Ngong Wind ~15MW Effective 2011 Raising Masinga ~81GWh •Geothermal~318MW Sang’oro ~21MW • Thermal ~120MW delivery of • Hydro ~15
Slide 20: Geothermal-Led Strategy Is Least Cost Power for Kenya
2 KENGEN IS PURSUING A GEOTHERMAL LED STRATEGY AS IDENTIFIED TO BE THE Low security Geothermal Thermal High security Import LEAST COST POWER FOR KENYA 273 Breakdown of levelised cost Ksh/Kwh Absolute capital 168 5.2 required* 126 4.3 KSh Bn Fuel and O&M 0.7 3.3 Capital 3.6 5.3 5.2 1.9 4.3 Levelised
Slide 21: Planned Horizon II Capacity Expansion Projects
2 …OUR PLANNED HORIZON II CAPACITY EXPANSION PROJECTS… Geothermal Wind & Hydro Horizon 2 project capacity Thermal (Gas/Coal) Capital Planning and MW Execution A 600 MW coal plant is planned by 2013/14 to Menengai I 2013 140 provide breathing space for the geothermal ramp up Menengai II 2014 140 CP2
Slide 22: Capital Expenditure Projected Over US$5 Billion for Horizon I & II
…KENGEN CAPITAL EXPENDITURE OVER THE COMING DECADE IS PROJECTED TO OVER US$ 5 BILLION FOR HORIZON I & II. Cumulative capital expenditure (US$ million) 4 590 4 396 4 000 3 452 2 826 2 259 1 758 1 239 918 617 297 58 2.5 Mw Eburu 2011 140 Mw Menengai 2016 140 Mw Menengai 2015 140 Mw Menengai II 2014 An
Slide 23: Revenue Paradigm Shift Through Capacity & Energy PPA Regime
2 GOING FORWARD, WE HAVE A REVENUE PARADIGM SHIFT THROUGH THE CAPACITY&ENERGY PPA REGIME Capacity (Fixed) Energy Tariff (Variable) Revenue Payment Payment A B C Capacity Fixed O&M Expenses - Charge Rate (FOM) - Variable O&M & Return …escalable 1. Salaries & 1. Fuel Cost (Pass 1. Depreciation Adminis
Slide 24: Bond Proceeds to Finance Ongoing Horizon I Projects
2 … FROM BOND PROCEEDS WE WILL FINANCE ONGOING HORIZON I PROJECTS WHOSE TOTAL COST IS ESTIMATED AT US$ 1.68Billion. Thermal Plant 120 MW (US$ 156m) KSh. 15 Billion Redevelopment of Tana (US$ 46m) - Kindaruma 3rd Unit KSh. 25 Billion KSh. 10 Billion (US$ 46m); (Green-Shoe Kiambere Upgrading O
Slide 25: Agenda
AGENDA 1 Power Sub-Sector Today 2 KenGen Strategy 3 Performance & Projections 4 The PIBO 5 Discussions/Q&A 24
Slide 26: Income Statements - Historicals
3 Income Statements - Historicals 31-Dec-08 30-Jun-08 30-Jun-07 30-Jun-06 Kshs ‘m Kshs ‘m Kshs ‘m Kshs ‘m Electricity sales - Non Fuel 5,919 11,548 11,141 8,222 Fuel Revenue – Pass- 4,695 4,543 through 3,411 6,077 10,614 16,092 14,552 14,300 (9,046) (12,557) Operating expenses (11,075) (11,565) Gros
Slide 27: Balance Sheets
3 Balance Sheets (Kshs billion) 31-Dec-08 30-Jun-08 30-Jun-07 30-Jun-06 Shs’000 Shs’000 Shs’000 Shs’000 Non-current assets 94,032,874 96,338,413 92,142,616 53,111,388 Other Current Assets 9,809,986 6,924,858 7,985,117 7,268,009 Cash and equivalents 3,344,737 4,999,726 1,839,128 4,406,845 Total curre
Slide 28: Significant Accounting Policies Adopted
3 … SIGNIFICANT ACCOUNTING POLICIES ADOPTED… • Foreign exchange: under the PPA all exchange differences are recovered from consumers through KPLC. • Implications: • KenGen does not incur exchange losses or make exchange gains; • Recognition of exchange differences through the Income Statement would
Slide 29: Performance Highlights – Asset Base & Ratios
3 PERFORMANCE HIGHLIGHTS – ASSET BASE & RATIOS CAGR +28% 107 102 Key Ratios 30 Jun 08 65 Gross Margin 22% Net Profit Margin 30% Interest Cover 4.8 Current Asset Ratio 1.34 Gearing Ratio 24% 2006 2007 2008 Asset Base – KSh. Billions 28
Slide 30: KenGen Debt Capacity ... Why the PIBO?
2 … KenGen DEBT CAPACITY… Low Weighted Average Cost of Debt (Pre-Tax) – 3.03% Long Average life – 22 years Long-term Debt Ratio to Total Asset – 19% … WHY THE PIBO? Consumers are protected from Forex +ves adjustments. Total KenGen Debt was Local PIBO allows consumers to invest KSh. 27 billi
Slide 31: Agenda
AGENDA 1 Power Sub-Sector Today 2 Our Capacity & 10-Year Strategy 3 Performance & Projections 4 The PIBO 5 Discussions/Q&A 30
Slide 32: PIBO - Highlights
4 PIBO - Highlights KenGen PIBO Description Highlights 1. Issuer • Kenya Electricity Generating Company Limited 2. Type • Senior Unsecured Unsubordinated Bond 3. Issue • KES 15 billion ( with a Green-Shoe Option for an additional Amount KES 10 billion) 4. Indicative Coupon • TBA 5. Issue Price • Ful
Slide 33: PIBO - Highlights (continued)
4 PIBO - Highlights KenGen PIBO Description Highlights 8. Weighted • 6.25 Years Average Life 9. Interest • Semi annual in arrear Payment 10. Drawdown • One Full Amount Upon Allotment 11. Form of Bond • Certificate or Immobilized (in CDSC Account) 12. Governing Law • Kenyan 13. Listing • Nairobi Stoc
Slide 34: Offer Statistics
4 Offer Statistics Minimum amount of a Bond Kshs 100,000/= Minimum amount required (60% of Kshs 15 billion) Kshs 9 bn Yield to maturity (net of tax) [ TBA ]% Yield to maturity (pre-tax) [ TBA ]% Principal Redemption (without Greenshoe) every six months Kshs 0.9375 bn of Principal Redemption (with Gr
Slide 35: Allocation Pools
4 Allocation Pools Without Green Shoe With Green Shoe Pool Category % of Total Value of % of Total Value of Bonds Bonds (KES (KES Billion) Billion) A Retail Investors 20% 3.0 20% 5.0 B Institutional 80% 12.0 80% 20.0 Investors* TOTAL 100% 15.0 100% 25.0** * - Licensed/Registered in the East African
Slide 36: PIBO – Offer FAQs
4 PIBO – Offer FAQs KenGen PIBO Description Offer FAQs 1. APAs • Authorised Placement Agents (APAs) – NSE Members & Six Commercial Banks 2. Guarantees • Any applicant can use Bank Guarantees as payments 3. Automation • Automated Trading System for Bonds 4. Refunds • Only by Electronic Funds Transfer
Slide 37: Offer Timetable - 2009
4 Offer Timetable - 2009 Application and T+ 0 T + 21 T + 50 T + 52 T selection for + 551 positions T + 59 T + 62 level 8th Sept. 29th Sept. 28th Oct. 30th Oct. 2nd Nov. 6th Nov. 9th Nov. • Offer • Offer •Announce • Final Date • Issue Date • Deadline for •Listing and Opens Closes collection of ment o
Slide 38: Agenda
AGENDA 1 Power Sub-Sector Today 2 Our Capacity & 10-Year Strategy 3 Performance & Projections 4 The PIBO 5 Discussions/Q&A 37
Slide 39: Discussions/Q&A (Key Investment Considerations)
5 DISCUSSIONS/Q&A (Key Investment Considerations) • Leading electricity generator in the country • Well run operations by experienced management, execution track record on implementation of business plan • Good historical financial performance & conservative projections • Issue comprises of fixed ra
Slide 40: KenGen - PIBO Returns
KENGEN - PIBO • 12.5% p.a NET OF TAXES • 14.71% p.a GROSS SUBJECT TO 15% WITHHOLDING TAX • 17.86% p.a GROSS SUBJECT TO CORPORATE TAX OF 30% 39
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