Kenya Electricity Generating Company Plc · NSEKE:KEGN
Kenya Electricity Generating — FY2016/17 Earnings Presentation
33 slides from Kenya Electricity Generating's earnings presentation, Oct 18, 2017
Slide 1: Full Year Results 2016/2017
2016/2017 Villa Rosa Kempinski, Nairobi | Wednesday,18 October 2017 Full Year Results Full Year Business Review Rebecca Miano (Mrs.),OGW Ag. Managing Director & CEO
Slide 2: Global GDP growth expected to pick up modestly
GLOBAL GDP GROWTH EXPECTED TO PICK UP MODESTLY, but remains below historical norms Source: OECD June 2017 Economic Outlook database. Full year results to 30 June 2017 2
Slide 3: Africa's macroeconomic prospects
AFRICA’S MACROECONOMIC PROSPECTS Positive after slow growth, East Africa maintains its lead in regional growth 2016 2017P 2018P 6.0% 5.5% 5.7% 5.3% 3.8% 3.7% 3.4% 3.5% 3.4% 3.0% 3.3% 2.6% 2.2% 2.2% 1.9% 1.1% 0.8% 0.4% West Africa Central Africa Southern Africa Africa Africa North Africa East Africa
Slide 4: Kenya macroeconomic overview
KENYA MACROECONOMIC OVERVIEW Kenya economy stable despite market uncertainties GDP Growth Inflation 8.0% 14% 5.9% 5.4% 5.7% 5.8% 12% 6.0% 4.5% 5.0% 10% 4.0% 8% 2.0% 6% 0.0% 4% 2012 2013 2014 2015 2016 Q2-2017E Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Interest Rate Trend End of month E
Slide 5: Kenya ranked among top in global GDP growth
KENYA RANKED AMONG TOP IN GLOBAL GDP GROWTH Source: Bloomberg Survey, 2016 Full year results to 30 June 2017 5
Slide 6: Kenya's power sector today
KENYA’S POWER SECTOR TODAY Ministry of Energy & Petroleum (policy) Energy ERC Electricity Tribunal (regulator) (disputes) Value Chain Primary Generation Transmission Distribution Customers Energy (mainly geothermal) KenGen, GDC, KP+KeTraCo KP+REA+ KNEB+IPPs IPPs Current ~2,370MW ~75,350km ~139,650km
Slide 7: New developments in the power sector
NEW DEVELOPMENTS IN THE POWER SECTOR Key Developments •I Energy Bill 2015 – creating market for power generators (currently in Senate) •II Power Infrastructure Upgrades (improved power supply quality and reliability) • Draft National Geothermal Strategy (to guide III investments in the geothermal po
Slide 8: Kenya electricity demand trend
KENYA ELECTRICITY DEMAND TREND Electricity demand mirroring GDP growth Customer connections CAGR Power demand is projected at 8.00 25% between 2,600-3,600 MW by 2020, CAGR 6.18 6.00 17% 4.80 Demand to be driven by: 4.00 3.61 2.77 1.75 2.04 2.33 1. Anticipated growth in 2.00 1.27 1.46 0.92 1.06 popul
Slide 9: National production
NATIONAL PRODUCTION KenGen produced 74% of National consumption Installed capacity (MW) Market share (% of MW) CAGR 6.98% IPPs 2,299 2,341 2,370 31% 1,765 1,885 1,691 KenGen 69% 2012 2013 2014 2015 2016 2017 Unit sales (GWh) Market share (% of Units sold) CAGR 5.88% 10,205 IPPs 9,816 9,280 26% 8,840
Slide 10: Our strategic aspirations
OUR STRATEGIC ASPIRATIONS • Increase our capacity by 2,500MW to remain 1 Capacity relevant market player (50+% share) by 2025 increase focusing on geothermal • Provide adequate return to shareholders – 2 Value targeting a Return On Invested Capital of 10% creation • Profitably supply cheaper renewab
Slide 11: Our G2G strategy path
OUR G2G STRATEGY PATH …..well on course Horizon I Horizon II Horizon III Great company To be the market leader in the provision of reliable,safe,quality and competitively priced electric energy in the EA region Original Revamped plan 10 years+ Explore expansion opportunities Create sustainable • Dri
Slide 12: Our installed capacity - 30th June 2017
OUR INSTALLED CAPACITY-30TH JUNE 2017 84% of our installations is Green Energy 1,630 1,631 Decommissioned Thermal 262 253 Thermal 9MW Thermal (Garissa & Lamu) Wind 26 26 Wind Geothermal 524 534 Geothermal Commissioned 10MW Geothermal Wellheads Hydro Hydro 818 818 2016 2017 Full year results to 30 Ju
Slide 13: 2016/17 project milestones
2016/17 PROJECT MILESTONES Olkaria 1 Olkaria I Rehab. Olkaria VI (140MW) Olkaria V (140MW) Unit 6 (70MW) (46MW) 1 2 3 4 • Financial close • Financing • PPA extended by • Tender for a achieved committed 3 yrs JV Partner • Drilling under • Drilling • Govt of Japan completed, completed, pledge for fund
Slide 14: Powering Kenya with green energy
POWERING KENYA WITH GREEN ENERGY 89% of our energy is from renewables Electricity units sales mix (%) Electricity units sales mix (GWh) • Geothermal strongly • Increased Thermal dispatch to complimenting Hydros compensate for Hydros 1% 7,791 -3% 7,556 57 11% 408 63 872 5% 3,542 2017 3,282 2016 49% 4
Slide 15: FY 2016/17 Financial Performance Review
FY 2016/17 FINANCIAL PERFORMANCE REVIEW FCPA John Mudany 15 Finance & ICT Director
Slide 16: Financial highlights
FINANCIAL HIGHLIGHTS Improved profitability despite challenging environment KShs Millions % 2016 2017 Change Revenue 38,610 35,440 -8% Operating Profit 16,271 13,709 -16% EBITDA 26,495 22,953 -13% EBITDA Margin 69% 65% -5% Profit After Tax (1) Profit Before tax 11,264 11,534 2% up Profit After tax 6
Slide 17: Revenue sources
REVENUE SOURCES 83% of revenue came from electricity sales Total Revenue Other Income KShs Millions 38,610 35,440 2,210 2,210 882 882 6,856 * 5,189 376 Contract/consultancy 332 (Drilling) absent 29,543 29,369 57 1,502 538 286 2016 2017 2016 2017 Electricity Revenue Steam Revenue Contracts/consultanc
Slide 18: Stable electricity revenue
STABLE ELECTRICITY REVENUE 75% - 25% Capacity and Energy revenue split Capacity Revenue Energy Revenue KShs Millions Poor hydrology (-475), Improved availability for Olkaria 280MW Dispatch constraints (-173) 2% 21,714 7,671 5% 21,262 7,293 3,200 460 3,285 515 520 564 10,303 10,931 5,183 5,171 7,674
Slide 19: Breakdown of operating profit changes
BREAKDOWN OF OPERATING PROFIT CHANGES Operating profit decreased by 16% owing to…… Bad debt 2015 steam revenue provisioning arears earned in Other income 2016 Due to fully depreciated Reduced assets Staff costs owing Hydrology and Commercial to increased evacuation drilling activity operations const
Slide 20: Finance costs, tax and net profit
FINANCE COSTS, TAX AND NET PROFIT Interest income Effective tax rate EPS 123% 21% KShs 1.37 KShs 1,242 million interest income on Closing No. of shares At KShs 2,477 6,594,522,339 investments and interest million charge on late payments Finance costs Effective tax rate reduction from 46% 9% to 21% m
Slide 21: Cash movement
CASH MOVEMENT Growth in positive closing cash balances Closing Cash Balances (KShs Cash Flow (KShs Millions) Millions) Net cash from 9,429 4,850 Financing 7,831 1,973 6,756 Capex: KShs 13,074 11,849 12,820 9,299 8,972 3,996 3,292 6,756 7,831 Net Cash from 1 July 2016 Proceeds from Proceeds from 30 J
Slide 22: Balance sheet
BALANCE SHEET Strong Balance Sheet for project pipeline execution % 2016 2017 Movement ASSETS Property, Plant and Equipment 320,933 323,843 1% Other Non-current Assets 24,400 23,715 -3% Current Assets 21,916 29,639 35% TOTAL ASSETS 367,249 377,197 3% EQUITY AND LIABILITIES Share Capital 15,610 16,48
Slide 23: Debt profile as at 30th June 2017
DEBT PROFILE AS AT 30TH JUNE 2017 Closed the year with Net debt at KShs 128,124 Million (1% increment) Gross debt by source of funding Debt Maturity Profile (KShs Million) 5% Guaranteed 32,871 3% 14% KShs 20.1 Billion On-lent Debt-Equity swap 33% Direct (DFIs) 11,797 8,972 9,230 10,833 10,231 10,231
Slide 24: Capex funding
CAPEX FUNDING Funding for our project pipeline firmly on course Capex Plan (Estimates) Available multi-currency funding lines KShs Millions Wind Power Plants 81,000 Wellhead Modular 56,547 Plants Geothermal Plants Steam Drilling 31,700 40,000 Maintenance 28,737 18,000 13,000 7,000 6,000 2017 2018 20
Slide 25: Decent capital gains for shareholders
DECENT CAPITAL GAINS FOR SHAREHOLDERS KShs 2.20 KShs 3.00 KShs 2.05 52% • No dividend • Cash reinvestment 34% in capacity 31% expansion to unlock steam revenue • This represents Invested at Invested at Invested Rights start of within last better value for the Issue Price Year Six Months shareholders
Slide 26: Ongoing strategy (way forward)
1. MACRO ECONOMIC INDICATORS ONGOING STRATEGY (WAY FORWARD) Rebecca Miano (Mrs.),OGW 26 Ag. Managing Director & CEO
Slide 27: Capacity growth focused on renewables
CAPACITY GROWTH FOCUSED ON RENEWABLES To grow supply ahead of demand and retain our market leadership 2,307MW 630MW of Geothermal and 90MW of Wind 254 Thermal Wind 116 Ngong III, 1,631 MW 10 Meru Thermal Wind, Olk.V, 254 80 140 Geothermal Wind 26 1,119 Olk. I Unit 6, Olk. VII, 70 Geothermal 534 * 14
Slide 28: Our business models
OUR BUSINESS MODELS Innovative financing and business diversification plans ongoing KENGEN MODEL B MODEL A (TRADITIONAL) MODEL C (DIVERSIFICATION) (PRIVATE) Existing KenGen Multiple separate legal entities A legal entity 100% owned by legal entity (traditional) with ring fenced risks and KenGe
Slide 29: Strategic risks that we are continuously managing
STRATEGIC RISKS THAT WE ARE CONTINUOSLY MANAGING Mitigation Strategies • New IPPs are aggressively entering the market Competition • Mitigating this through competitive tariffs and fast project delivery KenGen Community • Community engagement through a structured continuously positioning Expectation
Slide 30: Thank you
KenGen Investor Relations 1) John Mudany, jumdany@kengen.co.ke Finance & ICT Director 2) Mary Maalu, mmaalu@kengen.co.ke Corporate Finance Manager 3) Fredrick Opondo, fopondo@kengen.co.ke Assistant Manager – Investor Relations THANK YOU Full year results to 30 June 2017
Slide 31: Appendices
APPENDICES 1. MACRO ECONOMIC INDICATORS 31
Slide 32: Appendix 1. Trading update
APPENDIX 1. TRADING UPDATE YTD one of the best performers at the NSE Share performance (Since January 2015) Monthly Value traded (KShs Millions) % Change Index 1WK YTD Since Jan -15 668 KenGen -2.2% 52.2% -13.8% 543 NSE 20 2.3% 13.1% -29.1% 327 260 207 219 228 135 102 76 107 76 61 48 58 Oct-16 Nov-1
Slide 33: Appendix 2. Tax incentive analysis
APPENDIX 2. TAX INCENTIVE ANALYSIS 150% investment allowance for plants outside the cities of Nairobi, Kisumu, Mombasa High tax incentives translates to tax credits or tax charge at an effective rate of less than 30%. Tax credits arise due to the translation of accounting profits into tax losses
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