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Unpacking the Kenya Power FY26 Results · The Mwango Capital Podcast

0:00
SPEAKER_01: Thanks for joining us on this special edition of Mwango Spaces.
0:02
SPEAKER_01: We have the CFO who's called General Manager, Steve here.
0:06
SPEAKER_01: He's going to take us through the results and then you're going to ask him
0:09
SPEAKER_01: as many questions as possible.
0:11
SPEAKER_01: Steve, maybe you can tell us a bit about yourself and what you do before you go into
0:15
SPEAKER_01: the results yourself and your journey to becoming a CFO of Tenor Power.
0:19
SPEAKER_00: Thank you.
0:19
SPEAKER_00: Thank you, Mukaya.
0:20
SPEAKER_00: And really appreciate for you having me on these expenses this evening.
0:24
SPEAKER_00: My name is Tiff Vekiruki Natira, the CFO of Kenya Power.
0:27
SPEAKER_00: And I have been at Kenya Power for quite some time.
0:30
SPEAKER_00: I joined Kenya Power in 2006.
0:32
SPEAKER_00: I left a bit to get to CMA and later on back to Kenya Power.
0:36
SPEAKER_00: Initially,
0:37
SPEAKER_00: my specialty was in tax,
0:38
SPEAKER_00: later on financial reporting, financial planning and modeling.
0:41
SPEAKER_00: And I headed the treasury a bit.
0:43
SPEAKER_00: And thereafter, I became a GM finance.
0:46
SPEAKER_00: That's about in 2021.
0:49
SPEAKER_00: So I've been GM for the last five years and something.
0:51
SPEAKER_01: A curious question, how come you use general manager finance and not CFO?
0:56
SPEAKER_00: There's something about the human resource instruments in government entities
1:00
SPEAKER_00: and that's how they structured it.
1:01
SPEAKER_00: At some point it was directors and then it moved to the chief managers and then
1:05
SPEAKER_00: to general managers.
1:06
SPEAKER_00: So it flows like that, but really that's the naming in the public sector.
1:11
SPEAKER_01: And then usually as we discuss Kenya Power,
1:14
SPEAKER_01: I know a lot of Kenyans do use it,
1:16
SPEAKER_01: but perhaps they don't understand where in the energy value chain
1:18
SPEAKER_01: in Kenya you stand.
1:19
SPEAKER_01: Could you check us through that value chain and also tell us what Kenya Power does
1:22
SPEAKER_01: as a business so that our listeners can understand that better?
1:25
SPEAKER_00: Back until the year 2000,
1:27
SPEAKER_00: Kenia Power was actually vertically integrated and we were doing all the way
1:31
SPEAKER_00: from generation, the Massinga dams and all the dams to the second fork.
1:35
SPEAKER_00: And of course,
1:36
SPEAKER_00: generation was actually under Kenia Power and then even transmission was KPLC and
1:41
SPEAKER_00: the distribution and feature still was Kenia Power,
1:43
SPEAKER_00: including the operation of the system.
1:45
SPEAKER_00: But then there was the first development ban thing in the year 2000
1:48
SPEAKER_00: where Kenjin was actually high door and government actually bequeathed,
1:52
SPEAKER_00: if I could use that word, the generation plans at the time to Kenjin.
1:56
SPEAKER_00: And so Kenjin essentially took over generation and then later on.
2:00
SPEAKER_00: Around about 2008, again,
2:02
SPEAKER_00: there was Ketrako that was formed,
2:04
SPEAKER_00: and around the same time, even rural application was formed.
2:07
SPEAKER_00: And so Ketrako took on the transmission,
2:09
SPEAKER_00: but their mandate was actually to build, construct a new transmission line.
2:13
SPEAKER_00: Initially,
2:13
SPEAKER_00: the idea was that they would construct and handle Kenya power,
2:16
SPEAKER_00: and then they would fold at some point.
2:18
SPEAKER_00: But it was found that it's a continuous kind of an investment,
2:21
SPEAKER_00: and so Ketrako took on the transmission bit.
2:25
SPEAKER_00: Right up on the other side,
2:26
SPEAKER_00: rural electrification and also the government connectivity programs.
2:30
SPEAKER_00: So they do that.
2:31
SPEAKER_00: It's part of distribution, regulation of electricity.
2:34
SPEAKER_00: So KPLC is concentrated in the space of distribution,
2:37
SPEAKER_00: a bit of transmission because the old transmission lines are distinctly.
2:41
SPEAKER_00: And then as well,
2:42
SPEAKER_00: we are in a bit of generation because we run the off-grid station,
2:45
SPEAKER_00: about 56 of them,
2:47
SPEAKER_00: the off-grid stations,
2:48
SPEAKER_00: the ones that generate thermal and also the hybrid stations that are in
2:52
SPEAKER_00: the fulfilling areas that are not connected to the grid.
2:55
SPEAKER_00: So we do a bit of generation.
2:58
SPEAKER_00: Issues licenses and the market is quite liberalized now and we can have utilities
3:03
SPEAKER_00: across generation, transmission, distribution, even retail as such.
3:07
SPEAKER_00: So for KPLC, we have generation licenses.
3:09
SPEAKER_00: That's why we do the off-grid generation.
3:12
SPEAKER_00: And then we have transmission and distribution and retail licenses.
3:16
SPEAKER_01: And there's been a bit of a change in the landscape.
3:18
SPEAKER_01: I think there were some rules that came in and now you can move up and down the value chain.
3:22
SPEAKER_01: What's your take on that so far in town?
3:24
SPEAKER_01: So what's,
3:25
SPEAKER_01: if you call it a mot for Kenya Power,
3:27
SPEAKER_01: as more people want to eat your cake, what are you good at?
3:31
SPEAKER_00: One of the biggest advantages for Kenya Power is the expansive grid.
3:34
SPEAKER_00: The grid has its own challenges in terms of being quite significantly low voltage.
3:39
SPEAKER_00: And that's by design because of the government's really aspiration for connectivity
3:44
SPEAKER_00: over and beyond.
3:46
SPEAKER_00: Really a very robust grid that would be at a higher voltage as such.
3:49
SPEAKER_00: So we have quite an expansive grid across.
3:52
SPEAKER_00: And so if anyone coming in,
3:54
SPEAKER_00: they would first either have to really do a wheeling on our grid or they'd have
3:59
SPEAKER_00: to put up a grid and grid investment.
4:00
SPEAKER_00: So the investment is quite capital intensive and the returns,
4:03
SPEAKER_00: it takes a very long time to actually be able to record the returns.
4:06
SPEAKER_00: And so that gives us a bit of an advantage.
4:08
SPEAKER_00: But in the space of like now generation and captive generation
4:12
SPEAKER_00: and what we are seeing now where some of
4:14
SPEAKER_00: the generators like Kenjin are actually creating investment parts
4:18
SPEAKER_00: where they would really attract the heavy industries to be able to generate at
4:22
SPEAKER_00: that point.
4:23
SPEAKER_00: It's a key thing in the sense that they would get power at much lower cost
4:26
SPEAKER_00: because there are a number of things like the system efficiency,
4:29
SPEAKER_00: when you transmit power over some distance,
4:31
SPEAKER_00: you actually inevitably have to lose some of it.
4:34
SPEAKER_00: So the shorter the distance, really the more efficient.
4:37
SPEAKER_00: So if you're generating or you're actually consuming close to the generation plant,
4:41
SPEAKER_00: then you have advantages of the efficiency,
4:43
SPEAKER_00: you have advantages of the stability in terms of the quality of supply.
4:47
SPEAKER_00: And that's what is very important for The heavy manufacturers, the data centers and the likes.
4:51
SPEAKER_00: And so we are seeing that actually evolve.
4:55
SPEAKER_00: But then the other side,
4:56
SPEAKER_00: as you can see in our numbers as well,
4:58
SPEAKER_00: we've seen demand quite significantly increasing as well.
5:01
SPEAKER_00: So there are many moving parts in this,
5:03
SPEAKER_00: and I think there will be space for everyone,
5:05
SPEAKER_00: especially if we are able to enhance on their efficiencies and
5:08
SPEAKER_00: on their affordability.
5:09
SPEAKER_01: Before we go to the numbers, I think there's a meldia milestone you hit this week.
5:12
SPEAKER_01: I think Lodo got connected to the grid.
5:14
SPEAKER_01: What took so long, by the way?
5:15
SPEAKER_01: That's pretty impressive though, generally.
5:18
SPEAKER_00: Yeah, loadway is actually way off when you look at the distance to the grid,
5:22
SPEAKER_00: but then over time there have been some connectivity happening,
5:25
SPEAKER_00: especially under the last mile and all that.
5:27
SPEAKER_00: And you see when last mile happens, it's on the low voltage.
5:30
SPEAKER_00: And so over time we have now to beef up the backbone.
5:33
SPEAKER_00: So what happened is that as Kitala was connected and moving on to the other side
5:36
SPEAKER_00: of Campinguri and all that,
5:48
SPEAKER_00: We need to do a sort of cost benefit analysis in terms of the kind of fuel costs
5:52
SPEAKER_00: that we were spending in Lodwa because almost 900 million shillings in a year
5:57
SPEAKER_00: on fuel just in Lodwa,
5:59
SPEAKER_00: but still having suppressed demand because the capacity of the generation.
6:03
SPEAKER_00: Directors were limited.
6:04
SPEAKER_00: And so connecting the grid at a cost of about 1.1 billion shilling,
6:08
SPEAKER_00: that makes it quite a very significant investment in that.
6:12
SPEAKER_00: It has implications even on the tariff because the fuel,
6:16
SPEAKER_00: usually fuel is what you call a pass-through in the tariff.
6:18
SPEAKER_00: So that pass-through of fuel will no longer,
6:20
SPEAKER_00: the extent of what was being used in logon hours that goes full throttle,
6:24
SPEAKER_00: then we would actually drop the fuel that we've been having on that range.
6:28
SPEAKER_00: They will be now becoming consuming on the grid as such.
6:31
SPEAKER_00: And that also gives a bit of really opportunity in terms of increasing the sales
6:36
SPEAKER_00: because there's a press demand now will actually be solved going forward because
6:40
SPEAKER_00: from the grid, they are able to get quite some good capacity.
6:43
SPEAKER_01: Could you take us through the high level numbers and then I'll ask
6:46
SPEAKER_01: a few questions here as soon as we can poke some of the results.
6:48
SPEAKER_01: So give us a bad eye view of the results that you presented today.
6:51
SPEAKER_00: Just starting off with the top line,
6:53
SPEAKER_00: if we go into the results with the top line in terms of the revenues,
6:57
SPEAKER_00: we actually saw an increase in revenues to 238 billion shillings.
7:01
SPEAKER_00: That was an increase of about 8.6% from the revenue for last year 2018.
7:06
SPEAKER_00: And in terms of the cost of sales, cost of sales was up 5%.
7:11
SPEAKER_00: And so we had really an uplift in the margin because when you look at 8% and 5%,
7:16
SPEAKER_00: And then that gave us a profit before tax of 36 billion shillings
7:21
SPEAKER_00: against 35.4 last year.
7:23
SPEAKER_00: But one of the key movers in that was the finance cost because we had
7:27
SPEAKER_00: a significant reduction in finance cost,
7:29
SPEAKER_00: 34% down from 4.7 billion last year to 3 billion this year.
7:35
SPEAKER_00: And so that really was key involvement there.
7:38
SPEAKER_00: I know there's been a bit of question around the operating costs
7:41
SPEAKER_00: that were actually much higher this year.
7:45
SPEAKER_00: Completing costs went up 25.7%, from 42.4 billion shillings to 3.7 billion.
7:53
SPEAKER_00: And so this actually is part of the capacity enhancement to be able to increase
7:59
SPEAKER_00: and grow the revenue capacity in terms of the workforce.
8:02
SPEAKER_00: We recruited over 1,100 staff, mostly technical staff.
8:06
SPEAKER_00: There were 434 graduate engineers and other staff in other key areas.
8:12
SPEAKER_00: And that really marked up the staff costs.
8:14
SPEAKER_00: There is the other aspect that increased the cost was the depreciation.
8:18
SPEAKER_00: If you look at our non-parent assets, it was up 8% to 420 billion.
8:24
SPEAKER_00: 8% up, there's about 30 or 32 billion additional.
8:27
SPEAKER_00: And that is net after the depreciation.
8:30
SPEAKER_00: And so that kind of an increase, it comes with its depreciation as well.
8:34
SPEAKER_00: So depreciation was up about 2.8 billion.
8:37
SPEAKER_00: And finally, there was the ACL, the expected credit losses, that's the provisioning.
8:41
SPEAKER_00: That's an area where we see a bit of work to do,
8:44
SPEAKER_00: but it really is an opportunity in this financial year to actually be able
8:48
SPEAKER_00: to turn these around and really improve on our collection so that we are able
8:52
SPEAKER_00: to write back a bit of those provisions and also enhance our cash.
8:55
SPEAKER_00: Thank you.
8:56
SPEAKER_01: Let's search on the revenue provides.
8:58
SPEAKER_01: I think the postpaid is your biggest contributor in terms of revenues,
9:01
SPEAKER_01: prepaid or so, maybe a third of that.
9:04
SPEAKER_01: There's a bit of exports and I think that there's been a constant question that you get.
9:07
SPEAKER_01: Why are we exporting?
9:08
SPEAKER_01: Yet our demand is greater than the supply.
9:10
SPEAKER_01: So maybe you can take us through the revenue items as we go through
9:13
SPEAKER_01: the annual reports that you also put out now.
9:15
SPEAKER_01: So take us through some of the key components that comprise of your revenues.
9:19
SPEAKER_00: Revenues, as you said, we have the postpaid revenue and postpaid and prepaid.
9:24
SPEAKER_00: Now, in terms of the split in revenues, it's about 25-75.
9:28
SPEAKER_00: So we'll have 25% on prepaid and 75% on postpaid.
9:32
SPEAKER_00: But when you look at the customer numbers, the customer numbers on prepaid is about 8 million.
9:37
SPEAKER_00: So the 8.3 million contribute the 25%.
9:40
SPEAKER_00: And then They actually 2.1 on post pay now contribute the 75% of the revenues.
9:48
SPEAKER_00: When you look at the customer split in terms of the various customer categories,
9:52
SPEAKER_00: our biggest consumers are actually commercial and industrial.
9:56
SPEAKER_00: And commercial and industrial, they are just about 10,000 customers out of the total 10.4.
10:02
SPEAKER_00: And they would actually do about 50% of our revenues as such,
10:06
SPEAKER_00: then followed by the small commercial.
10:08
SPEAKER_00: And then we have the domestic and in domestic, we have two categories.
10:12
SPEAKER_00: We have the lifeline domestic and the ordinary domestic.
10:16
SPEAKER_00: And even the trade, if the pricing itself is also structured.
10:19
SPEAKER_00: Based on these categories,
10:20
SPEAKER_00: and then we have the street lighting,
10:22
SPEAKER_00: which is unique in its own way, and then we have the exports.
10:26
SPEAKER_00: Now, to your question on exports,
10:28
SPEAKER_00: we have the interconnectors,
10:30
SPEAKER_00: and across the world,
10:31
SPEAKER_00: there is a lot of power interconnection,
10:33
SPEAKER_00: and it's becoming a major thing,
10:35
SPEAKER_00: really, that power grid is being interconnected across the regions, and...
10:40
SPEAKER_00: So, the key thing about this interconnection is
10:43
SPEAKER_00: that there are dynamics around power flow and so these systems can be interdependent
10:47
SPEAKER_00: on each other.
10:47
SPEAKER_00: Like the Thailand that we have with Uganda,
10:49
SPEAKER_00: sometimes when Uganda would have a significant problem in any order,
10:53
SPEAKER_00: as well when we We have had instances like of the national blackout.
10:57
SPEAKER_00: You have to start it from somewhere.
10:58
SPEAKER_00: And so quite often in such scenarios,
11:00
SPEAKER_00: you'd find that Uganda actually would help us really now start our grid again.
11:05
SPEAKER_00: And there's quite a complex protocol around now building that all the way
11:08
SPEAKER_00: to restore all the customers as such.
11:11
SPEAKER_00: So the main thing with the interconnectors is to be able to really leverage.
11:15
SPEAKER_00: The various generational capabilities across the region.
11:18
SPEAKER_00: Like right now we have connection to Ethiopia where we are importing 200 MW farm
11:23
SPEAKER_00: during the day and about 65 during the night.
11:25
SPEAKER_00: And the importation of that power is quite important currently when you look at
11:30
SPEAKER_00: the Demand supply dynamics where the ability for availability generation
11:35
SPEAKER_00: that is usually available at peak is not even sufficient to cover the kind
11:39
SPEAKER_00: of demand we have during peak.
11:40
SPEAKER_00: And so we really have to depend on that import from Ethiopia at that particular point in time.
11:46
SPEAKER_00: The connection to Ethiopia is not an exporting one as such as yet.
11:50
SPEAKER_00: But then for Uganda and Tanzania, these are timelines that flow both ways.
11:54
SPEAKER_00: And so during the period,
11:56
SPEAKER_00: if you notice our exports during the year under review, Increased by 356%.
12:00
SPEAKER_00: And that was mainly because of the Tanzanian line
12:03
SPEAKER_00: where initially there was quite some significant imports that we were doing.
12:07
SPEAKER_00: And then based on the power dynamics and the situation in Tanzania,
12:10
SPEAKER_00: we have been exporting to them.
12:12
SPEAKER_00: So it's quite some volumes on both sides.
12:14
SPEAKER_00: Then to Uganda.
12:16
SPEAKER_00: And so we leverage on really the available generation and even trying to balance
12:21
SPEAKER_00: the costs, the various generation sources across Tanzania.
12:25
SPEAKER_00: And some of these are bilateral and actually evolving into markets
12:29
SPEAKER_00: where we will have their head market,
12:31
SPEAKER_00: the auction markets where it becomes even more competitive and brings
12:34
SPEAKER_00: in availability because if we have a system operation between
12:38
SPEAKER_00: the East African countries,
12:40
SPEAKER_00: our customers can be able to We can be able to,
12:43
SPEAKER_00: the KPLs can actually be able to bid for the cheapest power from Gwanda or
12:47
SPEAKER_00: from Tanzania,
12:48
SPEAKER_00: if it is cheaper or much better than the power we are getting locally.
12:51
SPEAKER_00: So that bid is still evolving and there's quite a bid that is going on at the moment
12:56
SPEAKER_00: of the East African power bull.
12:58
SPEAKER_01: Will that mean then that especially Tanzania is developing,
13:00
SPEAKER_01: I think this year they're ramping up production electricity.
13:03
SPEAKER_01: Does that mean that we'll benefit from that?
13:06
SPEAKER_01: Should we have power shortages in the near future also?
13:09
SPEAKER_00: Yeah, it becomes an opportunity in that sense.
13:12
SPEAKER_00: Okay, usually you would not expect a country to over rely on its neighbors
13:16
SPEAKER_00: for critical services like power.
13:19
SPEAKER_00: But then the fact that they are able to have resources,
13:22
SPEAKER_00: hydro in a big way,
13:23
SPEAKER_00: just the same way Ethiopia has that and they have been able to invest in
13:27
SPEAKER_00: that manner.
13:28
SPEAKER_00: Then their pricing becomes quite competitive.
13:31
SPEAKER_00: And so we are able to get that.
13:33
SPEAKER_00: And the significant thing here is that is best load,
13:35
SPEAKER_00: which you cannot compare with the other types of dividend generation.
13:39
SPEAKER_00: So the investment in that provides an opportunity, yes,
13:43
SPEAKER_00: but then also important for Kenya as well to have its own investments
13:47
SPEAKER_00: in best load generation to also expand that so that we are not over-reliant on
13:51
SPEAKER_00: the neighboring countries.
13:53
SPEAKER_01: Electricity sales are up around 12%.
13:56
SPEAKER_01: Now,
13:56
SPEAKER_01: I want to explain the difference between that and revenues in terms of growth year
14:00
SPEAKER_01: over year.
14:01
SPEAKER_00: Electricity sales was up 8.6%,
14:04
SPEAKER_00: but when you look at the unit sales in terms of their guard hours, that was up 12%.
14:11
SPEAKER_00: And so the disparity between that,
14:13
SPEAKER_00: because you'd expect that if the price was constant,
14:15
SPEAKER_00: then the growth of 12% in the units would yield to more.
14:19
SPEAKER_00: A revenue group of almost that 12%.
14:21
SPEAKER_00: But then the pricing,
14:23
SPEAKER_00: the year that we are comparing me,
14:24
SPEAKER_00: that is June 25,
14:25
SPEAKER_00: that's the financial year 24-25,
14:27
SPEAKER_00: and the financial year 25-26,
14:31
SPEAKER_00: there was a tariff yield reduction when the tariff It was approved in April 2023.
14:36
SPEAKER_00: There was an annual really roadmap to bring down the price of electricity where
14:42
SPEAKER_00: the yield was going down by about $0.72 per year.
14:45
SPEAKER_00: And so $0.72 actually is about per month because it's still about a billion units a month.
14:50
SPEAKER_00: So when you talk about $0.72, that's about $720 million a month.
14:54
SPEAKER_00: Yeah, so in a year it's about 8.5 or 8.6 billion shillings.
14:58
SPEAKER_00: And so we would have that reduction every year.
15:01
SPEAKER_00: The expectation is that the growth in demand and the improvement
15:04
SPEAKER_00: in efficiencies would actually be able to really provide that benefit to
15:10
SPEAKER_00: the customer in terms of the affordability.
15:12
SPEAKER_00: So that's what brings about this sort of what looks like the mismatch in
15:16
SPEAKER_00: the increase in the sales in cashillings and the units in gigawatt hours.
15:20
SPEAKER_01: And then if you involve in all that,
15:22
SPEAKER_01: total sales is growing at a slower rate than revenues, which is good.
15:25
SPEAKER_01: What's driving that?
15:27
SPEAKER_00: Yeah, total sales is growing.
15:29
SPEAKER_00: The key thing about that is the efficiency.
15:31
SPEAKER_00: If you look at the efficiency, there was an improvement of efficiency from 79.8% to 81.4%.
15:39
SPEAKER_00: That means that some of the units that we sold are units that we would have lost
15:44
SPEAKER_00: if we were at the efficiency level of last year.
15:46
SPEAKER_00: So we didn't have to...
15:48
SPEAKER_00: By exactly the same as the growth in sales,
15:52
SPEAKER_00: there is a bit of benefit that came from the improved efficiencies,
15:55
SPEAKER_00: a bit of recoveries from what we would have lost when you look at
15:59
SPEAKER_00: the efficiency levels previous year.
16:01
SPEAKER_00: And so when we sold that, we didn't have to buy additional units to that extent.
16:05
SPEAKER_00: And that's why the cost of sales has increased, but at a lower rate than really the sales.
16:11
SPEAKER_01: And then if you move to operating expenses, they're significantly up.
16:14
SPEAKER_01: You gave a bit of an explanation,
16:16
SPEAKER_01: but I want to give you a chance to maybe expound on that a little bit more
16:19
SPEAKER_01: because I think a lot of the investors are a little worried that it's going
16:22
SPEAKER_01: to be up almost 27% up year over year when you compare it to just revenue growing
16:27
SPEAKER_01: at around 9% there.
16:29
SPEAKER_00: Yeah.
16:30
SPEAKER_00: The increase in operating expenses at 25.7% is about 11 billion increase.
16:37
SPEAKER_00: Now, I mentioned around the issue of the biggest increase there was on
16:41
SPEAKER_00: the expected credit losses at the provision and the electricity debt.
16:45
SPEAKER_00: And that provision is that high for a number of reasons.
16:49
SPEAKER_00: One is that there are certain specific segments of customers
16:52
SPEAKER_00: that we've had some challenges in printing.
16:55
SPEAKER_00: And specifically,
16:56
SPEAKER_00: this goes to a number of the county governments,
16:59
SPEAKER_00: where the delays in extra releases to the county governments
17:02
SPEAKER_00: and some county governments having some issues and disputes about their bills
17:06
SPEAKER_00: and all that.
17:07
SPEAKER_00: And so because they offer some critical services across,
17:11
SPEAKER_00: usually we have disconnections sometimes to be able to collect the monies,
17:15
SPEAKER_00: but then we have to leave the critical services owned.
17:18
SPEAKER_00: And so there has been a buildup in some of those accounts or debt
17:22
SPEAKER_00: that now is leading us to make these provisions.
17:24
SPEAKER_00: We have engagements across even with government in terms of how to be able to unlock
17:29
SPEAKER_00: that and really collect our revenues there.
17:32
SPEAKER_00: And then also at this time,
17:34
SPEAKER_00: we had a bit of quite some initiatives around being The Mwango Weekly,
17:38
SPEAKER_00: mwangocapital.
17:54
SPEAKER_00: Being able to clean out and replace the altimeters and recover the unbuilt units.
17:59
SPEAKER_00: And so when that is done, it's done even for a prepaid account.
18:03
SPEAKER_00: So you'd find a customer on a prepaid account has some debt.
18:06
SPEAKER_00: It's because they either had a faulty meter, they had bypassed a meter or something of the sort.
18:11
SPEAKER_00: And now when the billing is done for the period, the load is restricted to about six months.
18:16
SPEAKER_00: When that is done, then that debt is loaded to their prepaid meter.
18:21
SPEAKER_00: As they vend, a percentage of that is recovered to pay that debt.
18:24
SPEAKER_00: So that is debt that unlike postpaid where the customer has to pay fully
18:29
SPEAKER_00: to get reconnected or gets into a payment plan and then gets reconnected
18:32
SPEAKER_00: for prepaid is entirely dependent on the vending.
18:36
SPEAKER_00: So if they buy 100 shillings and 20 shillings is taken to pay part of that debt,
18:39
SPEAKER_00: that debt takes longer to recover.
18:41
SPEAKER_00: And so those are the factors that really led to prepaid.
18:45
SPEAKER_00: The increase in the expected credit losses.
18:47
SPEAKER_00: I mentioned about depreciation.
18:49
SPEAKER_00: We had a significant increase in depreciation about 2.8 billion shillings.
18:53
SPEAKER_00: And that is informed by the increase in the non-current assets,
18:57
SPEAKER_00: an increase of 8% to 421 billion.
19:00
SPEAKER_00: So that increase comes with as we really invest in the network,
19:04
SPEAKER_00: build new substations and links and lines, grid assets.
19:09
SPEAKER_00: Then these grid assets have different life.
19:12
SPEAKER_00: And so based on that, there are standard depreciation risks that are done.
19:16
SPEAKER_00: And so at an average of about 8 to 10% when you look at that,
19:19
SPEAKER_00: and that will give you about that 2.8 billion increase in depreciation.
19:23
SPEAKER_00: I had mentioned about the staff costs,
19:25
SPEAKER_00: but also it's important to mention that Some
19:26
SPEAKER_00: of these costs might not be current routine that every year we will select now
19:31
SPEAKER_00: the one for onboarding 1,100 staff.
19:34
SPEAKER_00: That is not an annual thing that is done.
19:36
SPEAKER_00: There has been quite a significant backlog and we've lost a number of key technical staff.
19:43
SPEAKER_00: And so there was really need to actually enhance those capacities.
19:48
SPEAKER_00: So that's why we had to onboard quite a number of graduate engineers,
19:51
SPEAKER_00: because also it takes time to be able to train and get the kind of experience
19:55
SPEAKER_00: and caliber that is required to be able to operate the clay.
19:58
SPEAKER_01: Yeah, a couple of questions under that.
20:00
SPEAKER_01: I think one is what's the quantum of government debt that is past due and
20:04
SPEAKER_01: then how much of that has been provided for?
20:06
SPEAKER_01: And then secondly,
20:07
SPEAKER_01: on the staff costs,
20:08
SPEAKER_01: I think one of the key areas that some of your employees are headed
20:12
SPEAKER_01: to is usually Sweden.
20:13
SPEAKER_01: I'm aware that ABB and Hitachi do get quite a significant number of your staff now.
20:19
SPEAKER_01: Is this something that is continuous and are you trying to mitigate that so
20:22
SPEAKER_01: that you're able to keep some of these staff who have quite a bit
20:24
SPEAKER_01: of broad experience and knowledge?
20:26
SPEAKER_00: In the side of the debts for GOK,
20:30
SPEAKER_00: as I said,
20:31
SPEAKER_00: various government,
20:32
SPEAKER_00: part of government,
20:33
SPEAKER_00: as I said,
20:33
SPEAKER_00: they have government accounts that are performing newer and will receive payments
20:38
SPEAKER_00: on continuing basis as such.
20:40
SPEAKER_00: But then there are just specific benefits.
20:42
SPEAKER_00: Areas where we have these challenges, and I highlighted county government.
20:46
SPEAKER_00: There are a number of county governments that we've had challenges,
20:48
SPEAKER_00: especially on street lighting.
20:50
SPEAKER_00: And the reason for that is that the investment into street lighting is a national government.
20:54
SPEAKER_00: They do the capital investment in street lighting, and then the counties to be paying the bills.
20:59
SPEAKER_00: And so there has been sort of some misunderstanding around.
21:02
SPEAKER_00: They are not the ones who invested in this.
21:04
SPEAKER_00: Why should they be the ones paying the bill?
21:06
SPEAKER_00: And there are those kind of discussions that have been happening, and that causes delays.
21:10
SPEAKER_00: But on a continuing basis,
21:11
SPEAKER_00: if you look at the debt for government,
21:13
SPEAKER_00: then we'll be talking about 6 to 7 billion tillings.
21:27
SPEAKER_00: To your second question on the technical skills and Sweden, I think it's not just
21:42
SPEAKER_00: As Sweden,
21:43
SPEAKER_00: we've had engineers moving across,
21:46
SPEAKER_00: not just engineers,
21:47
SPEAKER_00: but quite a number of staff across a number of skills,
21:50
SPEAKER_00: the US, Canada, Australia, Ireland, and Europe.
21:54
SPEAKER_00: Even with Sweden as such, Sweden has quite a number of programs that they are doing.
21:58
SPEAKER_00: And as well,
21:58
SPEAKER_00: you've mentioned the companies in Sweden that also have some places in Kenya
22:02
SPEAKER_00: and they've been able to interact within the sector and identify talent that later
22:07
SPEAKER_00: on would move.
22:10
SPEAKER_00: There are ways in which we have tried to really ensure that we can retain talent.
22:14
SPEAKER_00: And a number of initiatives that have been done in the last two
22:17
SPEAKER_00: or perhaps three years, as much as in that bearing, the fruit.
22:21
SPEAKER_00: But really,
22:22
SPEAKER_00: when it comes to somebody getting an opportunity that is a much better opportunity
22:26
SPEAKER_00: and all that, and they're keen on living, there's so much that you can do.
22:29
SPEAKER_00: And that's why we are...
22:31
SPEAKER_00: Really enhancing the capacity by now recruiting graduate engineers,
22:35
SPEAKER_00: develop a pipeline so that even as some leave,
22:37
SPEAKER_00: we still have some that we are able to continue within the business and build
22:42
SPEAKER_00: that capacity as we move forward.
22:44
SPEAKER_01: Moving to the finance income bit and finance income and finance costs,
22:49
SPEAKER_01: could you check us through what drove the low interest expenses there
22:52
SPEAKER_01: and what you're thinking around the deleveraging that you're doing?
22:54
SPEAKER_01: Do you take up more debt?
22:55
SPEAKER_01: Do you reduce debt?
22:56
SPEAKER_01: What's the composition of the debt so far?
22:58
SPEAKER_01: So take us through that and the finance costs and how they develop during the year.
23:02
SPEAKER_00: The finance cost was down 34.7%.
23:05
SPEAKER_00: And a few years back, 2023, 2022, we had finance costs of up to 20 billion.
23:11
SPEAKER_00: I feel in 2023, I think it was about 24 billion.
23:13
SPEAKER_00: And out of that,
23:13
SPEAKER_00: about 16 billion was and realized forex losses because of the kind of fluctuation
23:17
SPEAKER_00: that we were experiencing at the time.
23:19
SPEAKER_00: But currently, finance cost at 3 billion, reducing from 4.7.
23:24
SPEAKER_00: The key drivers of this,
23:26
SPEAKER_00: the debt book itself in terms of the content,
23:28
SPEAKER_00: And then also the stability of the currency because these debts for
23:33
SPEAKER_00: the longest time has been above 90% in terms of the foreign currency denomination.
23:37
SPEAKER_00: And the reasons for that is quite a bit of it is online debts through government
23:42
SPEAKER_00: from bilateral and DFIs.
23:44
SPEAKER_00: And so that comes in hard currency.
23:46
SPEAKER_00: And then the other bit in the commercial bit that was in foreign currency was debt
23:50
SPEAKER_00: that was taken on between 2014 and 2016.
23:54
SPEAKER_00: It has 12 years and 10 years.
23:57
SPEAKER_00: And at that time,
23:57
SPEAKER_00: there was major investments in the grid,
23:59
SPEAKER_00: quite a number of substitutions and all that.
24:01
SPEAKER_00: When the government,
24:02
SPEAKER_00: the Jubilee government at that time had a certain program of increasing generation
24:06
SPEAKER_00: and there were demand driver projects,
24:08
SPEAKER_00: including Konza and industrial parks across the SGR and all that.
24:14
SPEAKER_00: None of them didn't come and that created some challenges of a capacity in the system.
24:18
SPEAKER_00: And so some of those projects were done by foreign contractors and the funding for
24:23
SPEAKER_00: that was in foreign currency.
24:24
SPEAKER_00: And so that led to the imbalance where we have a debt book that is highly hard currency.
24:29
SPEAKER_00: Now to getting to where we are currently,
24:32
SPEAKER_00: that is changing and we are just about 75 or 76% in terms of the currency
24:39
SPEAKER_00: from 90% hard currency to about 75 or 76% still in hard currency.
24:44
SPEAKER_00: And the reason that that is coming down is because we have debt that we are drawing
24:48
SPEAKER_00: on right now.
24:49
SPEAKER_00: It's in local currency and we are continuing to repay entire set of the debt
24:54
SPEAKER_00: across those in our And so,
24:57
SPEAKER_00: a bit of your question around are we going down on debt or are we going to borrow?
25:02
SPEAKER_00: The reduction that we saw of about 7.9 billion on the debt book,
25:06
SPEAKER_00: there was some drawdown on the green financing from the World Bank.
25:11
SPEAKER_00: Because it's a performance-based facility that is really quite flexible.
25:15
SPEAKER_00: It's based on how you achieve the displacement linked indicators,
25:19
SPEAKER_00: which are really our strategic objectives.
25:20
SPEAKER_00: And then you're able to draw down on that.
25:22
SPEAKER_00: So that gives us flexibility in terms of really prioritizing and investing for
25:27
SPEAKER_00: where there is high impact.
25:29
SPEAKER_00: So that kind of debt, then we are really drawing down even now.
25:33
SPEAKER_00: And we are open to engaging with lenders on that kind of a model
25:38
SPEAKER_00: where it's not project-specific debt.
25:40
SPEAKER_00: And on commercial terms,
25:42
SPEAKER_00: and you find that the project itself might be very important to the gig,
25:46
SPEAKER_00: but might not be able to generate the kind of return that is required to be able
25:49
SPEAKER_00: to service that debt without really affecting the overall financial position of
25:54
SPEAKER_00: the company.
25:55
SPEAKER_00: So we are open to really more debt,
25:58
SPEAKER_00: but then very specific around innovative ways in terms of how we can be able
26:03
SPEAKER_00: to engage in debt that will support the business going forward.
26:07
SPEAKER_01: By the way,
26:07
SPEAKER_01: we hosted the CEO of the National Infrastructure Fund and I think they're looking
26:11
SPEAKER_01: for bankable projects to invest in.
26:13
SPEAKER_01: Is it a good source of funds?
26:15
SPEAKER_01: Because I think there'll be local currency maybe lending towards you.
26:18
SPEAKER_01: Is that something that you're thinking about, maybe borrowing from them?
26:21
SPEAKER_01: Actually,
26:22
SPEAKER_01: there are some major ones for
26:23
SPEAKER_00: us and already there are discussions
26:25
SPEAKER_00: the National Treasury around closing the window for concessional financing
26:29
SPEAKER_00: for commercial entities like KPLRC.
26:32
SPEAKER_00: And so that now points us towards the National Infrastructure Fund.
26:36
SPEAKER_00: And so there have been Discussions around looking at 7% lending or that region and
26:41
SPEAKER_00: the issue of tenor could be much,
26:42
SPEAKER_00: much longer beyond what we are seeing from the commercial banks as such.
26:46
SPEAKER_00: And that would really work for the kind of network investments that we'll be looking at.
26:50
SPEAKER_00: So I think that's a major one,
26:51
SPEAKER_00: especially now when we look at replacing what has been coming through
26:55
SPEAKER_00: the conditional debt.
26:57
SPEAKER_01: So you do have bankable projects for them then?
26:59
SPEAKER_01: Yes, yes, yeah.
27:00
SPEAKER_01: That's all right.
27:01
SPEAKER_01: I think that would be a good day or synergy then, maybe.
27:04
SPEAKER_01: You should do a courtesy call to the CEO now that he's setting up his money
27:08
SPEAKER_01: so they can give you a bit of that.
27:09
SPEAKER_01: CAPEX for the year I think was around $28 billion and I think
27:13
SPEAKER_01: the NIF has $300 billion sitting there.
27:15
SPEAKER_01: So perhaps that can come in terms of 10% of that.
27:18
SPEAKER_01: But take us through the CAPEX,
27:20
SPEAKER_01: how it developed during the year and how you are thinking about CAPEX going forward.
27:24
SPEAKER_00: In terms of CAPEX, there are specific critical priority CAPEX that we invested in.
27:30
SPEAKER_00: And the outcome of that is partly the efficiency improvement that we've seen.
27:34
SPEAKER_00: There are investments like what you mentioned around the Lodwa,
27:38
SPEAKER_00: which are good for not just for Kenya Power, but really for the country as such.
27:43
SPEAKER_00: And so that becomes very important because it speaks to even the tariff pricing itself.
27:48
SPEAKER_01: That's nice.
27:49
SPEAKER_00: So the critical areas that we look at mainly is efficiency of the network.
27:53
SPEAKER_00: And efficiency of the network, there are a number of factors that affect that.
27:57
SPEAKER_00: There are those factors that are demand-side,
28:02
SPEAKER_00: generation-side factors and transmission because we have challenges in
28:05
SPEAKER_00: the transmission network where we have not sufficient transmission capacity
28:09
SPEAKER_00: to certain areas.
28:10
SPEAKER_00: Part of what we import from Uganda would
28:17
SPEAKER_00: And so investment in those areas,
28:20
SPEAKER_00: we have to look at it from a sector perspective and not just
28:23
SPEAKER_00: a Kenya power perspective, because some of the high impact investments are actually
28:31
SPEAKER_00: So, besides that,
28:32
SPEAKER_00: now on the distribution side,
28:34
SPEAKER_00: we have quite a number of major investments and one of them is the reconducting
28:39
SPEAKER_00: of our transmission lines to increase the capacity of those lines to ever quit.
28:44
SPEAKER_00: We have several lines that are actually usually overloaded really at peak
28:48
SPEAKER_00: because they are Dispatching more than the capacity of the line because
28:52
SPEAKER_00: the demand is there, the generation is there, but the line has a lower capacity.
28:57
SPEAKER_00: So what we are doing currently,
28:59
SPEAKER_00: we are conducting with a higher capacity cable,
29:02
SPEAKER_00: still using the same pylons,
29:04
SPEAKER_00: the same infrastructure as such,
29:05
SPEAKER_00: but now the conducting with the higher could be able now to operate more.
29:09
SPEAKER_00: That helps us in two ways.
29:11
SPEAKER_00: One is to be able to get the electricity to where demand is because it gets there
29:16
SPEAKER_00: but isn't sufficient.
29:17
SPEAKER_00: And then the second one is in reducing losses,
29:20
SPEAKER_00: increasing efficiency because the heating of the lines when
29:22
SPEAKER_00: the lines are overloaded,
29:24
SPEAKER_00: I don't have the risk to the degree that the lines usually sometimes triple.
29:28
SPEAKER_00: But as well, the heating of the lines is much higher when it's overloaded.
29:31
SPEAKER_00: And so you lose much more electricity on an overloaded line than on too many loaded lines.
29:35
SPEAKER_00: So that will help us quite a bit on that.
29:38
SPEAKER_00: There are also projects around the distribution master plan.
29:41
SPEAKER_00: This is a plan that is usually done,
29:42
SPEAKER_00: 10-year plan,
29:43
SPEAKER_00: but usually reviewed every two to three years,
29:46
SPEAKER_00: which identifies how demand is growing and the dynamics around that,
29:51
SPEAKER_00: where generation is,
29:52
SPEAKER_00: how demand is growing and what kind of reinforcements or what kind
29:56
SPEAKER_00: of additional investments are required to be able to Ensure
30:00
SPEAKER_00: that we have reliable electricity supply and sufficient release supply to
30:05
SPEAKER_00: where demand has increased.
30:06
SPEAKER_00: And that is what determines where new substitutions are done,
30:09
SPEAKER_00: where transformers are operated or replaced to higher capacity.
30:13
SPEAKER_00: And those are the areas that we have been looking at in the year under review
30:18
SPEAKER_00: and still continue to focus on.
30:21
SPEAKER_00: There is also the aspect of transformer failures.
30:24
SPEAKER_00: Internationally, there is a rate of transformer failures that is about 2%.
30:28
SPEAKER_00: 0.5% is really a general standard out there.
30:33
SPEAKER_00: We've been upwards of 4%,
30:35
SPEAKER_00: mainly because of different dynamics,
30:36
SPEAKER_00: the weather,
30:37
SPEAKER_00: the electricity cord here,
30:39
SPEAKER_00: the kind of the hygiene of the infrastructure,
30:42
SPEAKER_00: the trees, the vegetation, and many, many things that go into that.
30:46
SPEAKER_00: But then as we work on the hygiene around the trace maintenance and all that
30:50
SPEAKER_00: as well,
30:50
SPEAKER_00: and also on the specs of the transformers and all that,
30:53
SPEAKER_00: we've really been working to improve that rate.
30:55
SPEAKER_00: And the rate actually improved, I think it's at 3.6% in the year from upwards of 4% as such.
31:02
SPEAKER_00: So that's one other major factor.
31:05
SPEAKER_00: Because when transformer goes off,
31:07
SPEAKER_00: it's not only the cost of replacing that transformer,
31:09
SPEAKER_00: but also the unserved energy because customers are off supply for longer periods
31:13
SPEAKER_00: of time.
31:14
SPEAKER_00: So the transformers, the big ones, actually take a very long time.
31:18
SPEAKER_00: I think MD mentioned during the press briefing that you can get a transformer
31:21
SPEAKER_00: that requires a year to manufacture to be able to deliver from the time
31:24
SPEAKER_00: when you give out the specs, the drawings.
31:28
SPEAKER_00: So if we can be able to prevent that,
31:34
SPEAKER_00: and we are doing quite a bit of that preventive maintenance
31:37
SPEAKER_00: by really assessing these transformers,
31:39
SPEAKER_00: monitoring them, and currently we are also investing in metering of transformers.
31:44
SPEAKER_00: With smart meters,
31:44
SPEAKER_00: meters that are able to give us more parameters rather than just measuring
31:48
SPEAKER_00: the quantum of electricity through a transformer for energy balance.
31:51
SPEAKER_00: They also give us the heating,
31:53
SPEAKER_00: the level of oil in the transformer,
31:56
SPEAKER_00: quite a number of vitals of the transformer so that we are able to prevent
31:59
SPEAKER_00: the failures by maintaining a good time.
32:02
SPEAKER_01: That's a robust response.
32:03
SPEAKER_01: I want you just to go to the balance sheet a little bit and maybe
32:05
SPEAKER_01: the cash flow immediately after.
32:06
SPEAKER_01: So take us a bit through the balance sheet and specifically think,
32:09
SPEAKER_01: focus on the developments around the accounts receivables there and the cash
32:13
SPEAKER_01: and cash equivalents.
32:14
SPEAKER_01: Year over year,
32:15
SPEAKER_01: tell us a bit about the cash flows and how it went between the cash flow
32:18
SPEAKER_01: from operations, which is slightly down.
32:20
SPEAKER_01: You can take us through that bit for now.
32:22
SPEAKER_00: If you look at the cash flow for operations, we'll go to that first.
32:27
SPEAKER_00: The cash flow for operations is down mainly because of the receivables.
32:33
SPEAKER_00: There is the receivables and the inventory.
32:35
SPEAKER_00: Those are two movements that tied up a bit of cash
32:38
SPEAKER_01: as such.
32:38
SPEAKER_00: And all the receivables,
32:39
SPEAKER_00: I have elaborated on that around some of the challenges that we are having.
32:43
SPEAKER_00: On the inventory side, the increase.
32:46
SPEAKER_00: Actually, unfortunately, when in the public sector, there are usually certain...
32:49
SPEAKER_00: Interventions or directives that come and you cannot be commercially agile at times.
32:54
SPEAKER_00: So like there's the issue of the electronic government procurement,
32:57
SPEAKER_00: the directive that all government entities would need to onboard on the EGP.
33:04
SPEAKER_00: And the uniqueness of QQLC with over 100,000 different items that we usually procure
33:10
SPEAKER_00: for the network.
33:11
SPEAKER_00: There have been challenges even acknowledged by the team leading that as treasury
33:15
SPEAKER_00: as such that the QQLC would require a bit more in terms of to be able to onboard.
33:19
SPEAKER_00: But once there is a complete freeze that you cannot procure until You are onboarded
33:25
SPEAKER_00: and then you have to get an exemption.
33:26
SPEAKER_00: The exemption takes a long time.
33:28
SPEAKER_00: So we got an exemption, I think about November.
33:32
SPEAKER_00: And so we did quite a bit of procurements and the lead time for that as such,
33:35
SPEAKER_00: and also to actually be more secure.
33:38
SPEAKER_00: We actually procured a little bit more in terms of transformers,
33:41
SPEAKER_00: monitors and all that,
33:42
SPEAKER_00: so that by the time the extension expires,
33:44
SPEAKER_00: at least you still have, even as we try to comply.
33:47
SPEAKER_00: We still have quite a bit to move.
33:48
SPEAKER_00: And so, based on that now, even our inventory planning actually shifted quite a bit.
33:53
SPEAKER_00: And so, as at the end of the year, we have a bit locked up in inventory.
33:58
SPEAKER_00: It's inventory that is moving and really supporting.
34:00
SPEAKER_00: Because even right now that the EDP, it is still very active.
34:04
SPEAKER_00: We are unable to do any procurements at the moment,
34:06
SPEAKER_00: but the materials that we procured during the exemption is what is helping us
34:11
SPEAKER_00: to actually run the grid.
34:13
SPEAKER_00: So other than that,
34:15
SPEAKER_00: from the sales perspective and all the way into the cash that is generated
34:19
SPEAKER_00: from operations, those are the two things that actually affected that.
34:24
SPEAKER_00: But also on our cash flow perspective, there are a number of things.
34:28
SPEAKER_00: One is the taxes.
34:29
SPEAKER_00: With the performance having improved over the last two years,
34:32
SPEAKER_00: and this is the third year, we also have quite some significant tax payments.
34:36
SPEAKER_00: I think upwards of about $5 billion.
34:38
SPEAKER_00: Previously, there were no tax payments.
34:40
SPEAKER_00: That is corporation tax.
34:42
SPEAKER_00: The capital allowances under the Income Tax Act were actually offsetting any taxes
34:47
SPEAKER_00: that would be paid.
34:47
SPEAKER_00: But because of the improved performance and also the changes on the Income Tax Act
34:51
SPEAKER_00: as such,
34:52
SPEAKER_00: in terms of the carry forward of those capital allowances,
34:54
SPEAKER_00: now we are paying taxes quite significantly.
34:56
SPEAKER_00: And so that goes into some crash outflows.
34:59
SPEAKER_00: There's the aspect of the dividend, the dividend payment and the end review.
35:02
SPEAKER_00: I think there was a dividend payment other than what we had declared in 24,
35:07
SPEAKER_00: June 24 and the interim for June 25.
35:12
SPEAKER_00: There was a dividend for government that we had not paid in the last declaration in 2016-17.
35:17
SPEAKER_00: There was about 800 million there.
35:20
SPEAKER_00: So that is part of what we were able to pay in the year.
35:23
SPEAKER_00: So that also speaks to the movement in cash.
35:26
SPEAKER_00: The rest of the assets, the receivables, the increase is mainly to do with the electricity debt.
35:34
SPEAKER_00: But also there is the amount that government owes Kenya power now about on
35:38
SPEAKER_00: the areas deficit that is building up over time.
35:41
SPEAKER_00: This year, the buildup is not as much.
35:43
SPEAKER_00: It's about 700 million or thereabout.
35:47
SPEAKER_00: But on an annual basis, the buildup has been about 6.5 billion.
35:50
SPEAKER_00: So about 34 billion as such.
35:53
SPEAKER_00: And that's what makes those balance sheet numbers.
35:56
SPEAKER_01: A couple of questions that have come in.
35:57
SPEAKER_01: Why not manufacture or assemble transformers locally?
36:00
SPEAKER_01: That's one question.
36:01
SPEAKER_01: And also clarify whether in terms of government debt,
36:05
SPEAKER_01: only $3 or $4 billion is past due and also clarify the percentage
36:08
SPEAKER_01: that has been provided for when it relates to In terms of the manufacture
36:13
SPEAKER_01: of transformers, that would be a good thing.
36:15
SPEAKER_01: We actually have a workshop, a very
36:40
SPEAKER_00: Robust workshop in terms of repair of transformers and quite a significant number of
36:45
SPEAKER_00: the transformers that become faulty out there are actually taken to the workshop
36:49
SPEAKER_00: and repaired.
36:50
SPEAKER_00: And the main workshop actually is in Nairobi,
36:52
SPEAKER_00: but we have smaller workshops across several of our regions.
36:56
SPEAKER_00: And so there is capacity to repair the transformers as such and all that.
37:00
SPEAKER_00: But now in terms of the We've had discussions around the issue of manufacture.
37:06
SPEAKER_00: And so to make that efficient,
37:08
SPEAKER_00: then you'd manufacture like for the region and for other customers.
37:12
SPEAKER_00: But then being a government entity as well,
37:14
SPEAKER_00: then decisions around setting up an entity that would not be struggled up with
37:20
SPEAKER_00: the public procurement act and these things of EGB and everything.
37:24
SPEAKER_00: You still run into the same challenges that we have as such to be able to Even
37:29
SPEAKER_00: if you want to run that.
37:30
SPEAKER_00: And so as it is currently, we procure mainly from manufacturers of transformers.
37:35
SPEAKER_00: And we have some of the international manufacturers that have set up assembly
37:38
SPEAKER_00: and manufacturing plants locally as such, but not capability itself manufacturing.
37:44
SPEAKER_00: Now, in terms of the government debt and the provisions,
37:47
SPEAKER_00: the government debt,
37:49
SPEAKER_00: I gave a ballpark figure around about 7 billion in terms of the moving debt
37:53
SPEAKER_00: that we usually have and 3 to 4 billion really being the one that is really sticky
37:58
SPEAKER_00: and hardcore.
37:59
SPEAKER_00: The number changes because,
38:00
SPEAKER_00: you know,
38:00
SPEAKER_00: for a monthly bill,
38:01
SPEAKER_00: if that runs into 90 days, then that is considered a bill that is really hardcore.
38:07
SPEAKER_00: So the number keeps changing as such.
38:08
SPEAKER_00: So sometimes touching 5 billion and the total debt touching 8 billion and all
38:13
SPEAKER_00: that depending on where we are at the month and the time
38:16
SPEAKER_00: when there are extra releases across to various government ministries or departments
38:21
SPEAKER_00: as such.
38:22
SPEAKER_00: And on the provisioning of that, we go by the IFRS 9 on the provisioning.
38:29
SPEAKER_00: And what happens here is that we have a model,
38:32
SPEAKER_00: a provisioning model that takes into account macroeconomic factors,
38:36
SPEAKER_00: takes into account customer payment behavior,
38:39
SPEAKER_00: takes into account now if they are government accounts,
38:43
SPEAKER_00: because the loss rate for government accounts is lower,
38:46
SPEAKER_00: but it's actually developed through that model to give that loss rate
38:50
SPEAKER_00: for provisions.
38:51
SPEAKER_00: It will not be the same provisioning rates that you do
38:55
SPEAKER_00: On
39:01
SPEAKER_00: the negative working capital, it's been a long time coming, actually 10 years.
39:06
SPEAKER_00: And so the question, the specific question is, is it a passing cloud?
39:10
SPEAKER_00: Is it that you've just surfaced out of the water and you'd be actually getting back
39:16
SPEAKER_00: in a year or two?
39:17
SPEAKER_00: There has been a lot going on to be able to get to this level.
39:20
SPEAKER_00: Very quickly.
39:21
SPEAKER_00: I'm sorry, I'm sorry, I'm sorry, I'm sorry.
39:40
SPEAKER_00: Because in the cash generation from operations of about 20,
39:43
SPEAKER_00: 24 billion then about a few years back,
39:45
SPEAKER_00: debt service was actually almost 80 or 90% of that.
39:49
SPEAKER_00: And so you'd find that that eats up quite a bit,
39:53
SPEAKER_00: the liquidity and even funds for investment and all that.
39:57
SPEAKER_00: So we've been able to manage that and currently the debt service average
40:01
SPEAKER_00: that we are looking at this year is about 10 billion in the year.
40:05
SPEAKER_00: And that is manageable and we expect that to really be able to maintain
40:09
SPEAKER_00: a very good working capital.
40:11
SPEAKER_00: There is also the overdue applications to electricity generators and other suppliers.
40:17
SPEAKER_00: That was quite a big problem during this entire period that we've been having
40:21
SPEAKER_00: the negative working capital.
40:23
SPEAKER_00: And you actually have noticed that interest on left payment charges You are above
40:29
SPEAKER_00: a billion three or four years ago.
40:31
SPEAKER_00: That reduced to 700 million to 500, 300.
40:34
SPEAKER_00: And now we're at about 200 million on that.
40:38
SPEAKER_00: As we head to the constructed periods,
40:41
SPEAKER_00: we've arrived to constructed periods for some of the generators,
40:43
SPEAKER_00: but then there are those that we are on that journey.
40:45
SPEAKER_00: And we expect that with a bit of the fricast laws that come from the debts
40:49
SPEAKER_00: that matured in June,
40:51
SPEAKER_00: there's a significant debt that was a 10-year USD $500 million that was onboarded
40:56
SPEAKER_00: in June 2016, that matured in June 2026.
41:01
SPEAKER_00: And so we expect that to really boost in terms of being able to maintain
41:05
SPEAKER_00: the positive working capital going forward.
41:08
SPEAKER_01: I see that you had some key performance indicators that you track very often.
41:12
SPEAKER_01: I think you mentioned some of them.
41:13
SPEAKER_01: Current ratio is one of them.
41:14
SPEAKER_01: It improved during the year.
41:15
SPEAKER_01: If you look at the debt to equity ratio, it's improved also.
41:18
SPEAKER_01: There are key metrics that I think you would want to trash out
41:21
SPEAKER_01: and maybe tell our listeners how you performed against those key metrics
41:24
SPEAKER_01: that you track very closely during the year.
41:26
SPEAKER_00: Now, specifically current ratio,
41:28
SPEAKER_00: what we previously had integers on some of the debts,
41:31
SPEAKER_00: the provenance,
41:33
SPEAKER_00: Around the current ratio,
41:35
SPEAKER_00: debt service ratio,
41:37
SPEAKER_00: average collection days,
41:39
SPEAKER_00: and really over the period we've seen quite some significant improvement in all
41:43
SPEAKER_00: the ratios actually,
41:44
SPEAKER_00: except now the collection days that seems to be lagging because of the challenges
41:48
SPEAKER_00: that we have in some of the customer segments collecting.
41:51
SPEAKER_00: But we really expect once we are able to deal with that challenge,
41:55
SPEAKER_00: then we should be in a much,
41:56
SPEAKER_00: much better place in terms of the stronger balance sheet.
41:59
SPEAKER_00: The specific ratios around debt to equity.
42:02
SPEAKER_00: And because debt to equity, ordinarily, in the industry, we'd be looking at 75-25.
42:06
SPEAKER_00: We're much lower than that.
42:08
SPEAKER_00: And the reason being that there is deliberate focus to really reduce debt,
42:13
SPEAKER_00: especially foreign currency debt, because of the imbalance.
42:16
SPEAKER_00: Our revenue is entirely cancelling.
42:19
SPEAKER_00: When you have obligations, the debt book being upwards of 70%.
42:23
SPEAKER_00: Foreign currency and the cost of sales being 65% foreign currency,
42:28
SPEAKER_00: then that becomes a significant exposure.
42:30
SPEAKER_00: And we've seen that we felt that heat,
42:32
SPEAKER_00: especially when there's an availability of forex and when
42:35
SPEAKER_00: the rates fluctuate quite significantly or the margins, the spreads are quite low.
42:40
SPEAKER_00: Huge, and then we really get the hit.
42:42
SPEAKER_00: And so we're okay going much, much lower on the debt to equity ratio.
42:46
SPEAKER_00: Also, the equity has been increasing based on the performance, really strong performance.
42:50
SPEAKER_00: Equity like this year increased by about 20% to $131 billion.
42:55
SPEAKER_00: And so rather than just looking at where the industry is and all that,
42:59
SPEAKER_00: there are certain specific unique factors for the entity that actually place us
43:04
SPEAKER_00: where we are and where we are looking to go.
43:06
SPEAKER_00: Thank you.
43:07
SPEAKER_01: I think now it's time to maybe look at capital allocation in terms of dividends.
43:12
SPEAKER_01: You issued an interim dividend.
43:13
SPEAKER_01: How was that?
43:14
SPEAKER_01: What was he thinking around that?
43:16
SPEAKER_01: The final dividends fell at around 1.2.
43:18
SPEAKER_01: There's a dividend yield around 7%.
43:20
SPEAKER_01: The share price has been pretty significantly up the past year.
43:22
SPEAKER_01: Yeah, also around 60%, I think, this year, last I checked.
43:25
SPEAKER_01: Could you take us through your thinking around your capital allocation,
43:28
SPEAKER_01: how you decide between retaining some and dishing out some rewards to
43:33
SPEAKER_01: the investors who've worked with you during the tough period,
43:35
SPEAKER_01: but now they're dripping some of the rewards.
43:37
SPEAKER_01: And I think some of them are actually in the audience who have been with you for a long time.
43:41
SPEAKER_01: And we know one who banks the table a lot on Kenya Power and how it's a value stock
43:46
SPEAKER_01: at the end of the day.
43:47
SPEAKER_01: Could you speak to them about your thinking around how you're rewarding them with dividends?
43:51
SPEAKER_00: In terms of capital allocation,
43:53
SPEAKER_00: we have a dividend policy that actually outlines the specific tenets that have
43:57
SPEAKER_00: to be considered when making dividend decisions.
44:00
SPEAKER_00: And the key factors here are profitability.
44:03
SPEAKER_00: The company has to have made profits.
44:05
SPEAKER_00: They're distributable to the shareholders.
44:08
SPEAKER_00: The other one is around the investment requirements in terms of
44:11
SPEAKER_00: the priority projects that would actually sustain and grow the top line into
44:16
SPEAKER_00: the future.
44:17
SPEAKER_00: And so those are very key that we would really have to have a retention rate
44:22
SPEAKER_00: that would support that.
44:24
SPEAKER_00: And then beyond that,
44:25
SPEAKER_00: we look at the cash of an ability because really we have to have the cash to pay
44:29
SPEAKER_00: the dividend and not go borrowing to be able to pay And so in arriving at
44:35
SPEAKER_00: the dividend payment,
44:37
SPEAKER_00: we started paying dividend after the dividend drought in June 2024.
44:41
SPEAKER_00: And so June 2024, we were still in the negative working capital.
44:44
SPEAKER_00: We still had quite some significant outstanding overdue payables to our suppliers
44:50
SPEAKER_00: of electricity and a bit of other suppliers.
44:53
SPEAKER_00: But then the realization that the shareholder had been.
44:56
SPEAKER_00: With us all along,
44:56
SPEAKER_00: without a dividend that entire period,
44:59
SPEAKER_00: really the management and board were of the view that whatever small we start with,
45:04
SPEAKER_00: at least we start paying dividend because the all indications at that time were
45:08
SPEAKER_00: that we're actually getting out of the financial distress.
45:12
SPEAKER_00: So we started with that 70 cent dividend in 2024.
45:15
SPEAKER_00: The improved performance in 2025,
45:17
SPEAKER_00: we increased that dividend by 30% to one shilling and still considering
45:22
SPEAKER_00: the specific,
45:24
SPEAKER_00: the tenets of the dividend policy around really being able to pay that.
45:28
SPEAKER_00: And one of the other tenets is sustainability of that dividend.
45:31
SPEAKER_00: This year,
45:32
SPEAKER_00: the payment of an interim dividend was actually really informed quite a bit on
45:39
SPEAKER_00: a half year performance as such,
45:41
SPEAKER_00: but then also In terms of the keeping really with the shareholders expectation
45:46
SPEAKER_00: as we move forward.
45:47
SPEAKER_00: So when it came to the end of the year, there's quite a bit of discussion here.
45:51
SPEAKER_00: At management and at board level around the dividend,
45:54
SPEAKER_00: the advantage is the number of shares the company has.
45:57
SPEAKER_00: When you compare with some of the listed,
45:59
SPEAKER_00: big listed entities,
46:00
SPEAKER_00: they have upwards of 5 billion and up to even 40 billion shares.
46:04
SPEAKER_00: We are just slightly below 2 billion shares.
46:08
SPEAKER_00: Whenever you look at the market capitalization,
46:11
SPEAKER_00: at about 22-23 shillings per share, that would be $2 billion.
46:17
SPEAKER_00: That would be around less than $45 billion value of the company with an onset base
46:23
SPEAKER_00: that is above $400.
46:25
SPEAKER_00: That's right.
46:26
SPEAKER_00: They're still quite differently undervalued.
46:29
SPEAKER_00: That undervaluation has been because of the many factors around the performance of
46:34
SPEAKER_00: the company and the things that are happening in the company,
46:37
SPEAKER_00: the reforms and all that on almost a continuous basis.
46:41
SPEAKER_00: And so the clear fundamentals of the business now come out when all that settles.
46:46
SPEAKER_00: For example, the issue of Forex.
46:48
SPEAKER_00: Fluctuation of forests would actually hit capitals quite significantly
46:51
SPEAKER_00: that you would not even know the real underlying performance of the company.
46:55
SPEAKER_00: But with the stability of the effects,
46:57
SPEAKER_00: then you are able to see the business fundamentals as such.
47:01
SPEAKER_00: And looking into the future,
47:02
SPEAKER_00: maybe just one comment from that,
47:03
SPEAKER_00: we're going into the future on the dividend to the shareholders.
47:06
SPEAKER_00: You see, they are in anger or shareholders.
47:08
SPEAKER_00: The key thing here is just to demonstrate that from a leadership perspective of
47:12
SPEAKER_00: the organization, the shareholder value is top of mind.
47:15
SPEAKER_00: That's right.
47:15
SPEAKER_00: Even as we sustain the business,
47:17
SPEAKER_00: reinvest within the business as such, there is always the voice of the shareholder.
47:21
SPEAKER_00: There's a governance restructure that was done where we brought on board
47:25
SPEAKER_00: the independent directors that are actually collected by the minority shareholders.
47:30
SPEAKER_00: And that has really shifted quite a bit because it's no longer that this is what
47:35
SPEAKER_00: the majority shareholder wants and it moves.
47:38
SPEAKER_00: There are different voices actually in that body and actually the voice
47:42
SPEAKER_00: of vision around how we move forward.
47:44
SPEAKER_00: Thank you.
47:45
SPEAKER_01: Just want to ask you now more like simple questions that you can respond to that you received.
47:49
SPEAKER_01: So one is someone noted that under network management,
47:52
SPEAKER_01: there is a bit of traveling expenses, which is significantly up.
47:55
SPEAKER_01: I think around up from 8.6 million to 303 million.
48:00
SPEAKER_01: So to explain that quick one.
48:02
SPEAKER_00: Network management is the nerve center of the business.
48:05
SPEAKER_00: And so traveling for network management is actually part of the business.
48:09
SPEAKER_00: We have a network that spans 344,000 kilometers across most parts of the country
48:16
SPEAKER_00: and including even the And so on a continuous basis,
48:21
SPEAKER_00: you cannot have staff or resources across every corner to actually be able
48:26
SPEAKER_00: to be maintaining that network on a continuous basis.
48:28
SPEAKER_00: That becomes really quite bulky because you'd have to have staff everywhere.
48:32
SPEAKER_00: And so staff are actually stationed in the regions, in the counties.
48:37
SPEAKER_00: And so from the county now, they would go to the Faflang area.
48:40
SPEAKER_00: Then that comes with some traveling resources.
48:43
SPEAKER_00: If you look at fuel and even vehicle mileage that the company vehicles run and all
48:47
SPEAKER_00: that, it would speak the same story.
48:49
SPEAKER_00: There's a bit of trouble that is related to the factory acceptance testing.
48:54
SPEAKER_00: Every country has its own grid code and the standards of the electricity equipment
48:59
SPEAKER_00: in that country.
49:00
SPEAKER_00: And so when we are manufacturing the transformers and other complex equipment,
49:05
SPEAKER_00: There's also the requirement actually for certain specific stress tests
49:11
SPEAKER_00: and certain faculty tests that are actually undertaken.
49:14
SPEAKER_00: And a bit of that also requires traveling as part of that.
49:18
SPEAKER_00: So that is what the advice would actually be in the amount of traveling bit.
49:22
SPEAKER_00: There are also some realignments in the organization where certain Roles
49:26
SPEAKER_00: that would previously be under commercial and all that would shift to network
49:30
SPEAKER_00: to be able to really optimize and increase the efficacy of that.
49:36
SPEAKER_00: And that would see the shifts even in some of the stuff that's now moving in that direction.
49:41
SPEAKER_01: With them losses, I think they were slightly down during the year.
49:44
SPEAKER_01: Could you tell us a bit about what initiatives led to that?
49:47
SPEAKER_01: And then also,
49:47
SPEAKER_01: I think someone is asking,
49:49
SPEAKER_01: despite that improvement,
49:50
SPEAKER_01: the losses are still pretty high at 18% compared to best practice.
49:54
SPEAKER_01: Is there anything you're doing to accelerate that efficiency side?
49:57
SPEAKER_00: Now the scheme of losses when you compare with best practice,
50:00
SPEAKER_00: then the comparative is not very aligned as such.
50:04
SPEAKER_00: If you look at where the best practice is,
50:07
SPEAKER_00: the network design there is predominantly high voltage network,
50:10
SPEAKER_00: where you now have system transformers and then you supply the customer.
50:14
SPEAKER_00: By design,
50:15
SPEAKER_00: our grid is low voltage,
50:17
SPEAKER_00: quite unique and very unique actually when you look at even
50:20
SPEAKER_00: the statistics worldwide around the percentage of low voltage.
50:24
SPEAKER_00: And so that speaks a lot because
50:43
SPEAKER_00: The lower the voltage on a particular network, the higher the losses.
50:48
SPEAKER_00: So when you increase the voltage, the capacity of the line, then you actually reduce losses.
50:55
SPEAKER_00: So as we continue expanding quite significantly at low voltage,
50:59
SPEAKER_00: then inevitably we are expanding the losses as well.
51:02
SPEAKER_00: But today's question around improving the efficiency.
51:06
SPEAKER_00: It's an important question here and what I might mention that
51:09
SPEAKER_00: the last time we had efficiencies of these below 20% was about 10 years ago and
51:15
SPEAKER_00: so there are still specific initiatives.
51:17
SPEAKER_00: One here is the issue of the maintenance and the monitoring of transformers and all that.
51:22
SPEAKER_00: We have 87,000 transformers and some of them are usually operating at low capacity,
51:28
SPEAKER_00: some of them are overloaded and it's because of We have the dynamics.
51:30
SPEAKER_00: If you connect a school here and there are no other transformers,
51:33
SPEAKER_00: that transformer itself uses more power than it is supplying the school and
51:36
SPEAKER_00: that becomes part of the losses as such.
51:38
SPEAKER_00: They are doing transformer metering to be able now to identify those specific losses
51:42
SPEAKER_00: and be able to optimize in terms of the positioning and the rating of
51:46
SPEAKER_00: the transformers.
51:47
SPEAKER_00: There is the specific initiatives around the intervention inspections where I talked
51:51
SPEAKER_00: about the issue of faulty meters,
51:53
SPEAKER_00: illegal connections and all that and we've done quite a lot in that particular area
51:57
SPEAKER_00: and that Brought in quite some significant amounts of consumed units
52:01
SPEAKER_00: that had not been built, and so that increased the units that have been consumed.
52:07
SPEAKER_00: As such,
52:08
SPEAKER_00: that bit might not occur on a continuous basis because if a customer,
52:12
SPEAKER_00: specific customer had bypassed the meter and now they are back on supply,
52:16
SPEAKER_00: you'd expect their ordinary consumption now to continue forward.
52:19
SPEAKER_00: So the delta would just be the ordinary consumption and not really the back below
52:23
SPEAKER_00: the six month period or whatever period they had been found not to have been billed
52:28
SPEAKER_00: as such.
52:28
SPEAKER_00: I hope our respondents.
52:30
SPEAKER_01: Yeah, I think you've robustly responded.
52:32
SPEAKER_01: Quick one on solar energy.
52:33
SPEAKER_01: Are you losing out to that or is that part of your portfolio
52:36
SPEAKER_01: that you're also working with customers who are establishing solar energy plants?
52:40
SPEAKER_01: Is that lost revenue, so to speak, from your end and how is that developing during the year?
52:45
SPEAKER_01: And then secondly,
52:45
SPEAKER_01: when you look at other people moving into different parts of the supply chain,
52:49
SPEAKER_01: some of them may want to be using your network to supply electricity at the end of
52:53
SPEAKER_01: the day.
52:53
SPEAKER_01: How are you thinking around that in terms of extra revenue, in terms of that competition also?
52:58
SPEAKER_00: On solar,
52:58
SPEAKER_00: of course,
52:59
SPEAKER_00: there's the grid defection where we've seen even large industrials do solar
53:04
SPEAKER_00: and their consumption has actually gone down quite a bit as such.
53:08
SPEAKER_00: But then given the intermittency of solar,
53:10
SPEAKER_00: the sensitive processes are still on the grid, mainly on solar.
53:16
SPEAKER_00: So we find that even with that,
53:19
SPEAKER_00: the shift where we are seeing customers increasingly installing solar,
53:23
SPEAKER_00: the effect or the impact is different across different customer categories.
53:27
SPEAKER_00: And we find that early when the weather is not very good,
53:30
SPEAKER_00: like we saw in June and July, and we see such significant increase in demand.
53:35
SPEAKER_00: Even during the day, because the weather is cold, there's a cloud cover and all that.
53:39
SPEAKER_00: So they are still tied to the grid,
53:41
SPEAKER_00: taking up a kind of units or consumptions that they would take up previously.
53:46
SPEAKER_00: But then they are still tied to the grid
53:47
SPEAKER_00: and they still partly consume certain specific categories where one will connect
53:52
SPEAKER_00: and don't.
53:53
SPEAKER_00: The challenge with here with solar mainly is those who've gone it
53:56
SPEAKER_00: and they would want now to sell back to the grid as such.
54:00
SPEAKER_00: Now there are certain technical challenges here
54:03
SPEAKER_00: and even safety challenges were feeding into the grid now from
54:07
SPEAKER_00: the opposite direction.
54:09
SPEAKER_00: Even the equipment that we have in the grid was not really designed.
54:13
SPEAKER_00: For that kind of supply as such.
54:15
SPEAKER_00: So there's many things happening around the solar and the computer generation space as such.
54:21
SPEAKER_00: But in overall,
54:22
SPEAKER_00: even with that, we've seen the units that are consumed have gone up a significantly.
54:27
SPEAKER_00: There is also the demand curve where those who are on solar.
54:30
SPEAKER_00: By 6.30 or 7,
54:32
SPEAKER_00: when we are having the peak demand,
54:34
SPEAKER_00: that's when also they are coming back to the date as such,
54:36
SPEAKER_00: because now solar is not available.
54:38
SPEAKER_00: So you still find that at that time we have quite insignificant demand.
54:42
SPEAKER_00: We've seen peak demand increasing actually almost on a monthly basis as such,
54:46
SPEAKER_00: even giving now to the overall demand that we've seen.
54:50
SPEAKER_00: Now, in terms of the supply chain,
54:53
SPEAKER_00: new entrance in the chain,
54:55
SPEAKER_00: but I think we started off with this around the specific issue of some of
54:59
SPEAKER_00: the customers buying from generation directly and all that.
55:02
SPEAKER_00: Yes, the liberalisation has quite significant impacts across and as key PLC as well.
55:08
SPEAKER_00: We look at that and we evolve with it as it goes.
55:12
SPEAKER_00: There is the bit where our infrastructure would actually be used at a stage
55:16
SPEAKER_00: to be able to supply customers from a generator to a consumer
55:21
SPEAKER_00: who has directly constructed the generator to supply.
55:24
SPEAKER_00: And so we'd expect that there will be a willing arrangement there
55:26
SPEAKER_00: that would give KPIs some revenues.
55:29
SPEAKER_00: So leveraging on the network,
55:30
SPEAKER_00: I think there's still quite a bit that we are able to do given with that change
55:35
SPEAKER_00: as such.
55:37
SPEAKER_00: Existing contracts around the generation that is already really committed to KPLC as such.
55:42
SPEAKER_00: So most of these are coming with a new generation or additional generation
55:46
SPEAKER_00: that they have that they'll be able to dedicate it to a specific customer.
55:51
SPEAKER_01: We've exhausted a lot of the questions.
55:52
SPEAKER_01: I'll give you the chance now to reflect on the year and just tell us a bit
55:56
SPEAKER_01: about your priorities for the coming year.
55:58
SPEAKER_01: You can recap some of the results and the key numbers that you want investors to keep in mind.
56:02
SPEAKER_01: And perhaps going forward,
56:03
SPEAKER_01: they should track alongside you as you also continue leading the organization.
56:07
SPEAKER_00: In going forward,
56:08
SPEAKER_00: where we see quite a bit of opportunity as a business internally is the area
56:13
SPEAKER_00: that we've had challenges in around the cultures,
56:16
SPEAKER_00: to the extent that we've had some provisions around that.
56:18
SPEAKER_00: And there are very,
56:19
SPEAKER_00: very well laid out strategies that the management we are working on to be able
56:24
SPEAKER_00: to ramp up The collections as such,
56:27
SPEAKER_00: that will give us some cash flows and as well some write back
56:30
SPEAKER_00: of these provisions according to the standard.
56:32
SPEAKER_00: Besides that,
56:33
SPEAKER_00: the specific focus areas around the supply reliability,
56:38
SPEAKER_00: where we have a stable supply of electricity,
56:41
SPEAKER_00: and that comes with the hygiene factors of the trace maintenance.
56:43
SPEAKER_00: There is the aspect of the linear coming in and all that.
56:47
SPEAKER_00: So on the operation side of the business, there is full total preparations.
56:51
SPEAKER_00: For that, the outcry around some trees being cut and all that.
56:55
SPEAKER_00: Trees along the way,
56:56
SPEAKER_00: the whelive trends really become the biggest risk in terms of the faults that we see
57:01
SPEAKER_00: and the blackouts that we see.
57:02
SPEAKER_00: Once those are removed,
57:03
SPEAKER_00: then we have stable supply and we are able to have more opportunities to sell
57:07
SPEAKER_00: when customers are actually connected.
57:09
SPEAKER_00: The bigger strength that we have now is a much stronger balance sheet,
57:12
SPEAKER_00: not just the working capital as such,
57:14
SPEAKER_00: but even when you look at the date book and we expect to continue leveraging on
57:18
SPEAKER_00: that.
57:19
SPEAKER_00: And the other advantage is right now our funding program under the green financing
57:23
SPEAKER_00: that is still passing for the next two years up to 2028 still have a bit
57:28
SPEAKER_00: of scope there.
57:28
SPEAKER_00: It was a $400 million facility.
57:31
SPEAKER_00: And so we expect that that funding would be really quite sufficient
57:36
SPEAKER_00: to cover our priority investments.
57:38
SPEAKER_00: We have a bigger list of requirements for investment and
57:42
SPEAKER_00: the appropriate time we'll be seeing if we I can look
57:45
SPEAKER_00: at wider financing arrangements,
57:48
SPEAKER_00: including the capital markets as such when everything is ripe for that.
57:52
SPEAKER_00: So I think for the investors,
57:53
SPEAKER_00: I think it's just to assure that despite the many moving parts in terms of
57:57
SPEAKER_00: the dynamics,
57:58
SPEAKER_00: the regulations,
57:59
SPEAKER_00: the tariff issues and all that,
58:01
SPEAKER_00: we are committed in terms of ensuring that we sustain the good performance
58:04
SPEAKER_00: and we continue to deliver value to the shareholders.
58:07
SPEAKER_00: Thank you.
58:07
SPEAKER_01: Thank you for your time today and helping us engage the FY26 results on short notice also.
58:12
SPEAKER_01: We are grateful for your time and we'll send you a few more questions
58:15
SPEAKER_01: that we perhaps may not have covered.
58:16
SPEAKER_01: So if any of our listeners has any questions,
58:18
SPEAKER_01: you can send them to hello at mwangocapital.com and
58:21
SPEAKER_01: then we'll definitely compile them and send them to the Investor Relations and CFO.
58:26
SPEAKER_01: So Steve, thank you so much for your time and have a lovely weekend and Friday evening.
58:30
SPEAKER_01: And I hope to see you again soon to discuss results.
58:32
SPEAKER_01: I think we should have the CEO soon to help us unpack the infrastructure side of
58:36
SPEAKER_01: the business, I think at some point in the near term.
58:38
SPEAKER_01: But for now, thank you so much for joining us.
58:40
SPEAKER_00: Thanks.
58:41
SPEAKER_00: Thanks for having me.
58:42
SPEAKER_00: Thank you very much.
58:43
SPEAKER_00: Good evening.