Letter from the Chairman
of KEGOC’s Management
I am pleased to present to you the Annual Report of KEGOC, which demonstrates the progress of the company in achieving the strategic goals set by the Board of Directors, ensuring the reliable operation of the UPS of Kazakhstan, sustainable development, stable financial standing of the company, and consistent cash flows to our shareholders and our development projects.
This Report includes the information on our sustainable development performance in economic, environmental, and social areas in accordance with GRI standards. It shows our progress in implementing the Sustainable Development Goals and in commitment to the principles of the UN Global Compact.
KEGOC’s customers include the power generators, power transmission entities, power suppliers and electric power consumers. The total number of service provision and electricity purchase contracts that either remain in effect from 2018 or concluded in 2019 was 797.
The electricity transmission in 2019 amounted to 43.97 million kWh. The amount of technical dispatching of electricity supply and consumption in the grid reached 97.06 kWh. The amount of electricity generation and consumption balancing services in 2019 was 188.77 billion kWh.
The reporting period was also noteworthy for the reduction in our cap tariffs for a number of services effective since 1 January 2019 which was required by the instructions of the First President of the Republic of Kazakhstan to reduce electricity tariffs as a part of the effort to support the population, small and medium-sized businesses. Thus, the transmission tariff was reduced from 2.823 to 2.496 KZT / kWh, the technical dispatching tariff was reduced from 0.306 to 0.237 KZT / kWh, the balancing tariff was reduced from 0.098 to 0.088 KZT / kWh.
In the reporting year we completed Pavlodar Electricity Transmission Rehabilitation Project and Construction of 220 kV Tulkubas-Burnoye OHL, as part of Kazakhstan Electricity Transmission Rehabilitation Project, Phase II. Also, pursuant to Kazakhstan President Decree on the concept master plan for the development of the city of Turkestan as a cultural and spiritual centre of the Turkic world, the company started the implementation of the Turkestan External Power Supply Reinforcement Project that plans to construct the 220 kV Ortalyk substation and supporting electric power facilities. The objective of this project, like the two large capital projects implemented in other regions of the country, is to ensure reliability, cover the expectedly growing electricity demand and create conditions for future development of the country regions.
The company has shown strong financial performance: EBITDA in 2019 amounted to KZT 88.5 billion, which is 14.8% higher than expected; the net income at the end of the year was at KZT 40.7 billion, which is almost 50% higher than planned value; the ROACE reached 7.47% in 2019, and the value of net assets was KZT 422.2 billion. All key financial indicators of the company were stably higher than in 2018.
The OHS matters are the absolute priority of the company and they are constantly supervised. During the reporting period there were no accidents at work in the company, which is the result of successful systematic effort of our personnel in this area.
We are proud of that the staff of KEGOC is composed of highly qualified specialists, professionals, who can deliver any ambitious and technically complex project. This is where all our success come from. In 2019, according to an independent study, KEGOC’s social stability index was 90%. This is the best performance among all portfolio companies of Samruk-Kazyna JSC. The personnel engagement index is in the green zone at 74%.
Our repair campaign was carried out successfully and in accordance with the schedule. In terms of the reliability indicators: SML (System Minutes Lost) and WWP (Work Without Problems) we are on a par with the foreign system operators.
Another priority of the company is the implementation of the Business Transformation Programme. In 2019 the company started using category procurement management for its operations, and completed the following projects: billing system for financial settlement with consumers; target IT management model to increase the availability, quality and speed of delivery of the IT services; and the target model of information security necessary for expanding the Information Security Management System to all information systems of the Company.
In the upcoming 2020 the company also plans to fully adhere to the principles of sustainable development and complete all planned investment projects and planned events. I believe that this will support our corporate image and reflect our commitment to achievement of our goals, enhancement of our risk management, and, in general, to increasing the value of the company through long-term and positive changes.