KPLC is a limited liability company which was incorporated in 1922 as the East African Power & Lighting Company Limited after the merger of two private utilities in Nairobi and Mombasa. KPLC is listed on the Nairobi Stock Exchange. It is majority owned by GoK (50.1%) and under the jurisdiction of the Ministry of Energy.

KPLC owns and operates the Kenyan electricity transmission and distribution network and had has 1,753,348 connections as of June 30, 2011. KPLC aims to continue increasing its customer base by 250,000 annually and the reach 2 million customers by the end of fiscal year 2012.

Until February 2009, KPLC was responsible for the construction of transmission lines as well. However, subsequently the Kenyan Electricity Transmission Company (“Ketraco”) was formed to design, construct, operate and maintain new high voltage transmission lines. Thus KPLC is no longer responsible for these functions, though it has retained ownership and responsibility for the operation of transmission lines existing prior to the establishment of Ketraco. KPLC’s distribution network consists of substations and primarily 66Kv, 33Kv and 11Kv transmission lines of about 43,754 kilometers. In addition to the transmission lines, the Company is also responsible for the establishment and maintenance of 38 off-grid power generators in rural areas with individual installed capacity ranging between 64kW and 673kW.

The total Project cost is estimated at $450 million. The proposed IFC investment is a senior loan of up to $50 million.

50.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan	50.0
Equity

* These investment figures are indicative

The Project involves expansion and improvement of the electricity distribution network throughout Kenya.

The proposed Project is expected to address some of the key challenges faced by the power sector in Kenya and have the following development impact: (i) increased coverage of electricity in the fast growing peri-urban as well as rural areas; (ii) reduction in commercial and technical losses; and (iii) improved quality of service.

Despite the successful sector reforms, electricity supply remains unreliable and penetration rates low. The World Bank''s Africa Infrastructure Country Diagnostic found that the lack of adequate, reliable electricity supply is Kenya''s largest infrastructure challenge and a key constraint to growth. Unreliable electricity supply in recent years has led to an estimated economic losses of up to 2% of GDP or approximately 7% of the annual revenues of Kenyan firms, higher than that in other countries of similar economic development. Interruptions in electricity supply stem mainly from inadequate generation capacity and weak transmission and distribution networks, particularly in areas of high growth in electricity demand.

The proposed investment builds on the extensive prior and on-going work of the World Bank Group to support GoK in developing, strengthening and commercializing the country''s power sector. The proposed support to KPLC as one of the key players in the power industry in Kenya has been well coordinated with GoK''s overall strategy, WB projects and other IFC projects in the sector (IFC financed the first IPP in Kenya in the late 1990s and has current mandates to arrange debt financing for two thermal IPPs). The proposed IFC investment would leverage WB programs aimed at commercialization and long-term sustainability of the sector and support further enhancement of the institutional capacity and commercial orientation of KPLC. It will support the gradual transition of KPLC from mostly concessional and government supported funding to commercial financing thereby introducing it to the discipline of market based financing, including, commercial due diligence and financial covenants. In addition to providing long-term financing necessary for capital investments in the distribution system, IFC involvement will support KPLC''s initiative to enhance its environmental and social management policies and procedures and build KPLC''s capacity in developing sound investment program on a coninuous basis.

The Project involves the modernization, upgrading and expansion of existing electrical distribution infrastructure, thus this is a Category B project according to IFC’s Environmental and Social Review Procedure. Key potential issues during the construction phase of capital improvements relate to land acquisition and occupational health and safety ("OHS"), whilst during the operational phase similarly OHS is also relevant, as is public safety and waste management. Given KPLC’s ongoing engagement with institutions such as the World Bank and African Development Bank, compliance with environmental and social standards that are in general alignment with IFC’s Performance Standards is integral to their operations. KPLC have a dedicated Environmental, Health and Safety Department staffed with qualified individuals and actively works towards continually improving environmental and social performance. The Company has clearly defined mitigation measures to address environmental and social issues, and these will be further supported via implementation of the project’s Environmental and Social Action Plan.