LETTER FROM THE CHAIRMAN OF KEGOC’S BOARD OF DIRECTORS
Dear shareholders!
2018 was an important year for KEGOC. In August 2018, the Board of Directors unanimously voted to update the Development Strategy in accordance with the long-term letter of the shareholder’s expectations for 2018-2028. The strategic goals and objectives of KEGOC were brought in line with the strategic goals of Samruk-Kazyna JSC to include the projects for technological development and business digitalization and update the investment project portfolio so that it would increase the efficiency of invested capital and develop new types of business.
In 2018 the Company achieved its goals in all strategic areas and completed the year on the positive operational and financial trend. The shareholders received their dividends twice in the total amount of about KZT 31.4 billion.
One of the foundations of a successful strategy implementation is motivation of employees to achieve the strategic goals. The members of the Board of Directors meet annually with the employees from the talent pool. The main topic of the meeting was corporate values developed as a part of the new project of the Transformation Programme titled ‘Development of the corporate culture in KEGOC in 2018-2020’. This project shall support employee transformation initiatives, further improve the corporate culture of KEGOC, increase employee engagement, and develop human capital.
An important strategy development area is the observance of the principles of sustainable development. KEGOC is aware of its responsibility to shareholders, employees, society and future generations. Improvement of the occupational health management system, human capital and environmental remain the key elements of maintaining the effectiveness of the Company.
The sustainable development of the Company is impossible without continuous improvement of the corporate governance system. At the end of 2018, the Company’s corporate governance rating was ‘BB’.
On behalf of the Board of Directors of KEGOC I would like to thank all partners and shareholders for supporting the Company, and the team for its outstanding performance and contribution to the efficient and reliable operation of the Company.
LETTER FROM THE CHAIRMAN OF KEGOC’S MANAGEMENT BOARD
The past 2018 was significant and productive not only for KEGOC, but in general for the entire electric power industry of the Republic of Kazakhstan.
The main event of the reporting year was the successful implementation of 500 kV OHTL Shulbinsk HPP (Semey) — Aktogai –Taldykorgan — Alma construction project. It was launched on 11 December 2018 during a live national TV conference on the Day of Industrialization. The event was participated by the President of the Republic of Kazakhstan, Mr. Nursultan Nazarbayev, who commended the completed project.
With this project in 2018 we completed North-East-South 500 kV Electricity Transmission Construction Project, the largest infrastructure project in the power sector. For four years KEGOC constructed more than 1,773.1 km of lines and three new 500 kV substations: Semey, Aktogay, and Taldykorgan. Open switchgears were expanded at 1150 kV Ekibastuzskaya substation, 500 kV Ust-Kamenogorsk substation, and 220 kV Shulbinsk hydropower plant. The Company also expanded and reconstructed 500 kV Alma substation, which is one of the substations providing power supply to Almaty.
2018 was also rich for other events important for the Company. KEGOC showed good performance. The amount of electricity transmission services in the national power grid amounted to 44.71 billion kWh. It is 2 billion kWh or 4.6% higher than it was in 2017. The amount of technical dispatching of electricity supply and consumption in the grid grew by 4.3% to 97.65 billion kWh. The amount of electricity generation and consumption balancing services in 2018 also grew by 5.1% to 183.36 billion kWh.
The net income for the year amounted to KZT 40 billion, which is KZT 7.2 billion higher compared with 2017.
To follow the instructions of the Head of State of reducing electricity prices, as well as to support the population, small and medium-sized businesses, the Company decided to reduce the prices of its services. Taking into account the growth of consumption and production of electricity, and respective growth of the regulated services provided by the Company, starting 1 January 2019, it will reduce the marginal prices for the following regulated services: from 2.823 to 2.496 KZT/kWh for electricity transmission; from 0.306 to 0.237 KZT/kWh for technical dispatching of supply and consumption of electricity in the grid; and from 0.098 to 0.088 KZT/kWh for management of the electricity production and consumption balancing.
Since KEGOC is a public company, the results of its operational and financial activities directly affect its stock price on the Kazakhstan Stock Exchange. In 2018 the maximum market price of one share reached a historic high of KZT 1,631 vs. the placement price in 2014 of KZT 505. It is symbolic that in 2018, KEGOC was awarded the prize of the Kazakhstan Stock Exchange ‘For Contribution to the Development of the Stock Market’.
In 2018 we reaffirmed our status of a socially oriented company with social stability as one of its priorities implemented through effective personnel, social and communication policies. According to an independent study, KEGOC’s Social Stability Index of 85% is one of the highest in the portfolio companies of Samruk-Kazyna. The engagement index of administrative and managerial staff in 2018 was also in the positive zone at 69%.
The Company has also been successful in implementation of the Business Transformation Programme. The transformation portfolio has 8 projects aimed at improving the efficiency of the Company’s operations. In 2019 we are planning to launch SAP ERP, a billing system for our customers, and a corporate information security management system.
Undoubtedly, all these high achievements became possible thanks to the solid effort of the entire staff of the Company, united around common goals and objectives. Each member of our team is proud of the fruits of their work, they put not just their knowledge but their heart into it constantly developing their professionalism. This is what moves the Company forward.
I would like to thank all our partners for their effective collaboration. I am confident that our further cooperation will be equally fruitful.
In 2019, relying on the vast experience of highly professional operational and administrative staff, the financial stability of the Company and the best practices, we also intend to achieve all of our goals.