2011 Annual Report & Financial Statements - Kengen

Notes to the Financial Statements(Continued)
Notes to the Financial Statements(Continued)
KenGen
KenGen
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2011 ANNUAL REPORT & FINANCIAL STATEMENTS For The Year Ended 30 June 2011
For The Year Ended 30 June 2011 2011 ANNUAL REPORT & FINANCIAL STATEMENTS
77
27. Operating Lease Commitments (Continued)
(b)
AS LESSOR
The company leased out geothermal wells OW 101 and OW 306 to Oserian Development Company Limited for a
period of 15 years at a cost of Shs 15,000,000 per well receivable in advance.
The advance receipts have been accounted for as shown below:
2011 2010 2009
Shs’000 Shs’000 Shs’000
At beginning of year 11,000 13,000 15,000
Charge to profit or loss (2,000) (2,000) (2,000)
At end of the year 9,000 11,000 13,000
Less current portion (2,000) (2,000) (2,000)
Non-current portion 7,000 9,000 11,000
Maturity analysis of operating lease commitments as lessor:
Within 1 year 2,000 2,000 2,000
After 1 year but not later than 5 years 7,000 8,000 9,000
After 5 years - 1,000 2,000
This amount is amortised annually on a straight-line basis over the remaining life of the lease.
28. Retirement Benefits Liability
9,000 11,000 13,000
Up to 31 December 2000, the company operated a joint defined benefit scheme with Kenya Power, which was funded
by contributions from both the company and employees.
The company registered its own defined benefits scheme in 2000 and commenced making contributions to the scheme,
alongside employees’ contributions, with effect from 1 January 2001. The scheme is administered independently by
Alexander Forbes Financial Services (E.A) Limited. AIG Global Investment Company (EA) Limited and Stanbic Investment
Management Services (EA) Limited jointly manage the funds.
Under the plan, the employees are entitled to retirement benefits of 3% of Final Pensionable Emoluments for Pensionable
Service upto 1 January 2000 and 2% of Final Pensionable Emoluments for Pensionable Service after 1 January 2000 on
attainment of a retirement age of 60 years. No other post-retirement benefits are provided to these employees. In
addition, these disclosures reflect the changes to the employer’s retirement policy to reflect a revised retirement age of
60 years from a prior year retirement age of 55 years.
A valuation of plan assets and the present value of the defined benefit obligation were carried out at 31 December
2009 by Ms Alexander Forbes Financial Services EA Limited for statutory purposes. An actuarial valuation to fulfill the
Disclosure requirements of IAS19 was also carried out as at 30 June 2011. On this basis, the present value of the defined
benefit obligation, and the related current service cost and past service cost, were measured using the Projected Unit
Credit Method.
The principal assumptions used for the purposes of the actuarial valuations were as follows:
Valuation at 2011 2010 2009
% % %
Discount rate(s) 13% 10% 10%
Expected return on plan assets* TBD 10% 10%
Expected rate(s) of salary increase 11% 8% 8%
Expected return on reimbursement rights n/a n/a n/a
Pension Increases - Kenya Power Service 3% 3% 3%
Pension Increases - KenGen Service 0% 0% 0%
*As this will impact the Expected Return on Plan Assets to 30 June 2012, Management have not as yet determined this
figure and will do so at the end of the financial year.
28. Retirement Benefits Liability (Continued)
2011 2010
Shs’000 Shs’000
Current service cost 125,600 110,500
Interest on obligation 539,000 475,600
Expected return on plan assets (421,300) (337,100)
Past service cost (299,700) -
Adjustments for restrictions on the defined benefit asset (56,400) 249,000
The expense for the year is included in the employee benefits expense in the statement of comprehensive income.
The amount included in the statement of financial position arising from the entity’s obligation in respect of its defined
benefit plans is as follows:
2011 2010 2009
Shs’000 Shs’000 Shs’000
Present value of funded defined benefit obligation 4,832,100 5,367,500 4,737,700
Fair value of plan assets (4,668,600) (4,127,800) (3,247,400)
163,500 1,239,700 1,490,300
Present value of unfunded defined benefit obligation - - -
Net underfunding 163,500 1,239,700 1,490,300
Net actuarial gains not recognized 948,900 179,400 -
Net liability arising from defined benefit obligation 1,112,400 1,419,100 1,490,300
Part of the defined benefit liability amounting to Shs 379 million is a claim from Kenya Power which is a subject of
ongoing discussions between the company and Kenya Power as provided for by an agreement for transfer of schemes
assets and liabilities executed by all the parties in 2004. The disputed amount has therefore been recognised as a
contingent asset in accordance IAS 37 (note 35 (b)).
Movements in the present value of the defined benefit obligation in the current year were as follows:
2011 2010
Shs’000 Shs’000
Opening defined benefit obligation 5,367,500 4,737,700
Current service cost 125,600 110,500
Interest cost 539,000 475,600
Contributions from plan participants 50,100 64,100
Actuarial (gains)/losses (819,700) 117,400
Past service cost (299,700) -
Benefits paid (130,700) (137,800)
Closing defined benefit obligation 4,832,100 5,367,500
Movements in the present value of the plan assets in the current year were as follows.
2011 2010
Shs’000 Shs’000
Opening fair value of plan assets 4,127,800 3,247,400
Expected return on plan assets 421,300 337,100
Actuarial (losses)/gains (50,200) 296,800
Contributions from the employer 250,300 320,200
Contributions from plan participants including AVCs 50,100 64,100
Benefits paid (130,700) (137,800)
Closing fair value of plan assets 4,668,600 4,127,800