Source: Business Daily
KenGen will sell a significant stake to a strategic investor in the State-owned firm that is racing to raise Sh467 billion ($5.5 billion) in debt and equity between now and 2018 to finance plans to more than double generating capacity.
Simon Ngure, KenGen’s acting managing director, said Wednesday the electricity producer plans to generate 2,500 megawatts of additional capacity in the next four years.
“The money will come from a split of equity and debt. We will maintain equity to debt ratio of 30:70,” said Mr Ngure.
This means that Sh327 billion will be raised from commercial banks and development finance institutions and the remaining Sh140 billion will come from a rights issue, joint ventures and sale of shares to strategic investors.
The firm says it will create new shares to accommodate the strategic investors in a move that will dilute the State ownership in the firm. The government owns 70 per cent and the remainder is held by retail and institutional investors who bought shares in the firm after its 2006 IPO.
“We will have to open up the shareholding structure by creating more shares that will give us headroom to invite investors to own a stake in the company,” said Mr Ngure.
He did not give time lines for either the share sale or the targeted amount of stakes that will be held by the strategic investors.
The country faces frequent blackouts due to generation shortfalls and an ageing grid, forcing most businesses and wealthy people to have stand-by generators.
The country’s average daily electricity demand stands at about 1,700 megawatts, against supply of 1,600MW mainly from rain-fed hydroelectric generators.
The government targets to add 5000MW to the national grid over the next 40 months and KenGen is working to increase its geothermal power generation.
The firm, which has a 1,239MW installed capacity, has 157 MW of geothermal capacity and is planning to produce an additional 350MW of geothermal power by the end of 2014.
Kenya is the first country in Africa to tap the vast quantities of hot steam in the earth’s crust for geothermal energy, which requires big investments up front, mainly due to expensive drilling of wells. Geothermal power is considered more reliable than hydropower generation, particularly in periods of drought. It’s also cheaper compared to thermal sources.
A tax credit has helped KenGen post a net profit of Sh5.2 billion in the year to June compared to Sh2.8 billion a year earlier as its sales grew 3.79 per cent to Sh16.4 billion.
Its pre-tax profit grew 1.2 per cent to Sh4 billion—reflecting the impact of the Sh2.3 billion tax credit that wiped out the firm’s entire income levy bill under a government initiative which rewards firms for investments outside Nairobi.
