Foreign investors ready to take up entire KenGen Rights Issue

Foreign investors have offered to buy the entire KenGen Rights Issue that was announced today, Dhahabu Kenya can confirm. The investors approached the company stating that the sh8.6 billion cash that is being floated is not beyond their reach.

John Mudany, KenGen Finance and ICT Director affirmed these types of investors look for long term investments and do not shy away from risking because they know they have guaranteed returns.

Earlier today, Kenya largest electricity generating company KenGen launched the Rights Issue, seeking to get sh8.6 billion in cash while sh20.2 billion is government’s loans that will be converted to equity.

This marks the third time that we go into the market to seek funding for our growth. The first was the Initial Public Offer (IPO) in 2006 then in 2009 when we launched the infrastructure bond. During the infrastructure bond, while we received sh26 billion, we only took sh25 billion,

affirmed Mr. Mudany who has been with the company for the past eight years.

The Rights Issue was necessitated by the need to further grow the company and help restructure the company’s balance sheet. This will see it grow its capital as it seeks to add 720 megawatts to the national grid by 2020 in order to meet the country’s demand for vision 2030 development projects.

Speaking during the launch of the Rights Issue in Nairobi, KenGen Managing Director and CEO Eng. Albert Mugo said the offer would give shareholders an opportunity to reap more from the company, which has consistently posted impressive financial results.

“By participating in the offer, shareholders will contribute to the growth of the company and reap more from our dividend scheme, which is one of the most competitive, reliable and sustainable in the country,” said Eng. Mugo.

KenGen is offering a total of 4, 396, 722, 912 new ordinary shares at a discounted price of Shs 6.55 per share. The Rights Issue closes on Friday June 10, 2016.

The power generator’s installed capacity is 1,618MW.

“With the country’s power demand expected to cross the 4,000MW mark by 2020. Success in the future is dependent on early planning and that is why we are asking shareholders to take up their rights at this time so that we can have enough capital for expansion,” said Eng. Mugo.

While the government will be converting its sh20.2 billion to equity, its shareholding will remain the same at 70 per cent. The Chief Guest at the launch Treasury Cabinet Secretary Henry Rotich said this move by the company is positive as it will ensure they are able to finance all their projects.

Energy and Petroleum Cabinet Secretary Hon. Charles Keter said that he hopes this will be the last time the company is going to the market to seek funds for its projects. He vouched for private partnerships to finance them as a more innovative and sustainable way to reduce reliance on the exchequer.

Capital Markets Authority’s Director of Operations Wycliffe Shamiah said the Rights Issue signals a resurgence in equity rights.

This move is good after a slowdown in the economic activity in the market due to macro-economic activities primarily the high interest rates, he said.

KenGen controls 70 percent of the energy generated in the country with the remaining generated by Independent Power Producers. In its energy generation installed structure, 51 per cent is hydro, 32 per cent geothermal, 16 per cent thermal and 2 percent wind energy.

Among the projects lined up is the drilling programme for 140MW Olkaria VII , which is scheduled for delivery by 2020.

The company expects to complete 25MW of early generation geothermal wellhead project by June 2016, bringing the total capacity on wellhead generation to 75MW.

Plans are also underway to begin 70MW Olkaria 1 Unit 6 and complete upgrade of Olkaria 1 Units 1, 2 and 3 to 50.7MW by 2017. The 140MW Olkaria V and 80MW Meru Wind phase I are expected to come on stream in 2018 and have already attracted funding from development partners, including the French Development Agency (AFD).

If the company fails to get enough money by June 10th, any eligible shareholder or potential new investor would be invited through the Rump application of a minimum of 100,000 new shares. This move will allow foreign investors interested to buy the remaining shares.

The Rights Issue will mature after 15 years.


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