Sugarcane is harvested on a farm in Bungoma South district last year.
Kenya has a total installed factory crushing capacity of 30,109 tonnes
of cane- per- day. FILE
By John Gachiri
In Summary
- Deal plugs funding gap that the firm needed for its Sh17.5 billion project.
A consortium of lenders led by CfC Stanbic Bank
has secured a Sh10.5 billion ($120 million) loan deal for the Kwale
International Sugar Company Limited (Kiscol) to finance construction of a
milling, distillery and power plants.
The deal plugs the funding gap that Kiscol needed for its $200 million (Sh17.5 billion) project.
CfC Stanbic Kenya was the largest contributor at $22.5 million (Sh1.96 billion), followed by PTA Bank $20 million (Sh1.75 billion), Standard Bank (Mauritius) $15 million (Sh1.3 billion) and the other $62.5 million (Sh5.5 billion) was sourced from a consortium of Kenyan and Mauritian banks.
Transaction advisors said the funding, wholly secured in August, will also make it easier for other companies in the region that plan to raise money to access international markets.
“This is an innovative project financing for the Kenyan market involving a wide range of regional lenders, which bodes well for the project finance market in East Africa,” said Herbert Smith Freehills finance partner Martin Kavanagh in a statement.
Herbert Smith Freehills was the legal advisor on the multi-billion shilling project.
The investment comes at a time when the sugar industry is facing hard times due to rampant cane poaching, competition from cheaper sugar imports, use of obsolete technology for the state-owned millers, which are also saddled by heavy debt.
Analysts however say that Kiscol can weather these problems due to its physical location, growing its own cane and bringing in a strategic investor, Omnicane.
“The main problem with millers is that they do not have a guaranteed supply of cane and that is why there is poaching industry,” said Francis Mwangi, head of research at Standard Investment Bank.
The syndicated loan is split between a 10-year $100 million (Sh8.7 billion) loan and a 12-year $20 million (Sh1.75 billion) debt but the company did not indicate at what interest rates the loans were secured at.
The equity per cent stake in the project worth $80 million (Sh7 billion) is jointly owned by the Pabari family and Omnicane, a sugar miller that is listed on the Stock Exchange of Mauritius that has a 25 per cent stake.
On completion, expected in mid-2014, the factory will have the capacity to churn out 3,000 tonnes of cane per day.
An 18 megawatt cogeneration power plant and a 30,000 litre ethanol plant will also be ready by then. The project is similar to Mumias Sugar which has a 26 megawatt power plant and an ethanol plant.
A coverage note on Mumias Sugar by Sterling Capital says that poaching has cost Kenya’s biggest miller, Mumias Sugar, Sh7 billion in the last two years and the problem does not look like it will end soon.
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