Rea Vipingo plans diversification into power generation

Corporate News

A section of Rea Vipingo’s sisal estate located in Kilifi. PHOTO | FILE 

By VICTOR JUMA, vjuma@ke.nationmedia.com

In Summary

• Rea Vipingo is expected to use the electricity generated to power its factory, potentially reducing its operating expenses. The surplus is also expected to be sold to electricity distributor Kenya Power.
• Rea Vipingo’s current main business is production of sisal which it sells in the international markets including China.

Agricultural firm Rea Vipingo will invest Sh1.3 billion in power generation and expansion of vegetables production after delisting from the Nairobi Securities Exchange.

The new investment will be undertaken by British brothers Richard Robinow and Jeremy Robinow who are set to fully acquire the company, making it private.

The brothers already own a 57 per cent stake in the agricultural firm. 

Rea Vipingo’s current main business is production of sisal which it sells in the international markets including China.

“We plan to diversify into power generation using sisal waste,” Richard Robinow told the Business Daily in an interview.

“We will also expand our production of vegetables,” he said, adding that the ventures will cost between $10 million (Sh920 million) and $15 million (Sh1.3 billion).

Mr Robinow said it will be easier for British investors to make the new capital expenditures in Rea as the only shareholders unlike the current situation where they are answerable to thousands of other investors.

“These ventures have higher risks and take time to pay off. It is easier to risk my own money,” he said.

Mr Robinow said the finer details of the power plant would emerge later. Rea Vipingo is expected to use the electricity generated to power its factory, potentially reducing its operating expenses. The surplus is also expected to be sold to electricity distributor Kenya Power.

Rea Vipingo will join other agricultural firms that have set up small power plants with similar objectives. They include James Finlay, Imenti Tea, Unilever Tea that have installed capacity to generate between one and three megawatts (MW) from hydro sources.

Besides cutting electricity costs, the in-house plants also reduce the firms’ exposure to unreliable supply from the national grid which interrupts production and leads to use of expensive generators running on diesel.

“Poor and inconsistent mains power remains a major headache and cost with the almost daily use of expensive standby generators on all estates,” Rea Vipingo said of its Tanzanian operation in its latest annual report.

The planned investments by the Robinows will come after the brothers pay Rea’s other shareholders Sh85 per share to take full control of the company through their investment vehicle Rea Trading.

The Sh85 per share –including a top-up of Sh15— is the latest and highest offer by the brothers after a bidding war that pitted them against investment firm Centum.

The parties recently struck a deal that will see Centum buy 10,546 acres from the agricultural firm for Sh2 billion in exchange for withdrawing its buyout offer of Sh70 per share.