KenGen Sh29bn issue will mainly pay Treasury debt

Money Markets

KenGen managing director Albert Mugo (right) with finance director John Mudany during the release of full-year in Nairobi in October. PHOTO | DIANA NGILA 

By GEORGE NGIGI, gngigi@ke.nationmedia.com

In Summary

• KenGen confirmed in its annual report it aims to raise Sh28.6 billion in a rights issue scheduled to be completed by June next year, but Sh20 billion is expected to clear a loan owed the government.

Listed power producing company, Kenya Electricity Generating Company (KenGen), hopes to boost its cashbook by a net of Sh8.6 billion in the upcoming rights issue and lift itself from a liability position.

The company confirmed in its annual report it aims to raise Sh28.6 billion in a rights issue scheduled to be completed by June next year, but Sh20 billion is expected to clear a loan owed the government.

“These proceeds comprise new cash estimated at Sh8.6 billion to be raised from the minority shareholders. The on-lent loan is expected to convert to equity when new shares are issued to the government from the rights issue,” reads part of the report.

The government owns 70 per cent of KenGen indicating it would have to put in Sh19.6 billion to defend its stake in the company during the cash call, an amount that will be covered by debt conversion.

KenGen’s short-term liabilities exceeded its current assets by Sh1.1 billion as at end of June compared to a net current asset position of Sh2.4 billion in a similar period last year. It hopes to use the cash from the rights issue to revert to a net current asset position.

The power producer booked a new Sh7 billion loan from Co-operative Bank during the year pushing its total debt to Sh144 billion from Sh134 billion last year. KenGen also increased its debt with Commercial Bank of Africa and Standard Chartered.

It cleared a Sh1.2 billion debt with Equity Bank and overdrafts totalling Sh5.7 billion offered by NIC, KCB, CBA and Bank of Africa.

The power producer hopes to make annual savings of approximately Sh1.8 billion for the next seven years which relates to the amount previously paid to service the government loans.

READ: KenGen board approves Sh28 billion rights issue

Its board is seeking shareholders’ approval to create an additional 7.8 billion shares to be sold at discounted prices to the owners during the rights issues.

Last year, the shareholders approved creation of only 2.2 billion new shares for the capital raising.

“That the limitation placed on the directors by the shareholders resolution passed on December 20, 2013 to issue only up to 2,215,927,528 is hereby revoked” reads one of the agendas the power company will be putting to the shareholders in the annual general meeting to be held on December 16.

The power generator has appointed Standard Investment Bank, Renaissance Capital, Dyer & Blair and Faida Investment Bank as its transaction advisers.

The cash call is meant to boost KenGen’s plans to increase installed capacity from the current 1,611 megawatts to 2,122 megawatts by 2018 at a cost of $1.75 billion.

These include a 50-megawatt wellhead for leasing, three new 350-megawatt Olkaria geothermal projects, a 400-megawatt wind project in Meru and the rehabilitation of the Olkaria 1 plant.