KenGen gets CMA nod for Sh28bn rights issue

KenGen managing director Albert Mugo. PHOTO | FILE 

By BRIAN NGUGI, bnjoroge@ke.nationmedia.com

In Summary

• KenGen plans to issue 4.3 billion newly created shares at Sh6.55 per ordinary share at a ratio of two for every share held.

The Capital Markets Authority (CMA) has given KenGen the greenlight to raise Sh28 billion through a rights issue.

The NSE-listed power producer said Tuesday the approval paves way for the cash call to enable it fund its expansion plan by injecting new capital and boosting its capacity to take on new debt.

KenGen plans to issue 4.3 billion newly created shares at Sh6.55 per ordinary share at a ratio of two for every share held.

KenGen, which is owned 70 per cent by the State, is counting on the rights issue to fund its ambitious expansion plan by providing the new cash and retiring part of its existing debts so it can borrow more.

The cash call will see the government convert its loans to KenGen amounting to Sh20 billion into equity, implying that the Treasury will participate in the transaction without providing new cash.

“The (KenGen) Board is pleased to confirm that the Government of Kenya has indicated that they will take up their full entitlement, in the rights issue representing 70 per cent of the transaction, through a conversion of some of the loans on lent by the Government to KenGen into equity (shares),” said the firm in a regulatory notice.

READ: KenGen Sh28bn issue will mainly pay Treasury debt

Its short-term liabilities exceeded its current assets by Sh1.1 billion in the year ended June compared to a net current asset position of Sh2.4 billion the year before. It plans to use the cash from the rights issue to revert to a net current asset position.

The power producer plans to undertake several projects to increase its installed capacity from the current 1,611 megawatts to 2,122 megawatts by 2018 at a cost of $1.75 billion (about Sh178 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 I plant.

READ: KenGen woos financiers to its mega power investments

The power producer took a Sh7 billion loan from Co-operative Bank during the year, pushing its total debt to Sh144 billion from Sh134 billion last year.

KenGen has appointed Standard Investment Bank and Renaissance Capital as the lead transaction advisor while Dye and Blair Investment Bank and Faida Investment Bank are the lead sponsoring stockbroker.

Co-operative Bank will be the receiving bank for the rights issue set for opening on May 23 this year and closing on June 10.

KenGen shareholders approved the firm’s rights issue last December in Nairobi and also agreed to the board’s plan to issue up to 7.8 billion shares, revoking an earlier decision to issue up to 2.2 billion ordinary shares.