Centum risks Sh2bn loss over delay in coal plant

Centum Investment Company CEO James Mworia announcing results at a briefing at the Nairobi Securities Exchange on November 28, 2019. PHOTO | DIANA NGILA 

By VICTOR JUMA
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By PATRICK ALUSHULA
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Summary

• Centum holds a 51 percent stake in Amu Power, the investment vehicle that was set up to develop the 1,050 megawatts coal-fired power plant.
• The company says that while it has made substantial progress in implementing the project, key hurdles remain including delayed funding and opposition from the National Environment Tribunal.
• Amu, for instance, is yet to secure a partial risk guarantee that lenders require to release funds.

Centum risks losing its Sh2.1 billion debt investment in the Lamu coal power project which has been rocked by delayed funding and regulatory challenges.

The Nairobi Securities Exchange-listed firm holds a 51 percent stake in Amu Power, the investment vehicle that was set up to develop the 1,050 megawatts coal-fired power plant.

“The company has recorded a one-off impairment provision of Sh2.3 billion of which Sh2.1 billion is against the debt instrument investment in Amu Power Company Limited,” Centum said yesterday when releasing its results for the half year ended September.

The company says that while it has made substantial progress in implementing the project, key hurdles remain including delayed funding and opposition from the National Environment Tribunal.

Amu, for instance, is yet to secure a partial risk guarantee that lenders require to release funds.

The African Development Bank (AfDB), which was to provide the partial risk guarantee, recently withdrew its support for the coal plant.

Such guarantees protect investors against various political risks including seizure of an asset by the government, defaults or change in laws. Centum’s half year profit to September more than quadrupled to Sh6.79 billion lifted by strong investment income mainly as result of net gains on disposal of three investments.

The performance, a contrast from Sh2.07 billion in a similar period last year, is higher than the bottom-line that the group has been returning year-on-year since 2016. This raises prospects of beating the Sh7.94 billion profit of 2015 which is the highest in the group’s history.

Group CEO James Mworia said private equity business booked net gains of Sh12 billion from the disposal of Almasi Beverages Limited, Nairobi Bottlers Limited and King Beverages Limited, all which were concluded within the reporting period.