KenGen headache as state delays decision on Sh50 billion cash call

The Kenya Electricity Generating Company is facing a financing dilemma as the government falters on making a decision on Sh50 billion cash call from shareholders.

A year after owners approved a management decision to raise the money through a rights issue planned for June this year, the majority state-owned power generating company is yet to make a final decision.

“The issue of whether the government will take up its rights is critical. There is also need to gauge the market appetite for taking up of the shares,” Energy Permanent Secretary Joseph Njoroge told journalists on the sidelines of the company’s annual meeting at the Safaricom Stadium in Kasarani, Nairobi, on Tuesday.

FLOAT NEW SHARES

Of the Sh50 billion planned to be raised, the government is expected to inject in at least Sh35 billion equal to its 70 per cent ownership with the public pumping in Sh15 billion.

The government is said to be mulling over possible debt conversion into equity at the power generator to maintain its stake.

The company hopes to conclude the cash call in the first quarter of next year, if the government decides.

The power producer plans to float 2.2 billion new shares to existing owners in the ratio of one new share for each held to raise money for doubling its generation capacity in the next five years.

KenGen chief executive Albert Mugo said the money to be raised will be used in expanding geothermal power production to meet its share of 844MW out of the 5,000MW the government is aiming to inject into the national grid by 2017. He said the company had already installed 340MW of the target.

At the same time, the company assured investors that the ongoing investments in increasing generating capacity would translate into higher dividends.

“Profits are lagging behind the heavy investments we are currently undertaking. But we expect to see higher returns in the form of dividends to shareholders once the projects we are currently undertaking start generating revenue.

DIVIDEND APPROVED

The impact will be seen in the bottom line starting this financial year 2014/15,” KenGen chairman Joshua Choge said. Shareholders approved dividend of 40 cents per ordinary share.

Mr Njoroge said the fuel cost component in the electricity bills had decreased by 61.6 per cent as a result of increased use of geothermal sources of power as opposed to the expensive thermal alternative.

As a result, he said, consumers should realise between 24 and 30 per cent decline in power bills. Mr Njoroge said geothermal power production would be increased to 560MW in the coming years further providing relief to consumers.

“As we continue to increase use of geothermal we will also retire use of thermal power which will translate to lower cost of power to the consumers,” he said.