Britam Asset Managers (Kenya) has bought a Sh1.4 billion stake in a local electricity producer through a US-based investment firm as the company seeks to diversify its investments beyond equities, real estate and bonds.
Britam said it would acquire a significant stake in Gulf Energy via New York-based Everstrong Capital — which has preferred infrastructure investments.
Gulf Energy supplied 81 million kilowatt hour of electricity to Kenya Power worth Sh3.5 billion in the year to June.
“Through this investment, Britam’s Asset Managers institutional clients will achieve diversification not only across asset classes but also across currencies. This is because the returns from the power plant will be in hard currency,” said Kenneth Kaniu, CEO of Britam Asset Managers.
Kenya’s cost of power is priced in dollars due to the existence of the foreign exchange levy in electricity bills sent to homes and businesses, making the sector attractive to international investors wary of exchange risks.
Power producers get compensated for expenditure done in foreign currency such as repayment of loans and equipment bought abroad.
“We are playing a role in both the funding and in the provision of long-term capital into the Kenyan power sector,” said Mr Kaniu, adding that they bought the Sh1.4 billion stake though Everstrong Capital because it has a better knowledge of the energy market.
Gulf Energy, the 80.2-megawatt thermal plant in Athi River, started operations in 2014 and has a 20-year power purchase agreement with Kenya Power.
“We will not have a majority stake but it will be almost a quarter. The firm is already revenue generating so we are buying into the cash flow with expected return over the 16 years at double digits,” Mr Kaniu said.
Britam has Sh158 billion in assets under management and the power deal will diversify its portfolio and give it a piece of a long-term investment.