Kenya Electricity Generating Company is pursuing alternative sources of money to supplement funding from loans and equity for its key projects.
The firm seeks to install additional 511 megawatts into the grid.
Last week, the company disclosed plans to raise funds through commercial drilling, consultancy services, the Olkaria geothermal spa, a proposed industrial park and establishment of a container freight station.
SH180 BILLION PROJECTS
During the period to 2018, KenGen plans to spend Sh180.25 billion ($1.75 billion) to finance new projects, mostly geothermal, that will include setting up new power plants and rehabilitating the existing ones.
The planned new capacity consist of 140 megawatts additional geothermal power plants whose construction is set to commence next year.
The company will also set up a 80 megawatts wind power plant in Meru County at a cost of Sh15.2 billion ($148 million), which will significantly raise its installed capacity for wind power generation from the current 26 megawatts.
The wind power plant will be financed by KenGen and loans from Germany’s KfW development bank and the French Development Agency (AFD).
“We have several financing options but the choice will depend on the advice we get from our transaction advisors,” KenGen’s managing director Albert Mugo told investors at a briefing last week.
It is understood that KenGen has raised about Sh824 million from a geothermal drilling contract with a private investor who has utilised the company’s idle rig to dig two wells within the Olkaria area.
The company has also carried out consultancy services on geothermal power development for Rwanda, Sudan and Comoros.
While the geothermal spa has been operational since last year, feasibility studies for the industrial park and container freight station are ongoing.
The power producer intends to tap the growing manufacturing sector with the proposed industrial park which is expected to attract foreign investors seeking cheap energy from the geothermal resource.
KenGen is also targeting to raise Sh30 billion from a planned rights issue to fund new projects.
However, the cash call that was intended to take place last year has delayed as the government is yet to decide whether it would take up its rights by injecting cash into the power producer’s balance sheet or convert its debt into equity.
“We have already reached an agreement with the government. In principle, it was approved that they will participate in the rights issue,” said John Mudany, KenGen’s finance and commercial director in a telephone interview.
Sources privy to the talks between KenGen and the government said the latter has settled on converting debt into equity, a move that will reduce KenGen’s liability.
As of the end of the last financial year, KenGen’s debt comprised Sh39 billion direct borrowings from financial institutions, Sh41 billion in government guarantees to KenGen and Sh64 billion worth of loans from bilateral lenders.
KENGEN RECORD PROFITS
KenGen’s net profit for the year ended June 30 was Sh11.5 billion, boosted by increased electricity sales from its geothermal power plants and a tax credit of Sh2.8 billion received during the period.
The company earned Sh2.8 billion last year in net profit. During the period under review, the value of its assets rose from Sh250 billion to Sh342.5 billion.
This follows revaluation of its plants, equipment and land that resulted into a surplus of Sh77 billion. The exercise is carried out every five years.
The increase in profits saw KenGen declare a Sh0.65 dividend payout, up from Sh0.40 per share that shareholders earned last year.
KenGen’s revenue from electricity sales increased from Sh17.4 billion to Sh25.6 billion during the period while finance costs increased to Sh3 billion from Sh2.5 billion incurred last year following additional borrowing to finance construction of new power plants.
Geothermal power sales were the company’s top earner at Sh8.3 billion, up from Sh2.4 billion last year. Hydropower sales earned Sh7.7 billion from Sh7.6 billion last year.
Income from sale of thermal electricity declined slightly from Sh3.24 billion last year to Sh3.16 in 2015.
KenGen’s total installed power-generating capacity increased from 1,337 megawatts last year to the current 1,611 megawatts.