KenGen bond offer attracts 12.5pc interest

August 31, 2009
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, NAIROBI, Kenya Aug 31 – The Kenya Electricity Generating Company (KenGen) intends to offer investors a competitive interest rate of 12.5 percent per annum in the upcoming Public Infrastructure Bond Offer (PIBO).

KenGen Managing Director Eddy Njoroge on Monday said it would be the country’s’ largest bond offering seeking to raise Sh15 billion.

However going by the increased interest from investors, KenGen is now setting its sights on raising Sh25 billion from the market, through a green shoe option.

“We have received keen interest from many investors with a growing appetite for long term debt instruments and as a result decided to increase the size of the offer,” Mr Njoroge said during an investor briefing.

He welcomed the renewed interest from investors saying KenGen would now have additional capital to finance investment in additional power generation facilities.

The bond comes after the Capital Markets Authority (CMA) approved KenGen’s Information Memorandum giving it the green light to raise Sh15 billion through the Public Infrastructure Bond Offer.

The offer opens on September 8 and closes on September 29. It is expected to be listed on the Nairobi Stock Exchange by November 9 when trading starts.

The minimum amount one can invest for a bond is set at Sh100,000 with additional investments above the minimum in multiples of the Sh100,000.

The term of the bond is 10 years and interest will be paid in the first two years, while the principal sum will be redeemed every six months for eight years in equal instalments.

Amish Gupta an associate Director with Standard Investment Bank says 20 percent of the bond will be taken up by the retail pool while the remaining 80 percent will be available to both local and foreign investors.

He added: “From the PIBO the minimum amount required for success is Sh9 billion which is 60 percent of the intended Sh15 million.”

Simon Kitololo of Standard Chartered Bank said he expected the bond to do well in the secondary market at the Nairobi Stock Exchange saying it would be highly tradable once listed.

Due to ongoing initiatives, the Central Depository and Settlement Corporation and Nairobi Stock Exchange will facilitate automated bond trading, delivery, settlement and registration for corporate bonds including the KenGen Bond.

The decision to seek funds from the debt capital market is a break from the past where the company relied heavily on development financial institutions with inherent risks of foreign exchange fluctuations.

“This will give us an opportunity to raise funds for capital expenditure on a fixed Kenyan shilling basis while at the same time allowing Kenyans to participate in infrastructural development through an attractive investment opportunity,” Mr Njoroge highlighted.

Mr Njoroge said the PIBO would ensure KenGen continues to generate additional capacity to cope with the rising demand of energy currently anticipated at eight percent annually.

The investment in additional power generation through the bond is part of KenGen’s five-year strategy (2008-2012) to increase its capacity by 500 MW and stabilise the power situation in Kenya, mainly through geo-thermal exploration.

“This will enable us continue with our critical role of ensuring there is enough additional capacity to cope with the rising demand anticipated at eight percent annually. Investment in additional generation capacity will not only help the country cope with additional demand, but also the power demand associated with the  implementation of Vision 2030,’’added Mr Njoroge.

Current energy peak demand stands at 1073 megawatts but Mr Njoroge says with the money generated from the bond offer they will be able to steadily increase energy output to 9000 megawatts by 2030.

“By 2018 Kenya must have at least 30-35 percent electricity penetration to reach the Vision 2030 target.”

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