Kenya power firm PIBO oversubscribed

October 6, 2009

, NAIROBI, Kenya, Oct 6 – Results from the recently closed KenGen Public Infrastructure Bond Offer (PIBO) indicate that Sh25.2 billion has been raised so far, marking a 66 percent oversubscription of the requisite Sh15 billion.

The power generating company had employed a green shoe option to raise a further Sh10 billion which has also been smashed by Sh200 million.

In a telephone interview with Capital Business, Amish Gupta an Associate Director with Standard Investment Bank – the the Lead Placing Agent for the offer – said  this comes after KenGen CEO Eddy Njoroge confirmed receiving applications worth the said amount on Monday.

“We are 66 percent oversubscribed at the Sh15 billion level and over 100 percent for the additional Sh10 billion,” he said during the interview.

Tallying is however ongoing with final results expected in the next two to three days. Mr Gupta said the offer’s success was an indication of the growing confidence by companies to raise funds from the debt capital markets.

The region’s biggest company in profitability, Safaricom, announced on Tuesday that it had received the nod from the Capital Markets Authority (CMA) to raise Sh12 billion through a corporate bond issue.

The operator is looking to raise Sh5 billion in the first phase, which opens on Wednesday and closes on October 29.

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

Mr Gupta said this was a key factor for the success of the PIBO saying it would be tradable on the secondary market from November 9. He called on the retail market to respond positively once it hits the trading floor of the NSE.

“There is still time for people to invest in the PIBO even if they did not invest in the primary offer,” he said.

The bond offer closed on September 29. The interest rate on the 10-year bond was 12.5 percent per annum. Repayment of the principal will begin after two years and will be paid every six months in equal installments.

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 Kenya shilling basis while at the same time allowing Kenyans to participate in infrastructural development through an attractive investment opportunity,” Mr Njoroge hinted at the offer launch.

Finances garnered from the PIBO are meant to aid KenGen 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 500MW and stabilise the power situation in Kenya, mainly through geo-thermal exploration.


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