Category Archives: Kengen

France & Kenya and Renewable Energy

Yesterday there was forum on renewable energy in Nairobi. It was organized by the Embassy of France and the Kenya government to show executives from French energy companies opportunities to invest in renewables and other energy projects in Kenya and Africa. Aqylon, Engie, GreenYellow, Quadran,  Sogea Satom, Total , UrbaSolar, Vegrent, and Vinci representatives were part of the group.

French companies built hydro dams in Kenya

French companies built hydro dams in Kenya

Excerpts

  • Large silent corporations include Engie which produces 3 GW in Africa and Vinci which has EUR  800  million of revenue, and 14,000 staff in Africa.
  • SUNREF from AFD/KAM provides tailored finance for green energy to Kenyan companies through Bank of Africa,  CBA,  Diamond Trust and Cooperative Bank. 11 companies have now been financed, and some that have got SUNREF green energy finance include KTDA, Meru dairy, Strathmore University, and Redland Roses.
  • Kenya has 10 independe power producers (IPP’s) producing 650 MW (28%) of its electricity – shows how vibrant it is for investors.
  • Regional electricity sharing in future: Kenya produces 2,200 MW, Ethiopia 4,284 MW (90% from hydro), Tanzania 1,583 MW (65% from thermal), and Uganda 900 MW (80% from hydro)
  • GreenYellow works with factory, malls, hotels, to finance & build (heat/cold/solar/light) systems that reduce their energy costs by 30%
  • UrbaSolar is working with Kenyatta University on a 100% self-consumption plant that will reduce electricity bills by 80% (20% is night).
  • Total is constructing a 40 MW solar plant at Isiolo with Green Millenia, while Kenya’s rural electrification authority (REA) has got funding to do a 50 MW one near Garissa.
  • KenGen which provides 80% of Kenya’s electricity, has tendered for an Olkaria 5 plant, and will build an industrial park there.
  • There’s opportunity in Kenya off-grid & mini grid electricity, but there’s no legal framework for integrating with the national grid integration & projects sometimes face land acquisition or compensation delays.
  • Solar has not picked up in Kenya, but with drop of photovoltaic prices, there’s lots of interest here now – Energy Permanent Secretary J. Njoroge told the companies..  He also said renewable energy is intermittent – it can only be used up to a certain % of Kenya’s electricity grid supply. Later there was  mention of CSP solar plants which are more complex & expensive than traditional PV ones which but do give stable solar electricity.

Kengen 2016 Rights Issue

The Kenya Electricity Generating Company (Kengen) has announced a rights issue in which they will issue 4.4 billion new shares to shareholders at a price of Kshs 6.55 each in a bid to raise Kshs 28.8 billion (~$288 million).

Shareholders of record on May 16 will be eligible to buy 2 new shares for every 1 they own, at a price, which is a discount of 18% of its recent weighted trades. Kengen has about 192,000 shareholders now.

Standard Investment Bank and Renaissance Capital are transaction advisors, Dyer & Blair and Faida are sponsoring brokers and Cooperative Bank will be the receiving bank for the rights issue which will run from May 23 to June 10, 2016.

The Kenya government which owns 70% will exercise its full shareholding rights, by converting some of the loans it has advanced to Kengen into equity in the rights issue.

Kengen owns 31 power generating plants with a combined installed capacity of 1,337 MW from diverse generation modes comprising hydro, thermal, geothermal and wind power.

$1 = Kshs 100 

Kengen shares trade at Kshs 8.00 at the NSE

For Last Minute Kengen Bond Investors

There’s a nice travel site called Kenya last minute that caters to the last minute travel planners. Similarly, taking up last minute offers is a trend that also spreads to investing and there is a lot of interest now in the public infrastructure bond PIBO (not BIPO) on sale from the Kenya Electricity Generating Company (Kengen) that closes on September 29 and targets to raise almost $200 million in exchanges for paying investors12.5% interest p.a.

Anyway what’s the rush? We have had one month to make a decision that covers ten years! And if this was a share sale, we’d probably see queues of potential investors lined up around stockbrokers offices holding bits of paper, cheques, ID’s etc. at least one of whom would look into the TV cameras and say something like “serikali ingetuongezea sisi siku moja tu” (the government should add one more day for investors). The offer has not pulled queues to the street corners, but its’ excepted to achieve its goal, as targeted marketing and forums are being held around the country

So what there to tell last minute investors? Blogger Kainvestor has a nice PIBO summary derived from the information memorandum almost from the day it was released and there’s no need to repeat the good points he has noted there.

Good for retail : with an over-subscription expected, the resultant allocation is likely to favour retail investors. The minimum investment has been set at 100,000 ($1,315) which is the same as the recent Kenya government infrastructure bond that was aimed at raising at raising 18 billion, but yielded 26 billion. Then, and probably now, the allocation formula was skewed in favor of retail investor compared larger investors and institutions.

source: CBK infrastructure Bond performance report (PDF)

Bad for retail: liquidity in the secondary market for Kenyan corporate bonds is low; while the NSE twitter feed (@NSEKenya) notes that the bonds segment witnessed trades worth Kshs. 1.15 Billion (on September 24) which is an increase from Kshs. 80 million worth of bonds traded yesterday, this was all in the government bonds segment, while corporate bonds are rarely traded; those who buy them, rarely trade them, so if a retail investor is looking to cash out early, odds are not good.

Also read another BIPO analysis from the Business Daily

Kengen & other Nairobi Bonds

Lots of questions abound about whether its time to invest in bonds at the Nairobi stock exchange. From late last year when Mabati Rolling Mills launched a bond, 2009 has really been the year of the bond with the clincher being the successful Kenya government infrastructure bond of February 2009.

Now ongoing now is the Kengen PIBO for which Kainvestor reviews the prospectus. It offers a 12.5% and the minimum subscription is 100,000 shillings (~$1,316)

Next expected next is a Safaricom bond, a Centum bond ( 2 billion), and more tranches from CFC Stanbic and Barclays. It’s quite a turnaround from 2007 when companies like Athi River Mining, Safaricom and Celtel Kenya (now Zain) all redeemed /repaid bond investors at a time of low interest rates.

Track all the corporate bonds at the at the NSE daily bond report and these include East African development Bank, Barclays, Faulu Kenya, Mabati, PTA Bank, Athi River Mining, Sasini and CFC Stanbic

Buy bonds directly from stockbroker agents, but if still unsure of the process, consider investing through bonds funds such as those from Old Mutual Kenya and Dyer & Blair Investment Bank – Kachwanya reports that investors can even access the Kengen Bond at ½ the prescribed price – paying just Kshs 50,000 (~$650) instead of the subscription minimum of 100,000.

Stocks versus bonds? in the long run, as shown by this stockskenya thread, shares are likely to out-perform bonds – even the generous 12% Kengen bond.

EDIT also on offer is Uchumi Bond/10% convertible shareholders’ debenture is on. Press reports say it was valued at 12 shillings each by KPMG and is available at a discount of 10/= to shareholders of the company. The funds raised will be used to restructure the balance sheet, which shoudl lead to the end the receivership, and re-listing of the company’s shares at the NSE.

Uchumi Financial Results

published by Specialized Receiver Manager – September 2009

Share Portfolio February 2009


Quarterly portfolio review after last snapshot in November 2008

The Stable
Diamond Trust ↓
KCB ↓
Safaricom ↓
Scangroup ↓
Stanbic (Uganda) ↓

Changes
– Best performer: Diamond Trust -8%
– Worst performer Stanbic – 33%, Safaricom -23%
– In: none
– Out: none, but sold a little KCB in January

Events & Outlook
– Performance: Portfolio is down 20% in the last three months while the NSE Index is down 25%
– Did not buy KQ and Kengen as expected, but that should happen in the next few weeks as prices continue to drop
– Sat out the Co-OP IPO and made just one trade in three months (sold some KCB in January). Are brokers generating enough income to stay afloat? I hope they don’t try and introduce new charges levied on dormant investor accounts
Money markets: Got started in money markets by signing up with a CBA Unit Trust
Bond markets: The Government of Kenya has lowered the minimum investment for GoK treasury bonds to just Kshs. 50,000 (~600)
Investor awareness: The CDSC started sending out monthly statements by e-mail to investors, cutting out the postal service, and alerting investors each time shares are bought/sold using their account.