Category Archives: Dangote

Cement Moment: CDC Buys into ARM

ARM (Athi River Mining) Cement seems to have been grappling with a short-term debt burden. It was reported that an Indian firm Ultratech was interested in investing $125 million, a few weeks ago for a stake in the firm. But today’s results announced by ARM, which show a full-year loss of Kshs 3.5 billion, 9blamed on an unrealised exchange loss  of Kshs 3.7 billion) also came with a notice that the CDC Group, the UK  government-owned development finance institution, has committed to invest Kshs 14 billion (~$140 million) for equity in the listed company.

CDC will become the largest shareholder in ARM and the company will use $110 million of the new funding to reduce their short-term debt (payments stand at about $1.5 million per month) and which totaled $200 million at the end of 2015. ARM shares have lost 2/3 of their value, now at 30 after trading as high as 80 in 2013

A few days ago, CDC also announced an acquisition of 10.7% of I&M Holdings, the parent group of I&M Bank. More detail here about ARM’s debt and fund-raising history, and when they kicked Bamburi, then a large shareholder, off their board.

Other Cement Companies

An Oxford Group report notes that The growth in (Kenya) construction activity has been a boon for producers, but the scope for further increases in the near term is sizeable, given that Kenya’s per-capita consumption remains well below that of other major economies on the continent. Annual per-capita demand for cement averages 100 kg, according to sector players, compared with 506 kg in Egypt and 230 kg in South Africa…However, the rise in domestic demand has not necessarily translated to a healthier balance sheet for the country’s producers. The average net profit margins for Kenya’s cement firms hit an all-time low of 11% last year, according to ARM Cement.

  • Bamburi: A recent investor note about Bamburi mentions that its shares have gained 25% in the last year and it increased its’ profit by 45% in an industry which recorded a decline in average net profits. Bamburi also has a generous dividend policy and has paid an increasing level of divided since 2011.
  • EAPCC East African Portland Cement is said to be trying to negotiate with the government to use some of their vast land holdings in Athi River / Kajiado area to restructure the company.
  • Dangote: Is still interested in investing in Kenya? Media reports say there’s a grinding plant in Kenya with others planned.
  • Savannah Cement completed a major plant upgrade to boost the firm’s production and efficiency.

Financing Lake Turkana Wind

Monday saw the signing of final agreements for the financing of the Lake Turkana Wind Power – LTWP project.

This was the completion of a long, 9-year process that began with a fishing trip on Lake Turkana, that yielded no fish, but a lot of wind on the boat trip. The LTWP which will generate 300 MW, using 365 turbines in Laisamis (Marsabit) was registered in 2006. Aldwych International  was brought on  as an investment and development partner in 2009.

The signing of finance deals worth 498 million euros (~ Kshs. 60 billion), will go towards LTWP which at Kshs. 75 billion is arguably both, the largest single wind power plant in Africa and, the largest single private investment in Kenya. 

The Kenya Government has committed to raising the country’s electricity generation capacity to 5,538MW (from the current 1,533MW) by the year 2017. 630MW of that will be from wind, and they have identified five strong wind areas in Ngong, Turkana, Kinangop, Kipeto, and Isiolo – and hopes that using renewable sources of energy like the wind will bring down the cost of electricity to consumers, and save on fuel import costs for the country. The government’s KETRACO agency will build a 428 kilometre, 400 kV line, from Loyangalani to Suswa Suswa to Laisamis that they say will be ready in 24 months and which will also link up with geothermal plants along the way.
Image from LTWP website

Financiers in LTWP include the African Development Bank (AfDB) who are the lead arrangers and who have provided a guarantee against some delays. The bank has also financed $1.7 billion in power generation in Africa, with 39% of that going to private sector companies. Others are the European Investment Bank. Standard Bank (Stanbic), FMO, Nedbank, EADB, PTA, PKF, DEG, Proparco and soon OPIC (US). Other partners in LTWP include Vestas (turbine supplier), the governments of Denmark (providing EUR 135 million including 120M in export credits), Netherlands, and Spain (who are financing the Laisamis- to Suswa transmission line).

Next, the Kenya government wants to expand the number of last-mile electricity connections while KETRACO also plans to extend the transmission lines to Northern and North Eastern Kenya – and on to Ethiopia, Tanzania and Uganda. This will serve the regional transmission purposes and also open up Northern Kenya. Joseph Njoroge, the Energy Principal Secretary, said additional electricity opens up opportunities such as enabling the pumping of crude oil, the possibility for electric trains to run on the Standard Gauge Railway, iron smelting, as well as clinker production (by Athi River Mining and Dangote).

edit October 2015: A deal by Google to buy shares from Vestas fell through in 2016.

edit March 2023. Some shareholding changes at Lake Turkana Wind Power as CPF UK Holdings to acquire a controlling 31.25% stake from other shareholders.

edit: The new investor buying out Finnfund, is the Climate Finance Partnership (CFP), a fund managed by BlackRock Alternatives. Finnfund, which was a shareholder since the construction began in 2014, exits after doubling its investments in “undeniably one of the best wind sites in the world” – that was built on time and on budget despite its size and remote location. Finnfund will continue to make more renewable energy investments, including a recent one in a geothermal power project in Nakuru County, Kenya.