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South Africa firm dilutes Kenya’s stake in KenGen

By Macharia Kamau | Published Thu, November 23rd 2017 at 00:00, Updated November 22nd 2017 at 20:58 GMT +3
KenGen Chairman Joshua Choge (right), Managing Director Rebecca Miano (left) and Finance and ICT Director John Mudany during KenGen's 64th Annual General Meeting at the Kasarani Gymnasium in Nairobi. [Boniface Okendo, Standard]

In summary

  • Public Investments Corporation says it has approved funds to acquire a 10 per cent equity stake in power producer.
  • Shareholders protested at the AGM due to a two-year dividend drought

Government’s shareholding in KenGen has dropped following aggressive investment by South Africa’s Public Investments Corporation (PIC).

National Treasury’s stake in the power producer stood at 70 per cent in the year to June 2017, compared to 73.9 per cent shareholding in the previous year.

PIC bought into KenGen early this year, with its stake standing at 1.36 per cent as at March 2017, according to KenGen. In its annual report for 2016/17 financial year, PIC said it had approved funds to acquire a 10 per cent equity stake in KenGen and has in the course of this year increased its stake to 10 per cent.

Other shareholders were also be diluted by 5.3 per cent following the entry of PIC into KenGen’s roll of shareholders.

KenGen Chief Executive Officer Rebecca Miano told shareholders during the firm’s Annual General Meeting that the transaction was concluded this year.

She also told shareholders KenGen was registering a subsidiary, KenGen Energy Services, which would offer consultancy services as the firm starts to diversify revenue streams. Other than the sale of electricity to Kenya Power, the firm has in the recent past started offering consultancy and drilling services and sale of geothermal steam.

During the AGM, shareholders decried a two-year dividend drought, noting this is despite the company reporting profits. The company’s profit after tax grew 34 per cent to Sh9.1 billion in the year ended June 2017. The firm, however, said it would not pay dividends for the year as it plans to plough back profits in putting up power plants as part of its plan to increase power generating capacity by 721 megawatts. It currently has an installed capacity of 1,631MW.

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The shareholders, however, expressed their disappointment and also took issue with the amount paid to the board members. “The reason we invested in KenGen is so that we can get a return and not just in form of capital gain but also an annual dividend. We have looked at your emoluments and note that if you go without a dividend, it is not a big deal because you have the emoluments,” said Daniel Kimotho, a shareholder.

“We are a bitter lot especially bearing in mind that it’s the second year in a row that we have gone without dividends.”

KenGen Chairman Joshua Choge said there is a need for the firm to continue investing to guarantee its future, with the industry increasingly becoming competitive.

“We acknowledge that we should have paid dividends but also understood that we needed to inject some money in the projects that we are currently undertaking, which when completed will significantly grow the value of your shares. We could have paid dividends but we would not be able to complete the projects on time. We are a responsible board that wants to grow shareholder wealth,” he said.

Mr Choge added that the company’s non-executive directors were critical in helping the management in steering the company and what they were paid was a token. The directors were paid Sh44.6 million in the year to June 2017.

“The board members sacrifice their time. They are also highly qualified individuals who give their input to the company’s strategy with the aim of further growing it.”

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