Weeks after failed sale, power producer gets Danish suitor

Kenya Power technicians replace lines on Ngong Road in Nairobi.
Thermal power producer IberAfrica is up for sale again. The owners of the company, which operates a diesel power plant in Kenya, are in the process of selling it to a Danish firm, AP Moller Capital.

The Copenhagen-headquartered firm will acquire IberAfrica through its Africa Infrastructure Fund (AIF) and said it had set aside Sh20 billion for the acquisition as well as other investments in Kenya.

In a notice, the Comesa Competition Commission said it had received an application from AP Moller on its intention to acquire IberAfrica through AIF and is now seeking views from the public on the planned transaction.

The regional competition watchdog said it had received a notification on “the merger involving the acquisition of 100 per cent shares in IberAfrica Power by Africa Infrastructure Fund I... via AIF East Africa Power and Energy LLP”.

The new plan to sell IberAfrica comes shortly after a similar deal with South Africa’s AEP Energy Africa, which wanted to buy the power producer at Sh6.2 billion, collapsed.

The companies had signed a sale agreement last year June but the deal failed to go through on time and on October 30, AEP Energy notified its shareholders that the period within which it had to conclude the deal had lapsed.

Delays from AEP Energy resulted to the owners of IberAfrica issuing a notice to the firm in March this year that it would terminate the agreement due to the long period it was taking to conclude.

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In the new application, AIF said it would invest $200 million in acquiring IberAfrica as well as other investments in Kenya, including some projects that it will start from scratch.

“The acquirer has established a special purpose vehicle by AIF I to invest, own and operate power and energy infrastructure assets in Kenya and has a target to invest $200 million in equity capital in greenfield and brownfield power and energy infrastructure assets in Kenya,” said the Comesa commission in its notice inviting stakeholders to submit their views by November 27.

IberAfrica owns a 52.5 megawatt oil-fired plant at Lunga Lunga Road, Industrial Area. It has a power purchase agreement (PPA) with Kenya Power which will expire in 2034, guaranteeing the AIF steady revenues for the next 15 years should the deal go through.

The PPAs that electricity producers sign with Kenya Power are structured in a ‘take or pay’ model, where the power retailer pays the producer even when they are idle and not generating electricity.

One of IberAfrica’s PPAs lapsed this year, halving the amount of power that it can feed to the grid from 103.57MW. According to disclosures made while it sought approvals for the initial sale, IberAfrica reported a revenue of Sh6 billion in the year to December 2017 while its net profit was Sh580 million.

The firm is owned by First Independent Power (Kenya), which is wholly owned by Global Power Generation, SA, which is in turn owned by Naturgy Energy Group, SA and Wren house Infrastructure Management Limited.

The AP Moller-backed African Infrastructure Fund says it is targeting infrastructure projects within energy and power including transmission, as well as roads, rail and distribution centres.

Other key investors are Danish pension funds and have committed $1 billion (Sh100 billion).

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AP Moller CapitalThermal powerAfrica Infrastructure Fund