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KenGen raises Sh26b in oversubscribed bond

By | November 10th 2009

By James Anyanzwa

The KenGen Public Infrastructure Bond Offering was oversubscribed by 77 per cent.

The power utility firm raised a total of Sh26.6 billion above the targeted Sh15 billion.

KenGen locked in an extra Sh10 billion under the "green shoe" option lifting its bond proceeds to Sh25 billion.

Mr Eddy Njoroge, the company’s managing director said the issue received huge interest especially from institutional investors compared to retail investors whose pool was undersubscribed by 12 per cent (Sh600 million).

"The retail segment was undersubscribed a bit," Njoroge told a media briefing at the firm’s offices in Nairobi on Monday.

A total of 2,715 retail investors applied for bonds worth Sh4.4 billion against a total offer with green shoe option of Sh5 billion worth of bonds.

Foreign investors

On the one hand 489 institutional investors applied for bonds worth Sh22.2 billion above the offer size of Sh20 billion.

Sixteen investors from the Diaspora (USA, Europe, Singapore and Tanzania) applied for bonds valued at Sh9.9 million.

Njoroge said the allocation policy for the institutional pool had been reviewed due to the over-subscription by 11 per cent.

He said all retail investors would receive full allocation for the amount applied for while institutional investors would receive allocations in full up to Sh20 million.

He explained that institutional investors with applications above Sh20 million would be allocated the balance on a pro-rata basis at the rate of 91.54 per cent.

The KenGen bond was structured in the form of an IPO in order to encourage participation by the small and retail investors.

The Sh15 billion obtained from the bond issue would help the company finance the construction of a thermal plant to the tune of Sh12 billion and the re-development of Tana hydropower project at Sh3 billion.

Upgrading power projects

The additional Sh10 billion green shoe option will be used to fund the following projects; Kindaruma 3rd unit (Sh3 billion) and Kiambere upgrading (Sh1.15 billion).

Others include upgrading of Sang’oro and raising Masinga Dam potential to the tune of Sh4.62 billion and developing Eburu Geothermal Sh847 million.

KenGen’s decision to seek funds from the debt market is a break from the company’s over reliance on financial institutions with inherent risks of foreign exchange fluctuations and delays in financing its power generation projects.

KenGen’s Debt capacity as at December 31 last year, stood at Sh27 billion, mainly from Japan International Cooperation Agency (76 per cent), International Development Association (23 per cent) and One per cent from KfW (a German Government-owned Development Bank).

This type of debt is hit by a prolonged financial negotiations leading to delays in implementation of projects.

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