MSC concludes Sh1.6 billion debt financing deal

By James Anyanzwa

Mumias Sugar Company (MSC) has concluded the acquisition of Sh1.6 billion $20 million medium-term debt financing from a consortium of banks led by Ecobank Kenya to fund its Ethanol production plant.

Dr Evans Kidero, the firm’s Chief Executive signed the loan agreement with the financiers at the company’s offices in Nairobi on Monday.

The other bank participating in the syndicated loan includes Commercial bank of Africa (CBA).

Mumias Sugar Company Managing Director Evans Kidero (right)and Ecobank Kenya Managing Director Tony Okpanachi sign a deal to finance a new ethanol plant for the sugar miller yesterday. [PHOTO: ANNE KAMONI / STANDARD]

Kidero said ethanol production would help boost the firm’s revenue streams ahead of the expiry of the Common Market for East and Sothern Africa (Comesa) safeguard measures on December 31 2011.

He was optimistic the product would find a ready market in the region.

"The market for ethanol is ‘unlimited.’ It is an inexhaustible market," Kidero told reporters during the signing ceremony.

MSC’s ethanol is meant for use in the East Africa Community (EAC) and the Comesa markets.

The plant is projected to produce about 22 million litres of ethanol against an approximated total demand of between 40-50 million litres annually.

The Sh3.6 billion ($45 million) Ethanol plant is scheduled for completion by December next year.

project implementation

MSC is now in the preliminary stages of implementing the project, which is to be financed through a mixture of debt and equity in the ratio of 44 per cent: 56 per cent.

"We are borrowing $20 million while $25 million will be generated from our internal sources," Kidero said.

MSC is seeking to support compliance with the government legislation requiring petrol sold in the Kenyan market to be blended with ethanol.

The sugar miller also plans to start producing bottled water to bolster its earnings and maintain profitability in the competitive sugar industry.

These initiatives are part of the company’s growth and diversification plan ahead of the expiry of Comesa safeguard measures.

The expiry of these safeguard measures will open up the local sugar industry to cutthroat competition from imports in the regional trading bloc. The industry in the region is expected to get more competitive forcing sugar firms to lower their cost of production and expand their product range to create new revenues.

MSC’s water-bottling plant will utilise excess water from the co-generation plant operations, which was commissioned in the last financial year.