East African Cables banks on Sh2b sweetheart deal with Kenya Power
SCI & TECH
By Lee Mwiti | May 5th 2016
East African Cables has landed a lucrative Sh2 billion contract with Kenya Power to supply cables that will be used in the Last Mile Connectivity programme.
Kenya Power has been importing cables from Chinese and Indian manufacturers, spending billions of shillings a year to purchase copper transmission wires, which are required to connect electricity to households and industries.
As Kenya invests more in power generation and meets the demand for increased connectivity, the Nairobi Securities Exchange-listed company is well placed to profit. The firm, which exclusively manufactures electricity transmitting cables, has struggled to make money in the face of increasing competition from these Asian giants.
It is now banking on a share of these Kenya Power billions to appease shareholders who have gone without dividends for years.
In fact, the management led by board chairman Zephaniah Mbugua is so confident about the impact of this deal that it has assured investors that they would take home dividends this year. The company suffered a loss of Sh1.09 billion last year.
At its AGM on Thursday, Mr Mbugua said competition from Chinese and Indian products, as well as a fall in metal prices internationally affected the company’s performance in the last financial year.
Agitated shareholders were keen on the company revival strategy, prompting CEO Peter Arina to assure them that the completion of the new aluminum plant and the Kenya Power deal would boost dividends.
The issue of East African Cables’ parent company Transcentury Ltd stood out saliently like a sore thumb.
But Mbugua was quick to explain that the troubles bedeviling Transcentury had not reached at the subsidiary level.
“We have stood strong as a company. In fact, the parent company has lent us money as we seek recovery,” Mbugua said.
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