Capital Markets

CMA approves KenGen’s Sh28.8bn cash call set to start on May 23

The Capital Markets Authority (CMA) has approved Kenya Electricity Generating Company’s (KenGen) Sh28.8 billion cash call which will start on May 23 with the Treasury confirming it will take up its Sh20.2 billion worth of shares.

The company said the government, which holds a 70 per cent stake in the power producer, has already undertaken to convert some of its loans into equity through the rights issue — which will considerably reduce the firm’s interest payments.

In a statement, KenGen said the rights will be priced at Sh6.55 each, a 22.94 per cent discount on the stock price on May 4 this year.

The price is also an 18.33 per cent discount on the average price for the 30 trading days preceding the approval of the issue by the board.

“The board is pleased to confirm that the government of Kenya has indicated that it will take up its full entitlement in the rights issue, representing 70 per cent of the transaction through a conversion of some of the loans on-lent by the government to KenGen equity shares,” said the company in a statement.

READ: KenGen Sh28bn issue will mainly pay Treasury debt

Inject new equity

For participation, investors have to be on the register of shareholders of the company by 3pm on May 16, according to company secretary Rebecca Miano’s statement to the Nairobi Securities Exchange.

“The shareholders of KenGen will have the right to subscribe to two new ordinary shares for every one ordinary share held on the register closure date on Monday, May 16, 2016,” said KenGen.

The CMA confirmed the approval in a separate statement. “The proceeds of the rights issue will be used partly to fund new geothermal and wind power projects... The funds will also inject new equity into the company so as to create additional headroom that will enable it to access long-term loans at low interest rates to facilitate its expansion,” said the CMA.

KenGen is seeking to raise at least Sh140 billion ($1.4 billion) for investments in power generation for the years up to 2019.

Already, some foreign lenders have pledged to lend the firm tens of billions of shillings. By 2019, the company expects to have generated an extra 844 megawatts having already created capacity of close to 400MW after launching a series of production in geothermal plants as at the end of March this year.

By the end of the first quarter of this year, KenGen had a total installed capacity of 1,617MW out of the national capacity of 2,300MW, indicating that it has a share of over 70 per cent.

In the new fundraising initiative, those who will not subscribe to their allotment will be diluted. Investors are free to sell their rights on the NSE if they don’t take up their entitlement.

The opening date for the rights issue will be May 23.

The last date of renouncing the rights is May 27 and the closing date of the offer is June 10. Listing and commencement of trading will be on July 6.