Private equity firms set sights on power sector

Private equity investors are showing increased interest in Kenya’s power sector as lower investments by the government in building new power plants opens a fertile business opportunity for private capital.

Lawyers and players in the power sector say that consortia led by private equity funds are making enquiries on the investment opportunities in the energy market as investments in the local power sector emerge as a high-return business.

The country is targeting to add 800 megawatts of electricity to the national grid in the next five years at cost of Sh111 billion, but the government and power generator KenGen say it can only meet part of cost with balance being met by private investors.

“We are getting enquiries from two to three PE (Private Equity) firms every month asking about investment interests and the power sector is receiving the highest enquiries,” says Mr Nani Mungai of Murui Mungai & Co Advocates.

Joseph Njoroge, the managing director of Kenya Power and Lighting Company (KPLC) echoes the sentiments: “We are receiving a number of unsolicited enquiries from a wide range of investors including private equity players.”

Already global PE shops such as Aldwych International, Globeleq and local PE Transcentury are active in the local market but indications are that they would be increasing their stakes through new projects being lined up across the country.

With ready demand for power, it guarantees the PE funds a steady flow of profits and cashflow — a major attraction for private investors.

Citadel Capital of Egypt and Helios Partners are some of the PEs that are keen on deploying their funds on Kenya’s infrastructure projects.

Aldwych International has a controlling stake in the 300 megawatts Lake Turkana Wind Power project and has a stake in Rabai thermal power plant.

Transcentury is linked to Simba Energy, which is constructing a Sh7.5 billion ($100 million) electricity generating plant in Mombasa while Globeleq has a stake in the 75 megawatts Tsavo thermal plant.

“We have been approached by various entities in the region to participate in other wind and clean energy projects and we are evaluating these proposals. We remain interested in this industry in this region with an intention to invest further,” Mr Carlo van Wageningen, the chairman of Lake Turkana Wind Power Limited (LTWP) told Business Daily without elaborating.

Mr van Wageningen said the group was optimistic of breaking ground by September and have the project completed by 2012 following a successful equity partnership agreement.

“All the equity is fully committed and the final balance debt is being arranged,” he said in response to a question on financing status. “It is our intention to work on phase two of this project once the first phase will have reached financial close envisaged for July/August this year.”

The chairman said that the equity would form 30 per cent of the total project capital cost and that partners had fully committed.