Move is part of the insurance group’s plan to diversify into long term ventures with high return.
Insurance group Jubilee Holdings is set to raise its stake in Uganda’s Bujagali hydro-electric power plant as it prepares to buy shares from one of the project’s founder shareholders in a Sh5.5 billion transaction.
Sithe Global Power LLC is selling its interest in the venture, with Jubilee and Norway-based SN Power emerging among the buyers of its shares.
“We are investing an additional Sh5.5 billion in Uganda’s 250-megawatt Bujagali hydro-electric power project which is an additional 8.8 per cent in the equity of the project,” Jubilee’s chairman Nizar Juma said.
“We are taking more equity from Sithe Global that is exiting,” he said, adding that the transaction is expected to be completed in a few weeks.
Jubilee’s current stake in the project was not immediately clear. The Nairobi Securities Exchange-listed firm, however, holds a significant interest in the venture in which it is a founder shareholder alongside a consortium of other institutional investors.
One group of investors is led by the Aga Khan Fund for Economic Development (AKFED) which has co-invested in the project with its subsidiaries Industrial Promotion Services (Kenya) Limited and Jubilee.
The other group is led by New York-based asset manager Blackstone Group which has also co-invested with its associates Reservoir Capital and Sithe Global which is now selling its shares.
Shareholders of Bujagali — which supplies 40 per cent of Uganda’s electricity — are to operate the plant for 30 years before transferring it to the government of Uganda around 2042. The project was commissioned in October 2012.
Its building lasted five years, with the partners contributing to the construction cost of $900 million (Sh90 billion at current exchange rates).
For Jubilee, the increased purchase of Bujagali shares is part of its strategy of diversifying its investments into long-term ventures with high returns. The company has over the past few years reduced its exposure in listed firms, cushioning it from the bear run at the Nairobi bourse.
The firm has also invested in Tsavo Power, a private electricity producer in Kenya.
Jubilee also has interests in property development and fund management besides holding a stake in fibre optics infrastructure firm Seacom.
Besides increased investments in private ventures, Jubilee is also looking at regional expansion to other markets, having recently started operations in the Democratic Republic of Congo (DRC) with its medical scheme.
It is currently eyeing an entry in Ethiopia, subject to regulatory approvals. Some of the prospective new markets include Rwanda, South Sudan and Zambia.
The company posted a 7.5 per cent growth in net profit in the half year ended June, helped by an increase in premiums.
Its net profit in the period stood at Sh1.5 billion compared to Sh1.4 billion a year earlier.
This came as gross premiums rose 6.8 per cent to Sh17.1 billion. The company is launching a specialist (or referral) model in Bancassurance through partnerships with several other banks, a move that is expected to boost its life insurance business segment from this second half.
Mr Juma said the company is well capitalized and has achieved and surpassed the minimum new risk based capital required for both life and general business.
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