Paul Ndung’u tops KenGen owners roll ahead of rights issue

Businessman Paul Wanderi Ndung’u has bought 3.3 million shares of KenGen, making him the top individual shareholder of the NSE-listed power producer.

Regulatory filings show that Mr Ndung’u acquired the shares in the three months to December, with the value of his holdings rising to about Sh21.3 million based on KenGen’s current share price of about Sh6.40 apiece.

His purchase of the Nairobi Securities Exchange-listed firm’s shares comes ahead of the company’s rights issue that is expected to raise Sh8.6 billion.

The cash call will also see the government convert its loans to KenGen amounting to Sh20 billion into equity, implying that the Treasury will participate in the transaction without providing new cash.

The power producer is betting on the rights issue, expected to be concluded by June, to fund its expansion plan by injecting new capital and boosting its capacity to take on new debt.

The investment by Mr Ndung’u comes at a time when the KenGen share price has dropped significantly, partly due to investor fears of dilution in the rights issue, making it one of the cheapest counters on the Nairobi bourse.

The share price has lost 35 per cent over the past one year, touching new lows of Sh5.4 in recent weeks.

At current levels, the firm’s stock is trading at 0.1 times its net assets. The company on Thursday paid a dividend of Sh0.65 per share, representing a yield of 10 per cent based on its current trading price.

READ: KenGen shareholders approve Sh28bn rights issue

KenGen joins the list of publicly traded firms where Mr Ndung’u is the top individual investor.

He is also the largest individual investor in Kenya Re with 2.3 million shares worth Sh45 million and in Uchumi where he holds 18.8 million shares currently valued at Sh132 million.

Besides the Nairobi bourse, the businessman recently expanded his interests in private equity, with the buyout of agriculture and hospitality equipment company G-North & Son Limited from the Philip Ndegwa family.

Accumulation of KenGen’s shares signals his confidence in the company’s future prospects. The power producer plans to undertake several projects to increase its installed capacity from the current 1,611 megawatts to 2,122 megawatts by 2018 at a cost of $1.75 billion (about Sh178 billion).

These include a 50-megawatt wellhead for leasing, three new 350-megawatt Olkaria geothermal projects, a 400-megawatt wind project in Meru and the rehabilitation of the Olkaria 1 plant.

KenGen is counting on the cash call to fund the ambitious expansion by providing the new cash and retiring part of its existing debts so it can borrow more.

Its short-term liabilities exceeded its current assets by Sh1.1 billion in the year ended June compared to a net current asset position of Sh2.4 billion the year before. It plans to use the cash from the rights issue to revert to a net current asset position.

The power producer took a new Sh7 billion loan from Co-operative Bank during the year, pushing its total debt to Sh144 billion from Sh134 billion last year.

Its net profit in the year ended June rose four-fold to Sh11.5 billion, powered by increased sales and a tax credit.