KenGen replaces chair, targets equity sale with 7.7bn shares
Mr Titus Mbathi (left) and Mr Musa Ndeto. FILE
What you need to know:
Board head Titus Mbathi and directors Musa Ndeto and Mary Michieka retire as firm plans first rights issue.
KenGen has announced a board shake-up with the exit of its chair as the power generator this morning informs investors of the first rights issue since listing and the potential sale of a significant stake to a strategic investor.
The firm is seeking shareholder approval to create 7.78 billion shares of which up to 2.21 billion will be offered to its owners for a multi-billion shilling fund raising that could further cut the stake of the government in the utility.
The 2.21 billion shares worth Sh35.1 billion will be set for the rights issue and are equivalent to its entire issued stock at the Nairobi Securities Exchange (NSE).
KenGen did not explain how it intends to use the remaining 5.56 billion shares, but the firm earlier talked of plans to sell stakes to equity investors as it races to raise Sh467 billion ($5.5 billion) in debt and equity between now and 2018 to finance plans to double generating capacity.
The firm also informed shareholders that its chairman, Titus Mbathi, and directors Musa Ndeto and Mary Michieka were quitting; deepening the board changes that begun with retirement of its CEO Eddy Njoroge.
The appointment of new officials at Treasury and energy ministry after the March 4 Election has also ushered in Henry Rotich, the Treasury secretary and Joseph Njoroge, the PS in the energy ministry to KenGen’s board.
Mr Mbathi, 85, Mr Ndeto, 61 and Ms Michieka, 67, were some of the firm’s longest serving directors.
“That the authorised share capital of the company be and is hereby increased … by the creation of 7,784,072,472 new ordinary shares ranking pari passu in all respects with the existing ordinary shares in the capital of the company,” says KenGen in a notice that will appear in the press Friday.
Simon Ngure, KenGen’s acting managing director, said earlier the electricity producer plans to generate additional 2,500 megawatts in the next four years and the firm needs Sh467 billion
“The money will come from a split of equity and debt. We will maintain equity to debt ratio of 30:70,” said Mr Ngure.
This means that Sh327 billion will be raised from commercial banks and development finance institutions and the remaining Sh140 billion will come from a rights issue, joint ventures and sale of shares to strategic investors.
If the new shares are offered to strategic investors, it will dilute the State ownership in the firm and could make the firm a private entity should the government holding falls below 50 per cent.
“The government intends to defend its position in KenGen, but a final decision on the state’s next move will be made by the cabinet,” Davis Chirchir, the energy cabinet secretary told the Business Daily in an interview without giving details.
The government owns 70 per cent and the remainder is held by retail and institutional investors who bought shares in the firm after its 2006 IPO. KenGen did not give time lines for either the share sales.
Frequent blackouts
The country faces frequent blackouts due to generation shortfalls and an ageing grid, forcing most businesses and wealthy people to have stand-by generators.
The country’s average daily electricity demand stands at about 1,700 megawatts, against supply of 1,600MW mainly from rain-fed hydroelectric generators.
The government targets to add 5000MW to the national grid over the next 40 months and KenGen is working to increase its geothermal power generation.
A tax credit has helped KenGen post a net profit of Sh5.2 billion in the year to June compared to Sh2.8 billion a year earlier as its sales grew 3.79 per cent to Sh16.4 billion.
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