NSSF eases grip on KenGen after offloading Sh134m stake

The National Social Security Fund (NSSF) has traded its 17.3 million shares in Kenya Electricity Generating Company (KenGen), losing its long-held position as the second largest investor in the power producer.

KenGen’s latest annual report shows that the fund had exited the Nairobi Securities Exchange-listed firm’s list of top owners as of June, having held the shares equivalent to a 0.8 per cent stake in December 2014.

The shares traded by NSSF are currently worth Sh134 million based on the power producer’s current share price of Sh7.7 apiece.

A local institution, investing under a Co-op Bank custody account, is now the second largest shareholder of KenGen with 13.1 million shares.
The exit of NSSF is a rare one for the government-controlled fund that typically invests long term, especially in firms where the State has a significant or majority stake.

The fund’s current co-investments with the government include substantial interests in KCB Group, National Bank of Kenya and Safaricom. 

Its KenGen divestiture comes ahead of a rights issue announced by the power producer that is expected to raise Sh28.6 billion.

Only the government, with a 70 per cent interest in KenGen, will participate in the cash call without putting in new money.

The government will instead convert its debts amounting to Sh20 billion into shares, leaving other investors to provide the remaining Sh8.6 billion in cash to avoid dilution.

“These proceeds comprise new cash estimated at Sh8.6 billion to be raised from the minority shareholders. The on-lent loan is expected to convert to equity when new shares are issued to the government from the rights issue,” KenGen said in its annual report.

READ: KenGen board approves Sh28 billion rights issue

The rights issue is meant to help fund KenGen’s planned projects by bringing in new cash and raising its ability to borrow more, including from international development finance institutions.

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 (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’s 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 booked a new Sh7 billion loan from Co-operative Bank during the year pushing its total debt to Sh144 billion from Sh134 billion last year.

The power producer hopes to make annual savings of approximately Sh1.8 billion for the next seven years which relates to the amount previously paid to service the government loans.

Its board is seeking shareholders’ approval to create an additional 7.8 billion shares to be sold to the owners during the rights issues.

KenGen could price the rights issue at a discount as is the norm with shareholder cash calls. The stock has dropped 29 per cent over the past one year.

The company saw its net profit in the year ended June rise four-fold to Sh11.5 billion, powered by increased sales and a tax credit.

This saw the utility declare a dividend of Sh0.65 per share, up from the Sh0.4 paid on the previous year’s results.