KenGen raises Sh26.4 billion in the largest rights issue at Nairobi bourse

Listed power producer Kenya Electricity Generating Company (KenGen) has raised Sh26.4 billion in the largest rights issue ever undertaken at the Nairobi Securities Exchange (NSE).

KenGen fell short of the targeted Sh28.7 billion following a 92 per cent subscription, thanks largely to institutional investors.

The government, the majority shareholder in the power company with a 70 per cent stake, took up its full entitlement through conversion of a Sh20.1 billion debt to equity indicating the company received Sh6.3 billion in cash.

Institutional investors paid Sh3.6 billion to take up additional new shares in the company, which had been forfeited by retail owners, signalling a change in the ownership structure of KenGen.

“Excluding government participation, 58.2 per cent of the offer was taken up under additional shares and rump (additional allotment) applications rather than entitlement,” said Standard Investment Bank who were the transaction advisors.

The rump issue, which involved sale of a minimum 100,000 untaken rights to institutional investors and high net-worth individuals, raised Sh1.7 billion.

READ: KenGen's share picks up steam on local investor appetite

ALSO READ: State uptake of KenGen rights to cut finance costs

KenGen was selling 4.4 billion new shares at Sh6.55 each to its existing shareholders at a ratio of two for each share held to raise the targeted amount.

There were 351,210,589 untaken rights resulting in a Sh2.3 billion shortfall. The short fall will hamper KenGen’s plan to finance capital expenditures in geothermal and wind-power generation. KenGen had planned to spend Sh20.1 billion to settle expensive debts and the remaining Sh8.6 billion in capital expenditure.

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

“For the projects planned in the medium term, the funding raised is insufficient but we suspect the company will use a combination of joint ventures, special purpose vehicles and debt to exploit existing resources at its disposal,” said Standard Investment Bank.

The new shares will start trading at the Nairobi Securities Exchange on Wednesday.

“All applicants will receive 100 per cent of the new shares applied for,” said KenGen’s company secretary Rebecca Miano.

KenGen’s share price at the open market had converged around the discounted rights issue price leading to the low uptake of rights by retail investors.