An investor at the Nairobi Securities Exchange monitors trade at the exchange office in Nairobi. PHOTO | FILE
What you need to know:
The Kenya Power stock is up 18.7 per cent to Sh17.15 year-to-date—carrying on a trend established in 2014—even as power generating firm KenGen has shed three per cent to Sh10.
The stock has been among the leading beneficiaries of foreign investor inflows since the beginning of the year, attracting Sh197 million in net inflows for the first three months of 2015.
Kenya Power continues to outperform other energy stocks at the NSE this year, driven by sustained demand from foreign investors.
The stock is up 18.7 per cent to Sh17.15 year-to-date—carrying on a trend established in 2014—even as power generating firm KenGen has shed three per cent to Sh10.
Kenya Power has been among the leading beneficiaries of foreign investor inflows since the beginning of the year, attracting Sh197 million in net inflows for the first three months of 2015.
This is only behind KCB and Co-operative Bank which have net inflows of Sh550 million and Sh436 million respectively.
“The appetite for the stock by investors has been strong, bringing the higher gain compared to KenGen for instance. KenGen has delivered more robust numbers compared to Kenya Power, but has not had a similar performance at the market,” said Standard Investment Bank analyst Eric Musau.
Oil marketer stocks Total and KenolKobil have only registered modest movement this year. Total’s share is down 2.1 per cent to Sh23.50, while KenolKobil has gained 2.3 per cent to Sh8.90 this year.
Worst performer
Cross-listed Ugandan power distributor Umeme Ltd remains the worst performer in the segment, down 14.5 per cent to Sh17.95 even as it enjoys more trading following last year’s sale of a significant stake held by UK private equity firm Actis.
A number of Kenyan investors bought shares from Actis and deposited the units in local CDS accounts last year giving the counter local market float that was previously lacking as the shares were almost wholly in the Ugandan CDSC system.
Mr Musau said going forward the fundamentals of both Kenya Power and KenGen are robust enough, with fund raising not a risk for either firm even in the face of huge capital expenditure.
Utility companies globally are capital intensive due to the required equipment and machinery as well as associated maintenance costs.
“Their balance sheets show that they can service their obligations,” said Mr Musau.
He, however, said Kenya Power needs to diversify from relying solely on debt and retained earnings for the capital expenditure, and could consider an equity issue. KenGen is planning to do a rights issue to fund new power stations.
In the long run, Mr Musau said, KenGen will be buoyed by delivery of power projects, which give the share some upside.
Analysts at Genghis Capital say considering the high capital requirements (Sh87.7 billion in 2014), the support the companies receive from the government which is trying to achieve the targeted 5,000 megawatts of power by 2017 is also a big boost to both Kenya Power and KenGen.
“Most of their debt is acquired on concessional terms due to the social impact of energy projects. Loans guaranteed by the government accounted for approximately 48 per cent of total capex in 2014,” said Genghis in their 2015 market outlook.
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