Infrastructure investment firm TransCentury will use the Sh3.8 billion it earned from its Rift Valley Railways (RVR) exit to pay debts and invest in new and ongoing ventures.
Reduction of borrowings is set to lighten its interest burden while the new ventures are expected to contribute to earnings in the coming years.
Chief executive Gachao Kiuna said the firm recently repaid a large part of the Sh2.3 billion loan it took from Equity Bank.
“That debt is almost erased now, we repaid it using money from the RVR proceeds,” said Mr Kiuna. TransCentury is also set to invest substantial sums in a 35-megawatts geothermal power plant in Menengai as part of a consortium.
The firm has also prioritised re-investments in its ongoing operations and upgrading the plant and equipment of its power and engineering units in Kenya, Zambia, Tanzania, and South Africa.
While TransCentury did not give a detailed breakdown of how the RVR proceeds were used, the bulk of the cash is expected to have gone towards retiring the Sh2.3 billion credit from Equity Bank.
Paying back the debt will reduce its debt burden, with the company’s net finance cost standing at Sh676.4 million in December. This was used to service a total debt of Sh6.1 billion comprising of short and long-term borrowings.
The Equity Bank loan was the second-largest credit facility after the company’s five-year convertible bond –worth Sh5.1 billion in December— that is maturing in March 2016.
The bond has an annual interest rate of six per cent besides an additional six per cent to be paid at the end of its life for investors who will not have converted their portion into shares.