Eldoret Water and Sanitation Company (ELDOWAS) looks to be the first water utility firm in Kenya to go to the capital markets and raise debt as the sector looks to diversify funding sources and crowd in more commercial financing options to meet the growing need for capital investment.
The utility is working with financial services firm, CPF, towards structuring a Sh700 million green bond whose proceeds it says will be deployed in the expansion of the Chebara-Kapsoya Transmission Mainline project.
Speaking at the just concluded Water and Sanitation Investment Conference, CPF Group executive director Joseph Rono said the proceeds from the bond would be used to boost the project’s water supply from the present 22,500 cubic metres per day to 28,000 cubic metres per day.
“The main objective is to improve the transmission capacity of the Chebara-Kapsoya transmission mainline through the installation of parallel lines to enhance the flow capacity of the pipeline,” said Mr Rono at the conference.
“The social impact of the undertaking will be 8,000 new connections benefitting 40,000 individuals. 59 percent of Eldoret town residents use piped water while 41 percent rely on other sources which lead to health hazards like cholera.”
The Ministry of Water and Sanitation said the planned debt instrument would be a game-changer in water sector financing in Kenya with the funding gap for the National Water Sector Investment Plan estimated at Sh652 billion for the period 2023 to 2030.
“The financing gap for water and sanitation in Kenya cannot be filled with just government financing and development partner financing. The local currency is available on the Kenyan capital market and could meet the financing needs of water services providers,” said Kimanthi Kyengo, director in charge of sanitation and head of donor coordination at the Ministry of Water.
“The capital markets have a growing investor base with pension funds estimated to hold Sh1.5 trillion and insurance companies Sh500 billion.”
The leadership of ELDOWAS has, however, hinted that the issuance may be delayed owing to the prevailing situation in the capital markets where the cost of issuing debt is punitive even for risk-free government papers.
In its debut issuance of an infrastructure bond in 2024, the government gave investors 18.46 per cent in annual interest even though infrastructure bonds are tax-free.
“Other factors to consider are that current interest rates are high in the market and there is a need for a framework of assessing the creditworthiness of ELDOWAS,” said Mr Rono.
