Laikipia sees 12pc price for Sh1.16bn bond plan


National Treasury Cabinet Secretary Ukur Yatani during a past interview at his office. FILE PHOTO | NMG

Laikipia County projects its inaugural Sh1.16 billion infrastructure bond will offer investors a return of between eight and 12 percent when it’s floated in market subject to approval by Treasury secretary Ukur Yatani.

The county will present the proposal to raise cash from capital markets to Mr Yatani before end of the week following last week’s approval by county assembly, Governor Ndiritu Muriithi said on Tuesday.

Laikipia has inched closer to becoming the first county to issue an infrastructure bond since the advent of devolution eight years ago under Article 212 of the Constitution and Section 58 of the Public Finance Management (PFM) Act 2012.

“Inside a month we expect to go to the market because the Treasury is merely checking that we have complied with the requirements of law,”Mr Muriithi said on phone.

The law requires the devolved to be guaranteed by the Treasury to raise cash from investors upon meeting stringent conditions such as ability to repay as reflected by revenue collection trends and viability of capital projects to be funded.

The county says proceeds from the proposed seven-year bond issue will be invested in water and sewerage systems, building paved roads, walkways and cyclist paths as well as enhancing street lighting and enforced building zones.

The targeted projects, the county chief said, will help spur economic activity, helping it enhance revenue collections through single business permits, parking fees, land rates as well as water and sewerage connection charges.

The bond will be priced at the same rate as a seven-year Treasury bond since it’s guaranteed by the National government.

“At the moment you would say anywhere from eight to 12 percent, but it’s difficult to be precise. We have to see the prevailing market conditions through the month,” Mr Muriithi said.

The Treasury was until March, when it published guidelines on borrowing by the counties, reluctant to guarantee the devolved units, which largely rely on the central government for funding, to raise funds from investors through the capital markets since 2013 when they started operations.

Kisumu, Bungoma and Makueni are other counties which had shown interest in issuing bonds to fund projects.

“There’s been a good level of interest for counties to raise capital or market-based finance, particularly based on their equitable transfer which is largely used in addressing recurrent expenditure,” Capital Markets Authority director for regulatory policy and strategy Luke Ombara said on April 29.

“But they would also want to get into projects and you need long-term money to fund such long-term projects such as infrastructure, energy and building of resorts.”