Mr Chris Kirubi, a director of Centum. PHOTO | FILE
What you need to know:
Centum and partners have planned to raise $450 million (Sh40.9 billion) in equity and the remaining $1.35 billion (Sh122.8 billion) through debt.
The firm says it will raise its share of the amount through the local capital market.
Investment firm Centum is set to raise at least Sh39 billion as its share for the $1.8 billion (Sh163 billion) Lamu Coal power plant which it is building in a joint consortium.
Centum and Gulf Energy, another Kenyan firm, form part of a consortium that won the tender to build the 960 megawatt (MW) power plant.
Chinese multinationals Sichuan Electric Power Design and Consulting Company Limited, Sichuan Power Construction Company and China Huadian Corporation Power Operation Company are also in the consortium.
The partners have planned to raise $450 million (Sh40.9 billion) in equity and the remaining $1.35 billion (Sh122.8 billion) through debt. Centum says it will raise its share of the amount through the local capital market.
“We are applying to the Capital Markets Authority to approve the fundraising. We are investing Sh39 billion in the project,” Chris Kirubi, a director of Centum said on Tuesday in an interview.
He however declined to say the market instrument that Centum will use to raise the cash, only hinting that it will be an interest bearing security. The NSE-listed could either issue a corporate bond or an asset-backed security.
“The details are yet to be finalised but we have a bias for a dollar-denominated instrument that will offer returns higher than those currently available in the market,” Mr Kirubi said.
He said that Centum hopes to raise the entire amount from local institutional investors and wealthy individuals, including pension funds and other asset managers.
“Foreign funds are waiting in the wings, but we are giving priority to local investors,” said Mr Kirubi.
Centum itself has Sh35 billion of assets under management and also invests third party funds amounting to Sh140 billion.
The fundraising comes after the consortium’s win of the tender was upheld by the Public Private Partnership (PPP) Committee after a complaint by the HCIG-Liketh Consortium which had lost the bid.
Centum is looking at the Lamu power plant to earn significant and stable long-term returns.
The consortium is expected to sign a power purchase agreement with Kenya Power which is the sole distributor of electricity to households and commercial enterprises.
Investors have been attracted to the power generation business following favourable government policy and increased economic growth that is raising demand for electricity.
The government plans to more than double the country’s power production capacity to 5,538 MW in the medium term.
Increased urbanisation, new infrastructure projects like the Standard Gauge Railway and expansion of industries are some of the factors driving demand for more electricity.
Investors in power generation, including Centum and Transcentury are attracted by long-term contracts that allow them to sell electricity to Kenya Power at reasonable profits.
For Centum, the Lamu power plant will be the single-largest project it has undertaken and marks the investment firm’s shift to new ventures.
“We are transforming from investors in other people’s businesses to initiating our own projects,” Mr Kirubi said.
He added that the company is eyeing opportunities in new sectors like education and agriculture in the medium term.
Centum’s aggressive expansion has seen it freeze dividends since 2009 to help fund the capital-intensive projects including large property developments in Kenya and Uganda.
The company is set to receive a gross amount of Sh5.2 billion from Old Mutual, to which it has committed to sell its 13.75 per cent stake in UAP Holdings.
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