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Capital Markets

New projects to deny KenGen investors dividend

Kengen shareholders during the company Annual General Meeting (AGM) at Safaricom Kasarani Stadium on November 30, 2016. PHOTO | SALATON NJAU | NMG
Kengen shareholders during the company Annual General Meeting (AGM) at Safaricom Kasarani Stadium on November 30, 2016. PHOTO | SALATON NJAU | NMG  

KenGen #ticker:KEGN investors are unlikely to enjoy a dividend in the next three years as the power generator moves forward with costly plans to increase generation, analysts say.

The expected capital expenditure is tied to plans for an additional 721 megawatts into the grid by 2022, which Genghis Capital says will mean ploughing back profits to supplement debt financing.

The NSE-listed firm last Friday announced its half-year to December 2017 net profit dropped by 11.4 per cent to Sh4.09 billion, despite recording higher electricity sales.

“This is the second year without a dividend, a departure from prior years’ policy of a 30 per cent dividend pay-out,” said Genghis in a report on KenGen.

“Under its 2016–2022 plan, at a cost of approximately Sh135 billion, 721 megawatts of additional power is expected to flow to the grid. These projects will mainly be debt-financed and will require support of equity capital. Factoring the heavy capital needs for the power projects, we do not expect a dividend at least in the next three years.”

In the full year ended June 2017, KenGen did not pay a dividend in spite of a 34.3 per cent increase in cent earnings to Sh9.05 billion, also on a need to finance capital expenditure.

Genghis expect the debt component to eat into earnings through higher financing costs by the end of the financial year.

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