KenGen expects to conclude rights issue by year-end
NAIROBI (Reuters) - Kenyan power producer KenGen (KEGN.NR) said it aims to complete a 15 billion shilling ($171 million) rights issue by end-2014 and hopes to have a commitment from the government by August on the amount of financial support it will provide.
In February, KenGen said it planned to raise a total of 30 billion shillings this year, with 15 billion coming from shareholders via a rights issue on the stock exchange. The rest would be raised by the government using means it has yet to determine.
Albert Mugo, KenGen managing director and chief executive, said on Tuesday there was a possibility the government could chip in more than its earlier planned 15 billion shillings but that the figure would not exceed 20 billion.
He said the power producer was waiting for the state, which holds a 70 percent stake, to decide how it will raise funds and hoped a decision would be made by August.
"Between now and August, it's likely that we will have got government approval of what it will contribute to the rights issue, which will then enable us to start finalizing our information memorandum for approval," Mugo told Reuters in an interview.
He expected the rights issue to be completed by the end of the year.
Mugo said the proceeds would enable KenGen to restructure its balance sheet and take on more debt as it seeks to add 844 megawatts to its installed capacity of 1,252 MW by end-2017.
Its expansion plan is part of a broad national program to add 5,000 MW by 2017 to Kenya's current capacity of 1,664 MW. A growing economy is expected to Kenya's need for power generation capacity to 15,000 MW by 2030.
Mugo said in February that KenGen had proposed that the government raise the additional funds by converting some of the loans it had made to KenGen into equity and, in future, seek other business partners.
By the end of this year, the utility will add a total of 327 MW from geothermal and wind power, Mugo said.
The Kenyan government succeeded in issuing a debut Eurobond of $2 billion in June, but KenGen is not ready to follow it, although it already borrows in foreign currencies, he said.
The government has said the Eurobond will act as a bellwether for Kenyan firms seeking to access funds on international markets.
"I don't think we are ready for an international bond as yet. It might be one of the options we will be looking after we restructure our balance sheet," Mugo said.
Kenya is pushing to slash its heavy reliance on rain-fed dams and to use more geothermal and other sources to halve the cost of power production from the current $0.17 to $0.18 a kilowatt hour over the coming three to four years.
That will largely involve replacing diesel generation, which costs about $0.35 per KWh. Geothermal is the cheapest alternative, costing about $0.08 to $0.09 per KWh, the government has said.
($1 = 87.7500 Kenyan Shillings)
(editing by Jane Baird)