KenGen approves rights issue to raise billions for energy projects

The Kenya Electricity Generation Company (KenGen) board has approved a rights issue to raise billions of shillings for its energy projects.

The power producer said it would seek investors’ approval to issue up to 7.8 billion shares, reversing last year’s decision to issue up to 2.2 billion ordinary shares. KenGen has previously said it would raise Sh28 billion.

Company secretary Rebecca Miano said the board’s resolution on the cash call now awaits the approval of the firm’s shareholders at an annual general meeting to be held in December 16.

Further approvals are expected from the Capital Markets Authority and the Nairobi Securities Exchange (NSE).

“The KenGen board of directors has approved the following rights issue resolution… that the directors are generally authorised to allot shares and grant rights to subscribe for, or to convert any security into shares. The maximum aggregate nominal amount shall be 7,801,638,544 ordinary shares,” said Mrs Miano.

If the resolution is approved, this will bring the total number of shares to 10 billion — compared to the existing 2.198 billion listed at the NSE — meaning shares of those who do not buy in will be diluted. Share prices normally fall after an issuance of rights in the market.

The shareholders are also expected to approve a resolution seeking to convert part of the debt owed the Government into shares.

“To accept payment of the Government of Kenya’s share entitlement in the proposed rights issue by way of conversion of part of the loans on-lent by the government to the company,” said one of the proposed resolutions.

KenGen had borrowed nearly Sh40 billion as at the close of its financial year in June. The debt is expected to grow further given that it is in talks with the African Development Bank and the Japan International Cooperation Agency to fund geothermal projects.

Last month, the firm said the rights issue is likely to be done in the first quarter of next year. This means the company has four months to prepare and receive approvals.

“There are plans for a Sh28 billion rights issue in the first quarter of next year. The government will most likely participate by converting some of its loans into shareholding, not giving us cash,” said KenGen finance director John Mudany at an investor briefing early last month.

Mr Mudany said the company spends Sh1.8 billion on servicing debts every year. The power generator has appointed Standard Investment Bank, Renaissance Capital, Dyer & Blair and Faida Investment Bank as its transaction advisers.