Kenya to Switch KenGen Debt in Region’s Biggest Rights Offer

  • KenGen plans to raise 28.8 billion shillings in cash call
  • Other shareholders expected to provide 8.6 billion shillings

The Kenyan government will convert 20.2 billion shillings ($200.4 million) of debt owed by the East African nation’s biggest electricity producer into equity as part of a rights offer that’s the largest in the region.

The Kenya Electricity Generating Co. Ltd., known as KenGen, is asking investors for 28.8 billion shillings to help finance 720 megawatts of new production capacity over the next four years. Other shareholders apart from the government are expected to raise 8.6 billion shillings, Chief Executive Officer Albert Mugo said at the start of the cash call.

“We’re using that to take up our rights issue otherwise we’ll be diluted,” Treasury Secretary Henry Rotich said Monday in the Kenyan capital, Nairobi. The government holds a 70 percent stake in KenGen.

The transaction will be East Africa’s largest-ever issue of stock to existing shareholders and the biggest equity capital raise in the region since Safaricom Ltd.’s initial public offering in 2008, according to Renaissance Capital, the transaction adviser.

The company is offering a total of 4.4 million new shares -- or two for every one held -- at 6.55 shillings. The rights offer results will be announced on July 1 and trading will begin July 6. The 42.8 billion-shilling company has production capacity of 1,618 megawatts, mostly from hydropower dams and geothermal wells.

KenGen had debt of 150 billion shillings at the end of 2015, according to Finance Director Joshua Mudany.

The rights issue will reduce the company’s debt-to-equity ratio to about 44 percent from 56 percent, giving the company room to increase that to 70 percent in the future, Mugo said.

“What the government is doing is helping them restructure their balance sheet,” Silha Rasugu, an analyst at Exotix Partners, said.

KenGen shares were down 0.8 percent by 2:06 p.m. in Nairobi, bringing its decline this year to 4.7 percent, compared with a 1 percent increase by Nairobi Securities Exchange’s All-Share Index.

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