KenGen seeks funds for more power generation
11 April 2013, 10:16
Nairobi - Kenya Electricity Generating Company (KenGen) says it will spend an estimated US$ 5 billion to produce 3000MW of power by 2018.
The projection has now pushed the firm to seek new funding options to develop more power generation projects in the wake of the country's skyrocketing energy demands.
KenGen says it is considering entering into joint ventures with the private sector to realise the plan.
The move comes hot in the heels of an extraordinary general meeting (EGM) last week through which the company asked bondholders to accept pay cuts on bond earnings in order to safeguard its cash flow position.
The country¹s sole electricity producer consequently revised downwards the rate of return on its 10-year bond from 1.5 per cent to 1.3 per cent.
A downward trend in market interest rates has an upward effect on the prices of bonds. This means issuers pay more to the existing bondholders compared to the rate of return on similar bonds in the market.
KenGen managing director Eddy Njoroge says the power producer is also considering other funding alternatives.
“The alternatives include project financing through Export Credit Agencies (ECAs), Build-Operate-Transfer (BOT) and Build-Own-Operate ¬Transfer (BOOT) systems,” he said in Nairobi on Wednesday.
BOT finds extensive application in the infrastructure projects and in public-private sector partnership.
BOOT on the other hand is a project financing method where a private company receives concession from the private or public sector.
Through the concession, the entities can finance, design, construct and operate a facility stated in the concession contract.
This enables the project proponent to recover its investment, operating and maintenance expenses in the project.
In November 2009, the power firm issued a 10-year bond raising KES 25 billion to fund its power generation projects.
These include 24 MW Kiambere optimisation project at KES 1.12 billion, 20 MW Tana Redevelopment at cost of KES 3.1 billion, 32MW Kindaruma 3rd unit and upgrade and 21 MW Sang'oro project at a cost of KES 806 million.
There is also a host of thermal and geothermal projects already underway.
KenGen plans to achieve a target of 3000MW by 2018, an ambitious level that will require significant funding both internal and external sources.
Last month, KenGen also announced plans to raise KES 30 billion through a 20-year bond by use of asset-backed securities.
The firm has already appointed a financial advisor to guide the company¹s financial options going forward.
As Kengen seeks to increase its output, Kenya has also been mulling over possibilities of going into nuclear energy.
And last year, outgoing Prime Minister Raila Odinga asked the International Atomic Energy Agency to help Kenya build its capacity by training local scientists on the development of nuclear power.
“We are exploring geothermal, wind, solar and biofuels. But we have decided as a Government that we must pursue nuclear for purposes of longer term needs,”he said.
- CAJ News