KenGen to raise 30 B shillings for expansion
03 March 2014, 11:03
Nairobi - Kenya's biggest power producer KenGen aims to raise 30 billion Kenyan shillings in 2014 to fund its expansion plans, double the amount the firm previously said it would seek, its chief executive said on Friday.
The company, 70 percent owned by the government, has installed capacity of 1,252 megawatts (MW) out of Kenya's total 1,664 MW. It aims to add another 844 MW to the grid by 2017 as part of a broader national power expansion programme.
"We are looking at being able to raise this money by June. We have financial arrangers," Chief Executive Albert Mugo told Reuters in an interview.
"We have actually drawn up a programme to help us be able to get the approvals which we need from government, from the regulator," he said, adding that the expansion was focused on renewables, particularly geothermal.
KenGen's expansion efforts are part of the government's broader ambitions to add 5,000 MW to Kenya's power output by 2017, with the goal of boosting growth. A faster growing economy is expected to push power demand up to 15,000 MW by 2030.
The company had earlier said it would raise 15 billion shillings in a rights issue. Mugo said the firm would now be seeking 30 billion shillings for 2014, adding that the government would raise the rest.
The government had not yet said how it would raise the extra funds, but Mugo the firm had proposed that the state convert some of its loans to KenGen into equity and, in future, seek other business partners.
"For the fundraising we have a few ideas. For some of these projects we will be doing PPP (public-private partnership) arrangements. That means we will get some private investors who can actually do these projects with us," he said.
EMPHASIS ON RENEWABLES
This year's fundraising is part of a plan to raise $5.5 billion in debt and equity by 2018 to finance plans to more than double its generating capacity.
Kenyan industry regularly complains about the unreliability and high price of electricity, adding to costs and making them less competitive in the region. Most businesses run standby generators because of frequent blackouts due to a creaking grid.
"When you look at our strategy, you realise that even in that 844 MW, a lot of it is just renewables, and a lot of this is actually geothermal," Mugo said.
He said 280 MW of geothermal power would be added by August, while wind power would provide 20 MW more between April and November, with a further 24 MW from an already existing hydroelectric power dam.
However, Kenya is trying to cut its existing heavy reliance on rain-fed dams and wants to use more geothermal and other sources to halve the cost of power generation from between $0.17 to $0.18 a kilowatt hour over three to four years.
That will main involve replacing diesel generation which costs about $0.35 per kilowatt hour. Geothermal is the cheapest alternative, costing about $0.08 to $0.09 U.S. cents per kilowatt hour.
KenGen posted a 25 percent fall in pretax profit in the six months to December, but forecast a stronger second half as new power plants come online.