Kenya: KenGen to be privatized with sale of a 19% stake by the state

Kenya: KenGen to be privatized with sale of a 19% stake by the state 45 MW Olkaria I geothermal power plant, Kenya (source:
Alexander Richter 18 Aug 2010

Kenya's largest power producer, KenGen is looking at privatization with the sale of a 19% stake in the company. Currently the company runs a geothermal power generation capacity of 150MW.

Kenya’s largest power producer, Kenya Electricity Generation Co. Ltd., reports in local news that it has “appointed an adviser to help it find a buyer for 19 percent of the company to reduce the government’s stake.

“We want to privatize,” Managing Director Eddy Njoroge told reporters today at the Olkaria geothermal field, northwest of Nairobi. The plan is for the state’s holding in the company to shrink to 51 percent from 70 percent after a buyer is found, while public investors would continue to own 30 percent, he said. The company’s market value is 38.4 billion shillings ($475.4 million).

KenGen, as it’s known, aims to almost triple installed capacity to 3,000 megawatts by 2018 and increase that to 9,000 megawatts by 2030, mainly through exploiting geothermal reserves and building wind farms, he said.

Kenya introduced power rationing for almost two months last year amid a drought that cut output at hydroelectric plants. Industries faced daily power cuts and electricity bills rose as diesel-powered generators were deployed, damping economic growth.

KenGen’s shares rose 20 cents, or 1.2 percent, to 17.4 shillings at 1:09 p.m. in Nairobi.

Geothermal energy comes from natural formations where underground heat is used to generate steam that then drives turbines. The Great Rift Valley region, where two tectonic plates in the earth’s surface are separating, has sizeable geothermal energy reserves.

Current Capacity: KenGen now has 1,055 megawatts of generation capacity consisting mainly of hydroelectricity, and 150 megawatts of geothermal as well as diesel-power generators and a wind farm, Njoroge said. Independent power producers account for the remaining 22 percent of installed capacity in the country, he said. Peak demand in Kenya stands at 1,107 megawatts, he said.

To pay for geothermal expansion, KenGen will require $4.5 billion through 2019, of which $1 billion has been secured from five funding agencies, Njoroge said.

Among the financing options is selling as much as $1 billion in bonds, he said. The securities may be issued domestically or as “a foreign-currency denominated bond, which would be issued outside” Kenya, Njoroge said.

KenGen announced on Oct. 28 that it had raised 25 billion shillings ($310 million) in public infrastructure bonds, with demand for the securities exceeding the supply, saying the proceeds will go toward generation projects.”

Source: Bloomberg