KenGen yesterday announced that they will be offering a total of 4,396,722,912 shares in a rights issue with a view of raising Kshs.29 billion. The new ordinary shares will be offered at a discounted price of Kshs.6.55 per share. With the funds raised the company plans to commission an additional 720 MW of electricity. This rights issue comes 10 years after the company’s initial public offering (IPO) in 2006 which at the time was the largest at the Nairobi Securities Exchange (NSE). I remember it was after this IPO and subsequent dividend payments by the company that interest by Kenyans on stocks resurged such that when companies like Safaricom announced their IPO’s they were highly successful.
The existing shareholders will be entitled to two new shares for one share held as at 16th May 2016. The share price for the offer of Kshs. 6.55 is an 18% discount of the closing price of 9th May 2016 before announcement. Also eligible to take part in the rights issue are all prospective investors with a CDSC account who will purchase the Nil-Paid Rights on the NSE by 3rd June 2016 and all prospective investors with CDSC accounts who will purchase shares in the Rump issue by 17th June 2017. The rights issue will close on Friday 10th June 2016.
For the existing shareholders one can choose to accept the offer this basically means taking up all the rights and maintaining you shareholding as it was before the offer, accept offer and apply for additional new shares. One can also accept the offer partially by selling some or all the rights or via a private transfer of rights to close relatives (this shall be done between 23rd May and 27th May 2016). An existing shareholder can also decide to decline the offer by taking no action.
Currently Kenya ranks 8th globally in Geothermal installed capacity at 653 MW, how about that. KenGen has decided to invest more in Geothermal simply because it provides the highest return for shareholders, it is also reliable in that it does not depend on the weather, it is also the least cost source of power in the long run and it is also abundantly available in the country.
If you are a potential investor you might be asking yourself why you should invest in KenGen? Well here is why the company’s large asset base offers a solid growth platform, it is also emerging as a world leader in in Geothermal production, the company has strong growth and profitability, it offers consistent and stable dividends, it is a market leader and it is also delivering on mega capacity. The company also has other revenue sources which supplement revenue from power generation which include, revenue from steam sales, it offers commercial drilling for third parties, consultancy services, industrial park which is to be put up in Naivasha and carbon asset development. In my opinion, if there ever was a share to buy this would be the one. The company is practically a monopoly in electricity production in the country. The government has already taken up its full entitlement of the issue which represents 70% of the transaction in a strong show of confidence.
Speaking during the launch of the Rights Issue, KenGen Managing Director and CEO Eng. Albert Mugo had this to say, “By participating in the offer, shareholders will contribute to the growth of the company and reap more from our dividend scheme, which is one of the most competitive, reliable and sustainable in the country.”