KenGen Sells 10 Percent Stake to Public Investment Corporation

Electricity producer KenGen Ltd (NSE: KEGN) has sold an additional stake to South Africa’s pension fund, Public Investment Corporation (PIC) totaling to over 4 billion shillings (representing a 10% stake).

Early this year, the pension fund bought a 5.33 percent stake for 2.3 billion shillings. The sale of shares is aimed at enabling KenGen to finance its pipeline of projects that are expected to increase its installed capacity by 721MW under its 2016-2022 plan.

In the recent FY17 results, the electricity producer announced earnings before tax growth of 2.4% y/y driven by lower total revenue; KES 35.4Bn (-8.2% y/y). Operating earnings fell 15.7% y/y from weak sales and operating expenses increased 8.3% y/y.

Economic experts believe that KenGen will continue leading in the large-potential Kenya geothermal power sector by adding competitively cheap power to the grid and the revenue segment to maintain steady growth as the company increases its generation capacity through additional power plants, wellhead units and upgrade of existing plants. KEGN is currently trading at 8.55 shillings, having gained 47.4 percent YTD. We note that the counter is attractive at current P/E of 6.24x.

The Market

Market execution yesterday rose to 903 million shillings driven by two bond transactions on the 3-year and 10-year bonds.

Infrastructure bond transactions rose yesterday as investors exited the longer-dated IFBs to take up positions in the upcoming issue. T-Bill subscriptions dropped to 72 percent after the over-subscription we saw last week as the cash crunch manifested.

The continued tight money market environment will continue driving up the rates on the T-Bills with the 182-day T-bill rate rising in the last four auctions already signifying a trend. The shilling traded flat yesterday to close the day at 103.80 with a sustained upward pressure.

The market has started gaining a positive trajectory as the political temperatures in the country continue to settle.