INTERVIEW-Kenya says KPLC to earn $133 mln from rights issue

Fri Dec 18, 2009 3:26pm GMT
 

* Says Kenya Power to gain from conversion and rights

* Tenders for high voltage line to close end-January

* Sees electricity supply in 2015

By Duncan Miriri

NAIROBI, Dec 18 (Reuters) - Kenya Power and Lighting Company (KPLC.NR: Quote) will earn $133 million by June 2010 after conversion of the government's preference shares and a rights issue, a top ministry of energy ministry official said on Friday.

Kenya Power, which has a distribution and transmission monopoly in east Africa's largest economy, nearly fell into full government ownership after the Treasury stepped in to save it from near technical insolvency in 2003.

At the time, all Kenya Power's debts to the government were turned into a special cadre of shares, Patrick Nyoike, permanent secretary in the ministry of energy, told Reuters.

"Now that the company has virtually recovered and it is not in a position to repay that money, we will convert that money into ordinary stocks and offer them to the shareholders," he said after Kenya Power's annual meeting.

"We should be through by June next year."

He said the conversion of those shares would lower the government's stake in the firm to 75 percent from 90.7 percent.

The subsequent rights issue, in which the government was not planning to participate, would slash its holding further to just above 50 percent, Nyoike added.

"The idea is to generate at least 10 billion shillings for KPLC," he said, adding the government's retention of a controlling stake would enable the firm to keep accessing soft financing from international lenders such as the World Bank.

"KPLC is an engine of economic growth. It is an enabler. Without it, no matter how hard we talk and shout about realising a 10 percent (economic) growth rate, it will remain a pipe dream."

Kenya has a GDP growth rate target of 10 percent in the medium-term and Nyoike said the nation was likely to get relief from frequent electricity outages next year due to investments in the grid.

"You will see a mega change in power quality towards the end of the year because we are doing a major line from Mombasa to Nairobi, the first of its kind with 300 kilovolts," Nyoike said.

"Over time it will be able to transmit 1,500 MW. Tenders close Jan. 31 and it will take 18 months to construct."

Kenyan energy officials also expect the construction of a 600 KV line linking the country to Ethiopia to start in 2013 after it was delayed by environmental concerns.

The line will allow Kenya to import 200 MW of electricity from Ethiopia's 1,870 MW Gibe 3 hydropower project in 2015, pushing expected new power available in Kenya to 2,130-2,430 MW.

Nyoike said the additional capacity will translate into adequate reserve capacity, from 7.8 percent in the year ended last June, well below the desired 15 percent reserve margin.

"I estimate our current demand to be 1,200 MW right now, growing by 8 percent every year so by 2015 it will be just below 2,000 MW," he said. (Editing by Helen Nyambura-Mwaura and Stephen Nisbet)

 
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