August 6, 2014 / 1:43 PM / 4 years ago

Kenya's TransCentury plans $2 bln east Africa investments

NAIROBI (Reuters) - Kenyan investment firm TransCentury will invest more than $2 billion in building power plants, gas storage facilities and roads as it broadens its operations to include potentially lucrative infrastructure projects, its CEO said.

Gachao Kiuna, 36, head of TransCentury since 2009, aims to capitalise on rapid economic growth and urbanisation in Kenya and other east African nations such as Tanzania, whose expanding populations need more energy, transport and other resources.

TransCentury, founded in 1997 as an investment club by a group of wealthy Kenyan friends, is mainly focused on electrical equipment and engineering.

But the company sees scope to grow as east African nations invest heavily in areas such as energy infrastructure, whose deficiencies are a key problem hindering local businesses which complain of high electricity costs and blackouts.

Access to mobile phones and the Internet for instance was growing but cooking technologies had not kept up, said Kiuna, interviewed at his seventh-floor office in downtown Nairobi, next to one of Kenya’s oldest hotels, the Norfolk, a favourite haunt for white settlers in the colonial era.

This shortfall was creating opportunities in areas like liquefied petroleum gas (LPG).

“People are still trying to bring charcoal into the towns and cities,” exposing the need for LPG storage facilities, terminals and pipelines, said the CEO, who joined from consultancy McKinsey where one of his assignments was helping prepare Kenya’s economic blueprint called Vision 2030.

Yet recent events have not all been positive for TransCentury and the company said in April it would take a writedown of about 1 billion shillings after it exited its loss-making investment in Rift Valley Railways.

Kiuna, who holds a PhD from Cambridge University, said the east African nation did not have a single LPG storage facility, driving up costs of gas cylinders to about 80 percent above what they should be.

POWER PLANTS

TransCentury was also about to start building a 35 MW power plant to be powered by geothermal steam at a cost of 5 billion shillings ($56.9 million), Kiuna said, due to be completed at the end of next year.

TransCentury is also bidding with others to build a second 140 MW geothermal plant and plans to build gas- and coal-powered electricity plants, Kiuna added.

Kenya is building new power plants to add 5,000 MW supply capacity to the existing 1,664 MW by 2017 in order to cut electricity tariffs and lower business costs.

The government is also expanding the electricity grid to increase connections in a country where only about a third of households are connected to the grid.

“To bring Africa and to bring Kenya to the world you have to change that number to as close as 100 percent as possible,” Kiuna said.

Another area of activity for TransCentury is transport and Kiuna said the group was about to construct a toll road, bridge and border crossing point in the Democratic Republic of Congo, helping copper miners in Lubumbashi to move exports faster to the port of Dar es Salaam.

Kiuna said the total cost of the DRC project and power investments was about $2 billion. He said plans to raise more capital were in the final stages and the fund-raising will have both debt and equity elements, with the possibility of the formation of a special purpose vehicle to handle the new projects.

TransCentury’s other lines of business are its electric equipment-making division, which generates annual revenue of between 7 billion shillings and 8 billion, and its engineering business, Civicon, generating 5 billion shillings a year in revenue. ($1 = 87.9000 Kenyan Shillings)

Editing by David Holmes

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