PUBLIC INFRASTRUCTURE BOND OFFER - (PIBO)
 

Press Release


KenGen unveils the features of the Public Infrastructure Bond Offer

Investors to enjoy a competitive interest rate of 12.5 percent


Nairobi August 31, 2009 : As part of preparation for the launch of the Public Infrastructure Bond Offer (PIBO), electricity generating company, KenGen, has unveiled the features of its first local debt equity market product, KenGen Infra Bond 2019

The KenGen Managing Director, Mr Eddy Njoroge, said during a briefing in Nairobi today that the PIBO is the largest ever bond offering in Kenya and the second largest transaction in Kenya capital markets history.

Njoroge explained that in the event of an over-subscription, KenGen can take-up up to an additional Ksh 10 billion, through a greenshoe option. We have received keen interest from many investors with a growing appetite for long term debt instruments, and as a result, decided to increase the size of the offer. KenGen would like to leverage the increased interest to finance investments in additional power generation capacity, said the KenGen Managing Director.

He further noted, it is the first ever corporate bond offer targeting the retail segment with over one million CDS accounts. Njoroge added that investors in the PIBO need a minimum capital outlay of Ksh100,000 to invest and it's open to both local and foreign investors (individuals and corporates). Additional investments above the minimum will be in multiples of Ksh 100,000. He said investors will enjoy a fixed net interest rate of 12.5% which is considered competitive.

Njoroge observed that the retail pool will take up 20% of the bond while local and foreign institutional investors will subscribe to the balance of 80%. We have structured the offer to encourage uptake from retail investors with a view to deepening the bond market in Kenya, said the KenGen Managing Director.

The term of the bond is ten years and interest will be paid in the first two years, while the principal sum will be redeemed every six months for 8 years in equal installments.The PIBO is expected to be highly tradeable in the secondary market at the Nairobi Stock Exchange once it is listed. It is expected that due to ongoing initiatives, the Central Depository & Settlement Corporation and Nairobi Stock Exchange will facilitate automated bond trading, delivery, settlement and registration for corporate bonds including the KenGen Bond.

KenGen has appointed 20 Authorised Placement Agents (APAs) amongst investment banks, stockbrokers, and commercial banks for the PIBO. Standard Investment Bank is the Sponsoring Stockbroker and Lead Placing Agent. The Information Memorandum and application forms will be available from all APAs. The offer opens on 8th September and closes on 29th September 2009.

KenGen's decision to seek funds from the Debt Capital Market is a break from the past where the company relied heavily on development financial institutions with inherent risks of foreign exchange fluctuations and delays to finance its power generation projects. The Bond is expected to give KenGen an opportunity to raise funds to finance our capital expenditure on a fixed Kenya Shilling basis and with increased flexibility, while at the same time allowing Kenyans to participate in infrastructural development through an attractive investment opportunity, said the KenGen Managing Director.

The investment in additional power generation capacity through the bond is part of KenGen's five-year strategy (2008-2012) of increasing its capacity by 500 MW to stabilise the power situation in Kenya. This will enable us continue with our critical role of ensuring there is enough additional capacity to cope with the rising demand, anticipated at eight percent annually. Investment in additional generation capacity will not only help the country cope with additional demand, but also the power demand associated with the implementation of Vision 2030, added Njoroge.


ENDS


KenGen Infra Bond 2019

Interest Rates Explanation

KenGen Bond - Interest Rate Net of Taxes

12.5% per annum

Adjustment for Withholding Tax of 15% only

14.71% per annum

Adjustment for Income Tax at 30% only

17.86% per annum



For more information contact Mike Njeru, Corporate Affairs Manager, KenGen 3666704, 0722753848 or Antony Mwangi, Catherine Karanja Ogilvy PR 271774, 0722825227