MONEY MATTERS: Notable Events This Week

- KenGen seeks KES 8bn for power plant

- Coal plant to tap local lenders for KES 18.2bn

- NIC Bank enters into asset leasing with new subsidiary

- Kenya’s debt burden may double

KenGen seeks KES 8bn for power plant-Electricity generating firm KenGen is seeking KES 8.2bn to construct an additional geothermal unit at the Olkaria1 plant to shore up the country’s installed power. The State-owned firm said the 70 megawatts (MW) project is valued at KES 18.2bn but it can only raise KES 10bn. The planned project comes just weeks after KenGen connected 230MW of geothermal power to the national grid between August and December last year.An additional 15MW is expected in May from geothermal wellheads. KenGen is targeting to inject another 560MW of geothermal power to the national grid in the next four years, which could offer further reprieve for consumers in the form of lower power bills. The additional geothermal power has helped cut electricity bills by about 30 per cent since August following the drop in the fuel surcharge from KES 7.22 per kilowatt hour (kWh) in July to KES 2.51 this month. (Source: Business Daily)

Coal plant to tap local lenders for KES 18.2bn-The consortium that won a tender to construct a coal-fired plant in Lamu is seeking KES 18.2bn from local banks ahead of groundbreaking in September. The consortium has already commenced talks with undisclosed lenders for the funds translating into about 10% of the total cost of the KES 182.6bn (USD 2bn). Overall, the project will be financed through debt which accounts for slightly over three quarters (USD 1.4bn) with shareholders’ equity of USD 500m. KES 109.5bn (USD 1.2bn) has been signed with Industrial Commercial Bank of China. The African Development Bank (AfDB) will provide a partial risk guarantee for the coal plant, the largest in East and Central Africa. Construction of the 960MW coal plant is expected to start on September 30^th and will take 21months generating energy at a cost of USc 7.52 per kWh, a third of the price of diesel plants. Overall, the project will be financed through debt which accounts for slightly over three quarters (USD 1.4bn) with shareholders’ equity of USD 500m. (Source: Business Daily)

NIC Bank enters into asset leasing with new subsidiary-NIC Bank has established a subsidiary, NIC Leasing Ltd Liability Partnership (LLP) to enter the asset-hiring business since the law prohibits lenders to rent out equipment and real assets. NIC becomes the first bank to enter leasing business in the country which is estimated to have a penetration rate of 6% compared to global rate of 38%, underlining the growth potential in the industry. Previously, NIC would link customers with leasing companies and provide the financing, the arrangement will see NIC be able to provide the equipment and the financing under one roof.(Source: Business Daily)

Kenya’s debt burden may double- A study by global consulting firm Control Risks indicates that Kenya’s debt burden could double in the next two years as a result of failure by the government to tackle key structural issues related to the economy. Currently, Kenya’s external debt stands at KES 2.3tn, with 54% being foreign. The government has committed to borrow further to finance public infrastructure projects including power plants and road construction. Last year, Treasury got parliamentary approval to raise the maximum amount it can borrow from KES 1.2tn to KES 2.5tn, citing the need for more capital to fund flagship projects. Last month, the World Bank warned that external debts and reduced inflows of foreign investments are set to affect developing nations such as Kenya. Foreign debt repayment is expected to become expensive as the US Federal Reserve Bank withdraws its quantitative easing program. (Source: Daily Nation)

Equity trading expectations

-Demand on banking sectors ahead of FY14 results release

-Demand on SCOM , touched a high of KES 15.95 yesterday.

Note:

KCB and CfC Stanbic releasing FY14 results on Thursday.