Monday, December 15, 2008

Electric Slide

Kengen: the Kenya electricity generating company will have its third AGM later this week – and while shareholders may be happy with a Kshs. 0.90 dividend they will also be asked to approve (i) 30% investment in a geothermal development company to be created by the Government of Kenya (ii) invest in a coal plant (iii) participate in other ventures – (perhaps buy into another IPP independent power producer?)

The proposals to shareholders are vague and without any spending amounts attached, they should not be presented to a vote. When the Access Kenya board got shareholder authority to make other investments, they capped them at Kshs. 200 million each - this one has none, and the third proposal doesn’t even limit Kengen from investing within the energy sector so it could probably buy a sugar company or tea company (for cogeneration?) with that mandate.

Anyway Kengen has undertaken a lot of geothermal work with three olkaria plants and is it really necessary for the Government with strained recourses to create another parastatal at this time? Shareholders who were also spooked by plans of a secondary listing of shares and plans to hive off a geothermal company from their assets two years ago will also not be happy to see that the plans are. still active.

KPLC: The much heralded VAT reduction in electricity bills has not amounted to much. It was effected in the November power bills, but the reduction in VAT from 16% to 12% appears to only cover the fixed charge of a Kshs. 240 per meter – so the savings amount to just Kshs. 9.6 per consumer.


foodmerchant said...

banks, is it common practice for SH to vote and approve a companies Capital Plan at home?If a capital plan is part of the strategic plan, it seems "funny" to announce to your competitors what you intend to do and what the capex levels will be.speakin from my own work experience, only the BOD and sr mngt know what is in the cap plan in totality (in addition to the peons who crunch the numbers).the division presidents only know what their units get and thats it...the sh and general public only know the number as approved by the BOD but not the specifics.not saying this is common practice at all fortune 500 companies but it sems diffrent from your descriptions above, no?

MainaT said...

KenGen has not done as well as I and other investors thought it'd do. I suspect the plan to hive off Geothermal maybe due to the fact that it requires alot of initial outlay which will ruin Kengen's already overloaded balance sheet.
If KenGen was allowed, I'd say why not do what the Chinese Oil companies are doing and buy neighbours' companies?

Maishinski said...

Foodmerchant.. Just because something is done abroad doesnt make it right.

The failure of western businesses has exposed the gross incompetence and lack of integrity that exists there. Open your eyes. Look around you.

Capital spending can destroy a company in an instant (e.g. a wrongly timed acquisition). Seeking shareholder approval for expansion plans is part of good governance. After all they are the owners!

PS: The strategy execution plan is what needs to be kept secret as it reveals what the business considers important. Remember your compe mostly wants to know your immediate "next 3 moves" (not the next 15 moves - i.e. what you plan to do 3 years from now). Think about it as a game of Chess.

Maishinski said...

MainaT - Utilities and energy are usually a good long-term buy in the west. People will always need electricity and demand increases over time.

In Kenya, Kengen would have been an excellent choice if it wasn't for the fact that it was a mess from day1. The management are not immune from political interference (local, IMF etc). Their projects depend on the weather and they dont do any of their own RnD for alternative sources of energy.

Kengen is a speculator stock. Period.

Disclaimer: This is personal opinion - not advice. Just contributing to the debate.

inspectordanger said...

Foodmerchant: kengen doesn't have competitors thus they can afford to unavailing their strategic plans in public.

Maishinski: I agree, kengen is a good stock. All they need to do is be business oriented. They need some kind of competition to wake up.

bankelele said...

Foodmerchant: There are few secrets, and it is prudent to ask shareholders for authority to go ahead (cheaper than having to call an extraordinary meeting to close the deal). Access Kenya did that – they did not disclose what companies they were looking at

MainaT: company has been resilient and the 0.9 divided breaks down to quite a high yield. The geothermal issue spooked investors last time round

Maishinski: utilities are good, and with the increasing demand for electricity, independent power producers are doing well though it requires massive investments

Inspectordanger: Kengen a buy

Anonymous said...


Kengen should buy other neighboring countries companies when it can't even provide electricity to half of kenya?

wow! that's really a brilliant idea.


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