Financing Lake Turkana Wind

Monday this saw the signing of final agreements for the financing of the Lake Turkana Wind Power - LTWP project. This was the completion of a long, 9 year process that began with a fishing on trip on Lake Turkana, that yielded no fish, but a lot of wind on boat trip. 

The signing of finance deals worth 498 million euros (~ Kshs. 60 billion), will go towards LTWP which at Kshs. 75 billion is arguably both, the largest single wind power plant in Africa and, the largest single private investment in Kenya. 

The  Kenya Government has committed to raise the country’s electricity generation capacity to 5,538MW (from the current 1,533MW) by the year 2017. 630MW of that will be from wind, and they they have identified five strong wind areas in Ngong, Turkana, Kinangop, Kipeto and Isiolo - and hopes that using renewable sources of energy like wind will bring down the cost of electricity to consumers, and save on fuel import costs for the country.

The government’s KETRACO agency will build a 428 kilometer, 400 kV line, from Loyangalani to Suswa Suswa to Laisamis that they say will be ready in 24 months and which will also  link up with geothermal plants along the way. 

Image from LTWP website

The LTWP which will generate 300 MW, using 365 turbines in Laisamis (Marsabit) was registered in 2006, and brought one Aldwych International as an investment and development partner in 2009.

Financiers in LTWP include the African Development Bank (AfDB are the lead arrangers and who have provided a guarantee against some delays have also financed $1.7 billion in power generation in Africam with 39% iof that going to private sector companies) the European Investment Bank. Standard Bank (Stanbic), FMO, Nedbank, EADB, PTA, PKF, DEG, Proparco and soon OPIC (US)

Other partners in LTWP include Vestas (turbine supplier), the governments of Denmark (proving EUR 135 million including 120m in export credits), Netherlands, and Spain (who are financing the Laisamis- to Suswa transmission line).  

Next, the Kenya government wants to expand the number of last mile electricity connection while KETRACO also plan to extend the transmission lines to Northern and North Eastern Kenya - and on to Ethiopia, Tanzania and Uganda. This will serve the regional transmission purposes and also open up northern Kenya.

Joseph Njoroge,  the Energy principal secretary, said additional electricity opens up opporutunies such as enabling the pumping of crude oil, the Standard Gauge Railway is also planned to use electric trains, Iron Smelting, as well as clinker production (by Athi River and Dangote.

Bank Tales II

Maina T kind of started this thread with a review of the P/E correction of Nairobi Stock Exchange (NSE) shares.

NSE: ½ full or ½ empty? - to take it further, how are NSE shares today compared to last October? If you considered them fairly priced then, you are frowning today, but if you considered them over-valued, are you smiling today?
estimates
- Shares that have appreciated since October 2007: 4% - BAT Scangroup, 3% - Access 3%, 1% - Unga
- Shares that have depreciated since October 2007: (83%) – Mumias (74%) NIC (59%) Nation Media Group, CFC (55%) - Housing Finance, (53%) – Sasini (51%) – Kenya Airways (47%) - Sameer (45%) – Kengen, Centum (44%) - Eveready (43%) - Williamson (42%) – Express, Jubilee (41%) - KPLC, Kenol
- Banking sector: Best (4%) - NBK, worst (-74%) - NIC, sector average is -32%

Interesting that despite the world financial meltdown of late 2008, the Kenyan financial sector is faring no worse than other sectors (agricultural, industrial) which are all down approximately 1/3,and remains the sector most likely to produce super-profits again this year. Best performing sector is commercial services (excluding Safaricom only listed in June 2008) which is down 20% from a year ago

Cheap M&A The depressed NSE prices bring out good and bad banking opportunities.
- Good for anyone speculating on buying into a Kenyan bank. The Helios stake in Equity is priced as almost what it was when the deal was signed, while the CFC/Stanbic merger is worth ½ as much as it was a year ago.
- Bad for the Government who are hoping to raise funds from further sale of NBK and Development Bank of Kenya share. It also raises a question of how Co-op Bank IPO shares will be received i.e. if you enter a train going down hill and you want to go up hill, where will you end up?

Family Bank a recent stockskenya discussion could indicate that a listing of shares could happen soon.

EADB: sad tales on the East African Development Bank.

Bank Safety Net

and other brief’s

Kenya’s deposit protection fund results are also out. They fund had about Kshs. 18 billion ($240 million) invested in government securities to protect depositors in case one of Kenya’s 45 banks collapses – and pay each account holder up to Kshs. 100,000 (~$1,333). The fund now covers account holders in the two new Shariah banks who were excluded a year ago

Lending crunch? wooing customers
- CFC/Stanbic - win out of the blue; open an account with Kshs. 10,000 and win one of 5 cruises, flat screen TV, digcam, ipods, satellite TV decoders (with subscription)
- Stanchart - take unsecured loan of Kshs. 750,000 or more and get a DVD player
- KCB – spend more than Kshs. 2,500 on your credit cards and you may win a DVD, TV, mobile phones or a holiday

Going regional Equity Bank hiring staff to work in South Sudan, while East African Development Bank is hiring staff to work in Rwanda

Mobile payments Old Mutual customers/fund investors can now pay their monthly subscriptions by M-Pesa – Safaricom’s mobile phone money transfer facility. Banks have already a ceded a significant chunk of the local the money transfer business to mobile phone, who are now expanding into investment and utility payment turf of banks.

Kutwa Tuesday

West to East: Following Bank of Africa (2004) and Ecobank (taking over EABS), West African’ leading bank, United Bank of Africa (UBA) is making an entry to East Africa starting with Uganda and have also applied for a license to bank in Kenya.

Venture Capita Fund: From the East African Development Bank (EADB) is now operational, with small and medium enterprises (SMEs) in East Africa are eligible for funding.

Uchumi’s turnaround : Uchumi have finally published their financial results of the receivership period from 2006 to 2008. The turnaround has been remarkable and in the half year ending December 2007, they surpassed full year sales from 2006 (year of collapse). Still, the current ratio is still poor (less than 1), but that’s about three times better than it was when the company sunk.

The company lost 751 million in June 06, which improved the first year of receivership to a loss of 257m in 07 – and are on track to make a profit in 2008 – while operating fewer stores. It’s probably too soon to be re-listed (there would only be sellers, no buyers) and a dividend would not be likely for 5 years as the company still has an accumulated loss (negative reserves) of about 1 billion shillings ($15 million)

peeves two things irritate me though at Uchumi (i) their cashiers never have any shilling coins and insist on giving out sweets in lieu of change (ii) Cashiers’ who take advantage of my not having a u-card to top up their accounts with points I pay for.

Insurer collapses: Invesco assurance finaly goes under. The company which insured many matatu’s is now under statutory management and can’t make any policy payments or sign up new business. And when the history of the company is written, one paragraph must address why almost every insurance company (including Invesco) decided to put up an expensive office building in the Upper Hill area of Nairobi, far away from their core clientele.

Kenya Re profits: How much did Kenya Re earn in 2007? An interesting discussion at stockskenya.

Diaspora dollars: How much do Kenya’s abroad remit to the country (through official channels)? CBK reports $54 million in January 2008 and teh country is on track for an increase from the $573 million sent in 2007.

Dollar launderer: A Nation report cites US concern about money laundering in Kenya which has weak laws regarding the crime. The State Department report notes the difficulty as Kenya is a hub that mixes regional trade with exports to East & Central Africa, donor aid & NGO’s (managing over U.S. $1 billion annually), remittances from expatriate Kenyans estimated at $680-780 million annually, and Eastleigh Estate which handles unofficial remittances by the Somalia Diaspora. Also, though banks maintain records of transactions over U.S. $100,000 and international transfers over U.S. $50,000 (and report them to the CBK) they fear customer reactions to such release of information – and thsi was hammered home by a November 2007 court award that ordered Barclays Bank to pay a customer 400,000 shillings ($5,700) for providing customer details to the British High Commission.

New boards
- The Kenya college of communication and technology (KCCT) board now has Michael Joseph, Nick Nesbitt, Naushad Merali and Paul Kukubo to guide some relevance in communications training.
- The Resettlement fund (for election victims) has retired archbishop Ndingi, former minister Akaranga, and retired athlete Kipchoge Keino on board.

Bank Roundup (June 07)

all banks share capital raised from 250 million to 1 billion. At the beginning of the year, 25 of 43 banks were below this mark (with 7 banks below 500 million). This is an update/reversal of an older proposal to lower the share capital when some banks were struggling a few years ago. Not many mergers expected though it may prompt some mid size banks to go for a public listing to raise cash (only 3 banks lost money last year)

Central bank has advertised for some currency destruction contracts as the east African reports on talks for the government to invest in the current currency supplier DE La Rue

Diamond Trust to venture into Islamic Banking

East African Development Bank profit went up by 229% to $4.6 million – up from $1.4 million the year before. Assets increased to $262m dollars and their non-performing portfolio reduced by 11%

Equity bank won an international award – the 2007 global vision in microfinance award. Also KTN reported that the that the bank will open three women only branches in Nairobi

Two month old Family Bank is seeking a new managing director

KCB to expand into Uganda as it also wins an international award – the Africa investor for best performing stock in Africa award (shares price up 97% ) > but the company also held one of the longest dreariest AGM’s in history on Friday

National bank finally got recapitalized. NBK could receive 346 million in 2007 and 2008, a bullet payment in 2009 of 4.3 billion, 220m in 2010 and 2011 and another bullet payment of 5.2 billion in 2012. For 2013 - 2015 123m each and in 2016 a lump sum of 5.2b. 2017 to 2020 58m each and a final payment of 6 billion – for a total of Kshs. 22.48 billion ($340 million)

NIC to increase authorized share capital via a rights issue. The board approved it on June 14, but there was no mention at the AGM on May 16. This follows a Fitch Report indicating that mid-size Kenyan banks need to increase their capital

opportunities

East African breweries is accepting applications for a graduate management program. Details online and D/L is 22/6

Family bank: chief executive officer, credit manager. Apply through deloitte - esd@deloitte.co.ke by 29/6

Kenital solar : sales & marketing manager, technical manager, engineer sales executives (5) regional managers (4). Apply to cm@kenital.com by 22/6

Country manager at Steadman Tanzania . Apply to janis@steadman-group.com by 22/6

A dozen IT, research and engineering jobs at Safaricom

Writers at a new Swahili newspaper. Apply to gazetijipya@gmail.com

Project management specialist at USAID.apply to hrnaiorobi@usaid.gov

Rhodes scholarships: 2 for Kenyans to pursue full time post graduate study at the University of Oxford. Apply to rhodeskec@wananchi.com by 15/9

Real estate: for the monied in the Diaspora, those who have worked hard and are looking to return in style, consider investing in Kihingo village a gated community development in Kitusuru where prices start at $500,000.

VC Fund update

More on the $40 million VC fund set up by the Africa venture capital association and East African development. It will invest $100,000 to $2 million in SME's for expansion & modernization, as well as start-ups led by exceptionally qualified entrepreneurs. Advantages of getting funds is that unlike bank loans, you don't have to pledge assets or incur subsequent loan repayments

Jobs

The Africa Development Bank is currently accepting applications for its Young Professional Program (YPP). Details at their site and D/L is 10/5.

Celtel: Product development manager (Comm-mkt-02/07), Product developer (Comm-mkt-03/07). Apply to hr@ke.celtel.com by 4/5

Kenya Airways: Manager – hub & airport systems (I/065/04-07), Revenue management systems administrator (C/066/04-07)
Apply to the group HRD 19002 Nairobi by 14/5

Foundation manager at KCB. Apply to recruitment@kcb.co.ke by 9/5

Safaricom: Head of Retail, Head of Customer Management, Materials Inspection Officer, Senior CRM System Developer, Business Intelligence Developer.

Fund manager at the above mentioned VC fund. Apply to EADB@avcanet.com by 14/5

The Young Professionals Program (YPP) of the World Bank. apply online by 15/7

EADB Venture Capital

The East African Development Bank is proposing to set up a venture capital fund to invest between $100,000 to $1 million in companies who have turnover over $100,000 and are prepared to give the fund shares in exchange for capital invested. Expressions of interest to be sent to venturecapital@eadb.org

State of the VC

Is Kenya ready for VCs? Do we have the expertise and are they necessary?
The regulations for the VC industry are yet to be formalized and the Acacia Fund remains the only venture capital firm licensed by the CMA. But there are other players such as ICDCI, investment advisers, investment companies, and entities like Transcentury who can arrange equity-based financing for viable companies.

Given the archaic company laws and endless court processes, entrepreneurs in Kenya have to be very careful about who they let in as equity partners. They feel better off borrowing from a bank that they can pay off and walk away from after a while instead of having VC as partner/co-owner.

The VC route is more suitable for established companies who have a good long-term understanding of their requirements and the benefits that are offered by different equity partners.

A more viable, non-VC option for start-ups is the government’s proposed youth enterprise fund which was gazetted in December. (read more)