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Kengen Public Infrastructure Bond Offer
Rank: Veteran Joined: 4/4/2007 Posts: 1,162
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In today's papers,Kengen have announced a public bond offer to finance power generation for the next 5 years
How big is the offer?
Any fresh details?
In man prudence,in woman patience - Jacob Cats
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Rank: Elder Joined: 2/16/2007 Posts: 2,114
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The ad says for further info go to http://www.kengen.co.ke or email pibo@kengen.co.keWhen you get the info,do give us the details here
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Rank: Member Joined: 5/13/2009 Posts: 35
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But i got some clues about it ... The first tranche is valued khs 15.0bn with a green shoe option embedded. The sale period is slated for all of September 09 till 29th when it closes. I also know it will be amortized just like the debut kenyan infrastructure bond. The coupon will both be fixed and floating,the fixed one at around 12% and the floating pegged on either the prevailing 91-days T.bill or the 182-day T.bill weighted average rates at primary amrket. Any other questions/clarifications? .... The only place where dreams are impossible is your mind
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Rank: Member Joined: 2/8/2007 Posts: 808
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Somebody misadvised Kengen,12% for 10 year paper and looking for 15B?? They are not very serious! they definately will not get the 15B. This bond is a near junk bond in many ways. This company on stand alone basis other than the word Kenya and ownership of gava is a weak company. They generate negative cashflows most years and now with poor hydorology i expect minimal profits - below 500m or even a loss for the current financial year unless the elnino has floods to boot.
The IFB had an average yield of 13.5% and it was a treasury bond,no cash flow concerns. some people even got 14.1% in the bidding. CFC stanbic gave 12.5% for a 7 year paper. Stanbic has less risk than Kengen. So why would the same investor buy the Kengen bond??? Rather wait for Centum which is rumored to be above this signficantly. Plus a good chunk of the money is going to hydro investments which means the risk of low rainifall and the big one against it is Gava has repossed geothermal resources for exploitation by geothermal devt. authority so kengen doesn't have a free reign here. I strongly believe kengen will struggle to repay this debt in the first 4 years or will shaft ordinary shareholders big time to pay this debt. Am already an equity holder and with a huge unrealized loss. The only way i would accept this paper is at a higher yield else am just taking on risk without realistic decent returns and a solid promise of being shafted from the equity end....
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Rank: Chief Joined: 1/3/2007 Posts: 18,056 Location: Nairobi
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The only (maybe) redeeming is if it is tax-free (unlike stanbic) OR backed by government. Poor deal compared to IFB as Kausha pointed out. Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Veteran Joined: 11/29/2007 Posts: 948
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Two major incentives. the bond is tax exempted and has the average life of 6.25yrs as opposed to Stanbics 7 yrs and the Infrastructure bonds 8yrs. a return of 12.5% (withholding tax exempted) on a 6.25yr bond is not bad. guys. Yes am a slow walker,but i never walk backwards.(anonymous)
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Rank: Elder Joined: 2/26/2008 Posts: 4,449
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Issuer: Kenya Electricity Generating Company Limited.
Description: Fixed Rate Long Term Unsecured Infrastructure Bonds
Arranger: Standard Chartered Bank Limited
Lead Sponsoring Stockbroker and Placing Agent: Standard Investment Bank Limited
Financial Advisor: KPMG
Total value: Kenya shillings Fifteen billion ( KShs. 15,000,000,000) subject to increase up to Kenya Shillings Twenty five billion( KShs. 25,000,000,000) pursuant to a Greenshoe Option of up to Kenya Shilling Ten billion ( KShs. 10,000,000,000).
Maturity: Final Maturity in 2019 subject to early redemption in accordance with the Terms and Conditions
Denomination: The noted to be issued in denominations of KShs. 100,000 and integral multiples thereof.
Forms of notes: The notes will be issued in registered form.
Issue price: The notes will be issued on a fully paid basis at par.
Interest rate: 12.5 per cent per annum,payable semiannually in arrears.
Redemption: Unless redeemed in accordance with the Early Redemption provision,the Bonds are scheduled to be redeemed in sixteen (16) equal semi-annual installments with the first payment being made after two (2) year grace period as further described in the Terms and Conditions.
Listing: The notes shall be listed on the Fixed Income Securities Market Segment of the Nairobi Stock Exchange.
Continuing Obligations: The issuer shall ensure compliance with the continuing disclosure and reporting obligations as prescribed by the Authority for issuers of securities listed on the Fixed Income Securities Market Segment of the Nairobi Stock Exchange.
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Rank: Elder Joined: 7/26/2007 Posts: 6,514
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This is a good investment,given its tenor of 6.25 yrs and yield of 12.5% NET. This emans int income is exempt from any tax...both with holding and corporate. Effectively this gives you a yield of 14.4%!!!!! Business opportunities are like buses,there's always another one coming Business opportunities are like buses,there's always another one coming
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Rank: Chief Joined: 1/3/2007 Posts: 18,056 Location: Nairobi
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'Redemption: Unless redeemed in accordance with the Early Redemption provision,the Bonds are scheduled to be redeemed in sixteen (16) equal semi-annual installments with the first payment being made after two (2) year grace period as further described in the Terms and Conditions.' ____ So do I get a portion of the principal very 6 months after 2 years? Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett
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Rank: Member Joined: 3/23/2007 Posts: 127
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cons: according to cbk,annual inflation rate 23.51%
pros: feel good factor for contributing to nation-building
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Rank: Member Joined: 1/9/2008 Posts: 537
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hi all
well the only good things about this pibo is that it shall herald the advent of a bond OTC market in Kenya..very excitin...thats about all thats good about this pibo...the redeemable aspect of the bond makes the de facto coupon of the bond 10.5 pct if my calculations are not flawed..heck even if you were to ignore the fact that the yield is 10.5...the 12.5 coupon means that kengen is trading at 80 basis points above the GOK yield curve? very ambitous in my view...i will giv this one a miss...anyway i wud advise anyone takin it up to seek to punt it as opposed to holdin it to maturity...happy trading otherwise
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Rank: Member Joined: 10/6/2008 Posts: 21
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this are good investment avenues for investors and more companies should be encouraged to do the same.
For Kengen we will support you so that the power deficit in the country may reduce
Watu wachangamuke
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Rank: Member Joined: 6/3/2006 Posts: 553
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Kengen PIBO link The thicker the thigh the sweeter the pie. The thicker the thigh the sweeter the pie.
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Rank: Elder Joined: 2/26/2008 Posts: 4,449
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one small thing...average inflation rate is currently at 23.5%!! ....don't tie up a large chunk of your money on this bond. My 2 Cents
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Rank: Member Joined: 6/21/2007 Posts: 20
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With negative cashflows how is kengen going to pay the interest on this debt.
12.5% * 15 billion *10 years =18.75 billion over the ten years paid during the first 2 years.
The 15 billion is payable in equal instalments over 6.25 years .That works out to 1.2 billion shs every 6 months.
The projects they are implementing are VERY unlikely to generate this kind of income let alone cashflows.
This bond is what they would call a JUNK bond on wall street. The risks are just too high that the company will find it hard to service the debt.
Last year they paid a dividend of dividend around 2 billion shillings.They are definitely not going to maintain this kind of payout meaning they are going to shaft the shareholders big time.Expect no dividend over the next 4-5 years,maybe only a token payout (0.10 or less even).
One wonders why they did not borrow a part of the money externally,with the current weak shilling and low global interest rates they would have gotten a good deal. The shilling is more likely to appreciate against the dollar than weaken from here.
This is rough analysis and I encourage SKERIANS to criticise and/or correct my back of the envelope calculations.
Invest with alpha not leveraged beta
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Rank: Member Joined: 7/29/2008 Posts: 170
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this is a very good idea especially teh tax free part of the returns,actually with a good project they can repay this amount in lesser time than stipulated... however i dont agree with the projects they are undertaking... as much as this projects can generate capacity of over 3000 mw,its still rain/floods dependent.... if we dont get the el ninos of the day.... chances are that we'll have more rusting shells in the name of power generating plants......
Its just me whatever choice you make in life make sure that you can live with it.
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Rank: Member Joined: 6/3/2006 Posts: 553
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@ Ericks, Horizon 1 projects Hydro -101 Mw Geothermal-317.5 Mw Thermal-120 Mw Wind-5.1 Mw The thicker the thigh the sweeter the pie. The thicker the thigh the sweeter the pie.
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Rank: Member Joined: 7/29/2008 Posts: 170
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@ General
This is what i meant and believe me am for this bond big time.... but there are few things am looking at..... the hydro projects a part from the raising of masinga dam and procurement of a third kindaruma unit are all on going.... also the wind project at Ngong hills has been completed.
As for the Geo thermal,olkaria third unit and Eburu which account for 13% of the geothermal projects are ongoing.... but the others (olkaria iv,olkaria i and olkaria i life extension) are undergoing feasibility study.. so until the study turns out positive i might correct myself by saying that for now 50% of these projects are rain dependent... then after the study is complete and positive then 25% of the projects will be rain dependent thus making it a good prospect with or without rain....
Its just me whatever choice you make in life make sure that you can live with it.
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Rank: Elder Joined: 6/27/2008 Posts: 4,114
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Should I buy the bond or the company's share? Or would it be advisable to sell my shares in KENGEN and put the money in the bond? Behind the gardens...Behind the wall...Under the tree (Including: Red...Dark Blue...Yellow) Nothing is real unless it can be named; nothing has value unless it can be sold; money is worthless unless you spend it.
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Rank: Member Joined: 6/3/2006 Posts: 553
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@ Mukiha,thats the big question. @ Kularaha,kindly expound The thicker the thigh the sweeter the pie. The thicker the thigh the sweeter the pie.
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