Kengen RIGHTS ISSUE 2016 INFORMATION MEMORANDUM
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www.kengen.co.ke @kengenkenya KenGen Kenya Energy for the nation. KenGen RIGHTS ISSUE 2016 INFORMATION MEMORANDUM 1 KenGen 2016 RIGHTS ISSUE INFORMATION MEMORANDUM This announcement has been issued with the approval of Capital Markets Authority in Kenya. 2 KenGen 2016 RIGHTS ISSUE INFORMATION MEMORANDUM THE VISION Who we want to be To be the market leader in the provision of reliable, safe, quality and competitively priced electric energy in the Eastern Africa region • To ensure QUALITY AND RELIABLE electric power, we are transitioning from a mix of time-based planned maintenance to condition- based maintenance (CBM) practices to ensure sustained availability of plants. • KenGen continues to pursue aCLEAN AND SAFE generation mix through a combination of green sources such as geothermal, wind, hydro and solar. In the interest of sustainability, KenGen is laying more emphasis on renewable technologies as evidenced by the commissioning of the mega 280MW geothermal and 20.4MW wind projects in the financial year 2014/2015. • COMPETITIVELY PRICED ELECTRICITY. Our generation projects take a lead role in the National Least Cost Power Development Plan. KenGen is committed to deliver projects on time and within budget, optimizing operating costs, competitively negotiated Power Purchase Agreements and negotiating concessionary loans. OUR MISSION What we want to achieve To efficiently generate competitively priced electric energy using state-of-the-art technology, skilled and motivated human resource to ensure financial success. We shall achieve market leadership by undertaking least cost and environmentally friendly capacity expansion. Consistent with our corporate culture, core values will be adhered to in all our operations. • Using state-of-the art technology, supervisory control and data acquisition (SCADA) systems for plant visibility, operational convenience and enhanced connectivity. • With a balanced workforce of over 2,400 of diverse technical and professional competencies; KenGen is positioned to realize its mandate and respond appropriately to emerging challenges. • The combination of growing asset base, increased profitability and enhanced revenue has ensured that KenGen continually maximizes on shareholder value. • KenGen continues to align its corporate culture with its organizational goals, strategies, structures and approach to the stakeholders in tandem with the evolving workplace dynamics. OUR CORE VALUES The base for our work Core values are our guiding principles and form the foundation of our culture. They guide our business processes and underpin each action we take. These values are: • TEAM SPIRIT: Our willingness to cooperate and work together to achieve the corporate strategy • INTEGRITY: Our firm adherence to ethics and fidelity to doing right • PROFESSIONALISM: Our high level of excellence in delivering results to stakeholders • SAFETY CULTURE: Our care for each other goes beyond the call of duty to ensure safety at all times 3 KenGen 2016 RIGHTS ISSUE INFORMATION MEMORANDUM KENYA ELECTRICITY GENERATING COMPANY LIMITED Kenya Electricity Generating Company Limited (registration number C.20/55) was incorporated under the Energy for t h e na ti o n. Companies Act on 1 February 1954 and listed on the Nairobi Securities Exchange on 17 May 2006 RENOUNCEABLE RIGHTS ISSUE FOR KSHS 28,798,535,074 OF UP TO 4,396,722,912 NEW SHARES AT KSHS 6.55 PER NEW SHARE Provisional Allotment Letter is enclosed. Form of Renunciation, Form of Entitlement and Form of Power of Attorney are available from the Company’s website: www.kengen.co.ke and from the Sales Agents. THIS DOCUMENT AND ANY ACCOMPANYING DOCUMENTS ARE IMPORTANT AND REQUIRE YOUR IMMEDIATE ATTENTION. You should read the whole of this Information Memorandum, the relevant Forms and the documents (or parts thereof) incorporated herein by reference. If you are in doubt as to the action you should take, please seek advice from your own professional advisor. If you sell or have sold or otherwise transferred all of your shares (other than ex-rights) before the record date, please send this document, together with any provisional allotment letter, if and when received, as soon as possible to the Registrar or the stockbroker or other agent through whom the sale or transfer was effected for delivery to the purchaser or the transferee, except that such documents should not be sent to any jurisdiction where to do so might constitute a violation of local securities laws or regulations. The Capital Markets Authority (“CMA”) has granted approval for the Rights Issue. As a matter of policy, the Capital Markets Authority assumes no responsibility for the correctness of any statements or opinions made or reports contained in this Information Memorandum. Approval of the Rights Issue should not be construed as an indication of the merits of Kenya Electricity Generating Company Limited (KenGen) or of the shares of KenGen. The Nairobi Securities Exchange (“NSE”) has granted permission for the listing of the New Shares (hereinafter defined) on the main investment market segment of the official list of the NSE. It is expected that admission of the New Shares shall commence at 9.00 a.m. on the listing date. The NSE assumes no responsibility for the correctness of any of the statements made or opinions or reports expressed in this Information Memorandum. Admission to the official list is not to be taken as an indication of the merits of KenGen or the New Shares. INFORMATION MEMORANDUM RIGHTS ISSUE 2016 Lead Transaction Advisor YOU ARE ADVISED TO READ “SECTION 9 - on MATERIAL RISKS” BEFORE MAKING A DECISION TO INVEST. This Information Memorandum is dated 18th May 2016. Rights Issue opens on 23 May 2016. Rights Issue closes on 10 June 2016. www.kengen.co.ke Not For Sale 4 KenGen 2016 RIGHTS ISSUE INFORMATION MEMORANDUM TABLE OF CONTENTS CORPORATE INFORMATION ....................................................................................................................................................................8 TRANSACTION ADVISORS ........................................................................................................................................................................9 DEFINITIONS & ABBREVIATIONS ...........................................................................................................................................................10 IMPORTANT NOTICE ..............................................................................................................................................................................13 THE TRANSACTION ................................................................................................................................................................................14 STATEMENT BY THE NATIONAL TREASURY AND THE MINISTRY OF ENERGY & PETROLEUM.................................................................15 DIRECTORS’ STATEMENT .......................................................................................................................................................................16 CHAIRMAN’S STATEMENT…………….………………………………………………………...............................................................................……….……17 STATEMENT BY THE MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER ...........................................................................................18 SECTION 1 – TIMETABLE .......................................................................................................................................................................19 SECTION 2 – DETAILED OVERVIEW OF KENYA AND KenGen…………………............................................................................……….….......20 SECTION 3 – TERMS AND CONDITIONS .................................................................................................................................................37 SECTION 4 – KENYA’s ENERGY SECTOR ..................................................................................................................................................46 SECTION 5 – KenGen’s ENERGY SALES ..................................................................................................................................................49 SECTION 6 – OVERVIEW OF KENYA ELECTRICITY GENERATING COMPANY LIMITED .............................................................................51 SECTION 7 – KenGen’s FINANCIAL OVERVIEW ......................................................................................................................................71 SECTION 8 – KenGen’s STRATEGY OVERVIEW .......................................................................................................................................77 SECTION 9 – MATERIAL RISKS ............................................................................................................................................................... 79 SECTION 10 – LEGAL OPINION ..............................................................................................................................................................84 SECTION 11 – ADDITIONAL INFORMATION .......................................................................................................................................... 92 ANNEXURE A 1 – REPORTING ACCOUNTANTS’ REPORT .....................................................................................................................104 ANNEXURE A 2 – INTERIM FINANCIAL REPORT