BY PAUL MUTHAURA
Today marks yet another milestone in an astounding decade of capital markets activity that KenGen has been at the centre of following its IPO on May 17, 2006.
In that year, KenGen’s IPO attained a 333% subscription level- the 6th highest in Kenya’s history, as it raised over Sh7.45 billion shillings. Kengen’s public offer also played a pivotal role in introducing an estimated 300,000 new formal investors in the capital markets translating to stronger secondary market performance in terms of traded turnover, market capitalization and share volume.
A few years later came the hugely successful KenGen Infrastructure Bond in 2009, a ten-year bond, which raised over Sh25 billion. It is that bond offer that launched electronic trading in debt securities and generated unprecedented turnover volumes in secondary trading of corporate bonds at the Nairobi Securities Exchange.
Today, KenGen has come back to the market to list its rights issue shares and reassert its position as a blistering pace setter for issuers of securities in Kenya; and for that, the Authority strongly commends the Board and management of Kengen.
In maintaining its position as a market trail blazer, the Authority will continue to urge KenGen to lead other infrastructure providers and ultimately the county governments to take advantage of new structured products such as Asset Backed Securities (ABS) by establishing vehicles to finance infrastructural projects in transparent and sustainable ways off balance sheet. The Authority continues to work tirelessly with the National Treasury to ensure Asset backed securitization can be as attractive as possible through a number of fiscal incentives government has provided.
As I hope you are all aware, the Cabinet Secretary to the National Treasury exempted all transfers of assets as part of structuring Real Estate Investment Trusts (REITs) and Asset Backed Securities (ABS) from Stamp Duty. In addition, the National Treasury is currently considering the extension of similar treatment to VAT to ensure structured transactions can achieve true tax neutrality.
In this context, I wish to confirm that a number of potential issuers are in engagement with the Authority with a view to exploiting the enormous potential presented by the Asset Backed Securities solutions to fund infrastructure within various sectors of our economy.
As highlighted by the Cabinet Secretary in his 2016 Budget Statement, a program to enable all Kenyans to have universal access to safe water and sanitation by 2030 through the Kenya Innovative Financing Facility for water is among the issuers we are in engagement with a view to rolling out ABS.
I would like to confirm that several other potential issuers are also in consultation with the Authority with a view to rolling out ABSs in Kenya. In support of this, with the assistance of the World Bank/IFC, the Authority is nearing the completion of a complete overhaul of the ABS legal framework in Kenya to ensure that it can be sufficiently flexible and responsive to the different funding needs of the economy. The key statutory amendments to facilitate this transition are already under consideration by the National Treasury and we look forward to their early passage to support a conducive environment for infrastructure funding in line with the Capital Markets 10-year Master Plan.
The Government has consistently supported the Authority in development of capital markets through an enabling policy and regulatory framework and its keen interest in the development of the capital markets is a clear testimony of how important the capital markets in Kenya is viewed at the highest level of policy making. As such, we request more listed companies to follow in the footsteps of KenGen Limited to source for funding from the public markets and further urge more private companies to come on board in a bid to raise more capital from the domestic, regional and international public markets.
Noting the central link between the attainment of our Vision 2030 aspirations and the success of devolution, the Authority is working with the National Treasury towards the unveiling of a policy sensitization paper to be distributed to County governments on avenues for them to use project based financing to leverage capital markets financing. This is being supported through an extensive targeted investor education and public awareness program that has seen the Authority facilitate forums, media campaigns, road shows, round tables targeting county leadership, the youth, women, investment groups, community based organizations and learning institutions in thirty four counties since 2013.
I wish to reaffirm the Authority’s commitment, with the support of the Government, to providing a facilitative environment for issuers, investors, and market players to participate and prosper in the capital markets industry. The Authority remains focused and committed to ensuring the capital markets play their cardinal role in facilitating the realization of the Vision 2030 objectives through the delivery, in conjunction with industry, of the Capital Markets 10-year Master Plan.
On behalf of the Authority’s board, management, and staff and the entire Capital Markets fraternity, we wish KenGen Limited success in their expansion and future development plans.
Writer is Capital Markets Authority Chief Executive.
