Britam Asset Managers has bought at least 40 per cent stake valued at Sh1.4 billion in Gulf Power’s 80 megawatt heavy fuel oil plant in Athi River.
The investment in the energy sector comes three weeks after parent firm Britam issued a profit warning for the year ended December 31 citing a tough insurance market and the bear run on the Nairobi Securities Exchange.
Chief executive Kenneth Kaniu said the entry into long term energy sector will diversify and grow its investment portfolio for maximum returns for investors.
Launched in 2014, Britam’s asset management arm now controls a portfolio worth Sh158 billion.
“Through this investment, institutional clients will achieve diversification across asset classes and currencies. Returns from the power plant will be in hard currency,’’ said Kaniu.
Britam picked an American energy investment vehicle Everstrong Power to secure stake in the power plant that has a 20-year power purchase agreement with Kenya Power.
Gulf Power, a special purpose vehicle for Gulf Energy entered Kenya’s power generation market with its $112 (million Sh11.2 billion), 80MW, Medium Speed heavy Fuel Oil (HFO) power plant which became operational in December 2014.
“We expect a double return from this 16 year investment that has given us a significant non-ownership stake in the project which translates to about 40 per cent stake,” Kaniu said.
Everstong Capital principal Africa and country head Kenya, John Ouko called on other investment firms to take advantage of the country’s infrastructure deficit to pump resources in energy, communication and transport.
He said the assumption that more power is produced than demanded is a myth, stating that local consumption per capita of 167 kilowatt is not enough for a country warming up to manufacturing.
Kenya currently produces 2,300MW with peak demand at about 1,700MW.
In 2014, Ministry of Energy had planned to push up generation by 5,000MW in 40 months.
A report by Britam Asset Managers released in 2017 shows that East African economies need at least $100 billion (Sh10 trillion) over the next four years to plug their infrastructure gap, which has kept the cost of doing business in the region high.
It is yet to be seen if investment into energy sector will positively impact Britam’s financial fortune even as it plans to announce more than 25 per cent drop in the last financial year.
