Kenya Power, the country's sole power distributor, will lean on soft financing and may turn to the bond market, its chief executive said after unveiling results of a 9.5 billion shillings cash call.

Energy utilities in the east African nation rely on concessional financing from institutions like the World Bank to meet massive capital requirements following decades of underinvestment in the sector.

The firm raised 9.8 billion shillings in a rights issue aimed at upgrading the national grid, representing a 103.17 percent subscription rate for the offer.

Because of our improved balance sheet and because the government is a major shareholder, we should be seeing a lot of resources coming from very soft lenders like the World Bank and other multi-lateral lenders, Chief Executive Joseph Njoroge told Reuters.

To complement all those resources, we can be able to comfortably go for a bond issue because our balance sheet has improved. We will explore all available channels for raising funds.

Some 47 applicants who had applied for more than 500,000 shares of the 488.6 million shares on offer at 19.5 shillings each will miss out on full allotment.

The cash call was the final step in the restructuring of Kenya Power's balance sheet, which started with redemption of the government's preference shares and an eight for one share split.

During the process, the government's shareholding initially rose to 69.7 percent from 40 percent before falling to a stake of 50.1 percent after it sat out the rights in line with its policy of cutting its involvement in public enterprises.

Equity Bank and Centum Investments had underwritten the issue up to 50 percent.

Its shares slid 6 percent on the day to 24.00 shillings per share at the stock exchange after announcement of the cash call's results.


Njoroge said the firm will also study the possibility of cross-listing its shares in the rest of east Africa. A few Kenyan firms are also listed on the Dar es Salaam and Kampala bourses as well as the Kigali market in line with growing regional ties.

Power cuts are unlikely in Kenya this year even if an emerging dry spell persists, thanks to two plants generating a combined 140 megawatts to be commissioned soon, Njoroge said.

The drought could however curb the firm's financial performance for its year ending June 2011, he added.

Even though the current drought is itself a setback, we see a very successful financial year ending 30th June 2011. The economy is picking and we have seen a rise in demand of our electricity, he said.

Officials expect the economy to grow by about 6 percent this year after expanding by an estimated 5.1 percent in 2010, up from 2.6 percent in the previous year.