Another major step was taken towards the reform of the Kenyan power sector in May with the successful flotation of a 30% stake in the country's main generator, Kenya Electricity Generating Company (KenGen).
Kenya Power Company (KPC), the state-owned power company that had dominated the sector since independence, was unbundled in the 1990s, resulting in the creation of KenGen and distribution operator Kenya Power and Lighting Company (KPLC).
However, the recent initial public offering (IPO), which was managed by Kenya Commercial Bank, should help to create a more competitive and efficient sector by generating new investment and turning KenGen into a more commercially driven organisation.
The government fixed the offer price for the KenGen shares at KSh11.90, which valued the company at KSh26.13bn or $361.6m. However, this appears to have been an underestimate given the scale of public interest in the privatisation.
Around 272,000 people applied for shares as the offer was vastly oversubscribed, with just 65,000 eventually awarded a stake. Disappointed investors had their payments returned to them.
The clamour for shares resulted in a huge immediate rise in the share price, which ended the first day of trading at KSh40. The government raised $108m from the sale, which was one of the biggest in the history of the Nairobi Stock Exchange.
Investors earned KSh258m from the 8.5m shares sold on the first day of trading, although the vast majority of successful applicants decided to hold on to their shares. It appeared that institutional investors were keen to increase their stakes in the company.
One of the main reasons for the flotation's success was the company's improving financial health. KenGen enjoyed a high profits to revenue ratio for the latest financial year, 2004-05, earning $28m on income of $118m.
According to by KenGen managing director, Eddy Njoroge, profits were up 8% on the previous year and he attributes the improvement to the impact of economic growth on demand for electricity.
The company had previously been entirely state owned, so the government received a KSh500m payment from KenGen in April, based on a dividend per share of KSh1.80, up from just KSh1.00 a share the previous year.
Finance minister Amos Kimunya praised the company's performance and said that the government was pleased that recent power sector reforms were yielding benefits and that the management of KenGen was...