Tough balancing act here, Debt Vs Equity (rights issue) Vs a mixture of the two

In otherwords, KGN has a plot and approaches you for debt finance to build real-estate. The security being the plot (steam), the houses (plants) & that you'll be repaid from the rent (revenues) over time [all factors held constant]. IMHO

You are right. The current revenues from steam wont go into the ABB.

However the current steam drilled will be used as collateral.

“We plan to use the steam already drilled as collateral to raise additional affordable capital from the market. We shall use this capital to build power plants and use the revenue from the sale of power to pay those who have invested in us,” said Mr Njoroge during a tour of the Olkaria Geothermal Power plant in Naivasha.

would i then be correct in saying that the growth in profits attributable to shareholders will now remain in hydro, thermal and wind?

Since the increase in geothermal production will go into bond payment hence not attributable to shareholders.

Indeed. Mafwans wengine wamegoma!

Hey the cash flows from the geothermal plant will be used to pay interest on the bond...the rest goes to KenGen...an ABB results in creation of an SPV which will not be part of the KenGen balance sheet...so no risk to KenGen at all...in case of a default....bond investors will go for the geothermal fields not KenGen....putting in a bid now before interim earnings next week.

Keep falling. We are waiting to collect at a dirt cheap price. Keep falling.

@cde. My take home message here is. Kengens earnings stay as they are for the medium term with growth coming from wind.
Geothermal growth will not attributable to shareholders only existing capacity. I dont expect the company to create other geothermal plants other than those in the ABB in the foreseable future.

So we are left with kengen as it is, but with reduced earnings growth prospect. Kengen as it is is grossly undervalued so it still remains a good fair value play for me, however the pot has been unsweetened.
Lets await managements details BD has its challenges.

I have been complaining about the value destruction going on in this company and now the details are becoming clear. I can bet you Kengen will have to pay a premium to get the Kshs 30B and a good premium if at all they get the money. Using the last completed greenfield projects (Kipevu 3 and Sondu miriu)it appears Kengens capacity acquisition rate is USD1m/MW of thermal elec. and USD1.3m/MW of hydroelec. I will check out the same for geothermal. The question that begs then is why does Kengen need USD 5B for 2000MW. Using it's current costs they only beed USD 2B for the missing 2,000mw.

Second gripe, of the Kshs 25B PIBO, some of the amounts were to be used for the 280mw olkaria III geothermal and current equity investors have been servicing this PIBO debt and other debt (in other words forgoing dividends) so that Olkaria 3 can be built and they can enjoy higher divys. Now it turns out Olkaria 3 proceeds will go towards supporting the ABS. Surely if that's the truth management is being conish and insencere to equity investors.

I have said it before the financial structure of kengen and business plan is not sincere and who knows what becomes of it once regimes change. KPLC forecasts indicate demand for power will be 2,250 in 2018 including reserve capacity. Why is kengen adding 800mw of unwanted capacity. Then if indeed we have found oil, thermal power capacity is the cheapest to acquire but thermal power costs more to generate - cost of oil, with locally sourced oil generation cost will drop massively, shouldn't this be factored into Kengen's plan. The reality is that we will need a refinery either in Turkana, Kitale or even Mombasa but at whichever point you will need thermal power plants to consume the sludge from the refinery. Why is Kengen not revising the USD 5B plan?? To honest as equity investor, this is the time to dump this stock in masses...there is no future for this stock, it might as well revert to GoK and operate like KPA. Absolute value destruction of equity investors!

Hmmm you seem not to understand what an ABS is? How has the pot been unsweetened? The pot has just been sweetened...the risk was how they're going to execute the whole geothermal thing and the finance part was the main hurdle.

Unsweetened because. Earnings growth for shareholders isnow reduced. Reduced because the new geothermal proceeds will now go to service the bond. Get it?