@ Mukiha..

i would buy the bond hold it to completion of the projects first phase then trade it in the secondary market and load on the share....

Its just me
whatever choice you make in life make sure that you can live with it.

In my humble view inflationary pressure is a strong factor here. most in SK are seeking the highest return on investment as simply compared to a 'safe haven' for their cash,as such if you make selective investments in stocks and real estate with the same 10 year maximum bond holding period,the average annual returns for the same period are definately going to be a lot higher than what the 'safe' bond is offering. That is the best it can get.

@kausha;

The rationale behind the installed capacity charges is similar to that of car-hire charges. You are charged fixed daily rate and a mileage premium [for distances above a certain limit]....even if you don't use the car,you have to pay for keeping it....

This arrangement makes sense because the normal practice is to have about 15% to 20% excess installed capacity. The guy that installs the excess must be paid for keeping it idle!

Anyway,the capacity charges are minuscule compared to generation charges.

Behind the gardens...Behind the wall...Under the tree (Including: Red...Dark Blue...Yellow)

@ Mukiha

the type of inflation to use in this analysis depends on the individual objecive towards investment.... the purpose of any investment is to build wealth,wealth that has capacity to acquire,Any type of wealth that cannot match up with price changes whether seasonal or otherwise beats its own purpose... therefore the most prudent analysis would be one that uses overall inflation.....

imagine investing your buffer cash using underlying inflation as the main fiscal pointer yet u want the same to give u the ability to live comfortably for a certain period of time (which is affected by seasonal commodity price changes) if u lose ur current income stream....

Thats my take....

Its just me
whatever choice you make in life make sure that you can live with it.

@Ericks; the seasonal fluctuations of the overall inflation are just to erratic to form any basis for investment projections. This the reason it is actually more prudent to use the underlying values.

You may start with 15% one month,then two months later the figure jumps to 33% ...and on the sixth month it is down to negative3%...just too erratic!!

@kausha; a time must come when one has to stop being too untrusting of any figure coming from government institutions. When you write 'street wisdom tells me that the underlying inflation is a creation of some political analyst meant to allow for a 'burry our head in the sand' moment.' you make one wonder why the statistics bereau publishes both figures.

If they wanted to understate the inflation,they would simply publish the underlying value...or better still,cook some figures!!

True; very many Kenyans do live on less than 100-bob aday...but those in that category DO NOT INVEST!! They don't have spare cash to invest because the consume all their income....

For the rest of us with cash to invest,underlying inflation makes more sense because it is more predictable.....and after all,we don't invest for future consumption alone!!

Having written all that; I must not lose sight of the fact that at any given moment,an investor wants an investment that will give the greatest returns....thus the question remains,THE BOND OR THE SHARE?

Behind the gardens...Behind the wall...Under the tree (Including: Red...Dark Blue...Yellow)

There are 3 issues:


Is the bond a good money market instrument? Yes,If you are a unit trust fund manager,you will love being able to put Ksh1bn into this and earning 12% tax free every year even its on a reducing balance.
Is it a good investment vehicle for private investors like you and me? Well,core inflation (underling inflation is only important to fund mangers and sometimes CBK not raia) is 23% currently and is unlikely to go below 12% over the next 3/4 years. That is your reference point...
Is a better bet than stocks? Depends on how good a stockpicker you are.

Finally,will the bond benefit Kengen shareholders? Nay...


www.mjengakenya.blogspot.com

I won't buy it coz u can get similar returns from treasury bonds with far less risk.

5 what? It seems to me that u r relating ur monthly expenditure to returns or have a fixed monthly target. Not bad idea. How wud u invest 1M?

Crocodile tears: If you can't assist me when I'm alive en you attend my funeral.

Did anyone look at the assumptions on financing future projects on page 183 of the IM.

They make some strange assumptions about their proposed issue of stock in 2010.

Plus I think the valuation on the 12.5% is still too rich...a 15.5% valuation would be more appropriate based on recent market movements.


SCUBI

How liquid is the bond market let say after 1 year i want to exit will there be willing buyers especially for bond worth 100k.and how much interest will i have to for go?

NAMASTE !Don't be unrealistic with your expectations