Kenya Pipeline Company (KPC) is considering a bouquet of solutions as it seeks to preserve its cash rich position to finance heavy capital spending on projects in the medium-term.
Among the options on the table for the recently listed utility are issuance of infrastructure bonds to raise cheap capital and issuance of bonus shares to shareholders to stave off the pressure of dividend payment that eats into the company’s cash pile.
The utility closed the year ended June 2026 in a cash rich position with Sh20.5 billion in its books, but says that the expensive nature of its capital projects necessitates abundance of caution as it calibrates the demands for dividend payment to shareholders and capital preservation for project funding.
‘Our cash reserves are good and healthy and it tells you that we can be able to meet obligations as and when they arise and we are able to invest adequately as an organization. However, we have just declared a dividend of about Sh6.0 billion which once the shareholders approve at the forthcoming AGM will bring down the cash,” KPC Managing Director, Pius Mwendwa, told the Business Daily.
“The remaining cash is meant for investment in the company and we are looking at significant outflows in the coming years and especially in the next three or four years.”
Mwendwa says that among the top considerations is the potentially issuance of bonus shares which refers to a satiation where a listed entity creates new shares and distributes them to existing shareholders at an agreed ratio in proportion to their shareholding.
Bonus issuance of shares allows companies to preserve their capital for future growth plans since from an accounting treatment, the company converts a portion of its retained earnings into paid up equity meaning cash only moves internally on the balance sheet from reserves to capital stock.
For the year ended June 2026, KPC announced a proposed dividend of Sh0.32 per share translating to a total dividend payout of Sh5.9 billion.
‘This is a market that is very dividend sensitive and obviously every shareholder expects returns but we have to strike a balance between growing the business and paying the shareholder, a balance that has to be agreed by all parties. We are looking at various alternatives,” Mwendwa says.
“One is that we could finance some projects through debt, commercial or otherwise. We can do project financing; we can also do infrastructure bonds just to be able to maintain this balance. We could also consider doing bonus shares to shareholders because if you look at our balance sheet, you will realise we have quite healthy reserves.’
According to KPC, undertaking a single project could cost the company anything between Sh60.0 and Sh70.0 billion, necessitating accelerated efforts to ramp up the firm’s cash position to be ready to meet such infrastructure spending as and when it arises.
‘The last mega project we did was Line 5 which was the replacement of Line 1 from Mombasa to Nairobi, a 450-kilometer pipeline. That was eight years ago and we spent upwards of Sh50.0 billion. If we were to do a line today of the same magnitude we would probably be talking about Sh60.0 billion or Sh70.0 billion,” Mwendwa said.
“When we are financing most of our projects, especially those which are huge in capital outlay, we usually do a hybrid where about 30.0 percent is financed through equity and the remaining 70.0 percent through debt and that is what we continue doing.’
In the twelve months ended June 2026, KPC’s net earnings grew 13.1 percent to Sh11.58 billion while the firm’s total revenue grew 8.8 percent to Sh42.98 billion. In the same period, the company’s total assets grew 6.15 percent to Sh149.27 billion.