Water companies approved for NSE fundraising
Kenyan water companies have been authorized to secure funds through the capital markets, aiming to address the substantial deficit of Sh995 billion required for water projects. The proposed financing method involves issuing water and infrastructure bonds. The Kenya Association of Stockbrokers and Investment Banks (KASIB) recently collaborated with the Eldoret Water and Sanitation Company, laying the groundwork for alternative funding opportunities through the capital markets.
This partnership allows water companies to raise capital by leveraging the stock exchange. Kenya’s Water Sanitation and Health (WASH) investments are currently estimated to necessitate Sh1.8 trillion, resulting in a significant funding shortfall of Sh995 billion. Geoffrey Odundo, CEO of the Nairobi Securities Exchange, stated that this memorandum of understanding (MoU) aligns with the shared belief in utilizing capital markets as sources of medium to long-term funds, attracting investment from impact investors and other relevant parties.
The proposed bonds serve as financial instruments that governments and water companies can employ to generate capital for water-related ventures. The funds raised can be allocated to the enhancement and establishment of water infrastructure, such as treatment plants, sewage management systems, and distribution networks.
Ugas Mohammed, Chairman of the Capital Markets Authority, emphasized that this opportunity will enable water companies to undertake their development projects on a larger scale, reducing their dependence on government and development partners for funding. Mohammed also noted that the president is committed to capital market fundraising, highlighting the importance of initiatives like this and the issuance of green finance and environmental, social, and governance (ESG) frameworks for the future of the capital markets.
Typically, Water Service Providers rely on funding from tariffs, taxes, transfers, loans, bonds, and equity investments. Donald Wangunyu, Chairman of KASIB, mentioned that ELDOWAS has engaged with the Water Services Providers Association to explore possibilities for bridging the funding gap.
This marks the government’s second attempt to secure funds from the financial markets for water and sanitation programs. Previously, the State introduced the Kenya Pooled Water Fund as part of the Water Ministry’s 2018-2022 strategic plan, aiming to attract private contributions through local bond markets and raise Sh10 billion. However, this initiative did not achieve its intended objective.