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Insolvent firms risk being delisted under proposed NSE trading rules

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Insolvent firms risk being delisted under proposed NSE trading rules

Nairobi Securities Exchange
Nairobi Securities Exchange staff on the trading floor. FILE PHOTO | NMG 

Some of the insolvent or financially distressed companies at the Nairobi Securities Exchange (NSE) #ticker:NSE risk being delisted if far-reaching changes to the rules are adopted.

The Capital Markets Authority (CMA) and the NSE Wednesday released the proposed listing rules that will see the struggling firms put under a recovery board and given three years to complete a turnaround or be expelled from the Nairobi bourse altogether.

The recovery board will accommodate firms struggling with negative working capital — where short-term assets fall short of short-term liabilities — a position that has made it difficult for them to pay their short-term debt and meet routine financial obligations.

The recovery board is also expected to alert investors at the NSE of companies in which they should trade with caution when buying shares.

The proposal is aimed at helping especially retail investors make informed decisions before buying stocks.

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“The Exchange shall compulsorily delist an issuer who is placed on the recovery board of a market segment if the issuer… after the expiry of a three-year period on the recovery board has not met the net assets and insolvency requirements,” say the proposed changes to listing rules.

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Failure to submit a recovery plan within six months of being placed on the recovery board or failing to show progress reports of the restructuring plan will also earn a firm expulsion from the NSE.

Investors trading in firms that have been moved to the recovery board will be advised to trade with caution and be aware that they are dealing with firms in trouble.

Hong Kong and India have similar boards to put listed firms that do not fit on the main board to ensure key investor protection measures are maintained.

“In order to enhance investor protection, the Exchange and the authority are jointly proposing the establishment of a recovery board at the exchange on which securities of an issuer who is technically insolvent, non-compliant with any other listing obligation or whose operations are being conducted in a manner that is prejudicial,” the NSE said in a notice.

A poor run by companies at the NSE has turned most counters into penny stocks, wiping out billions of shillings of shareholder wealth.

One third of the counters — 23 firms — are trading at less than Sh10 out of which four are less than Sh1 as their value and confidence in the market are eroded. And four companies, including Mumias and Uchumi, are trading at less than Sh1 a share.

If the rules are implemented, the NSE and the market regulator will form an advisory board to help shepherd the recovery of the troubled counters while they take a timeout at the recovery trading segment.

The plan to create the special trading platform for troubled listed firms was designed after it emerged that outright delisting could create a confidence crisis in the capital markets and send the wrong signals to potential investors.

The rehabilitation is expected to help the distressed firms get back on their feet.

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3 Kenyan firms selected to host MIT Sloan Global Entrepreneurship Lab projects

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Since 2000, nearly 2,500 MIT Sloan G-Lab students have worked with host companies on 643 projects at 482 startups in emerging and frontier markets in 54 countries

, CAMBRIDGE, Massachusetts, Jan 20 — They are three Kenyan companies poised to expand locally and globally and are interested in exploring how best to take that next significant step.

Now, AT Labs, Lori Systems and SunCulture have been selected to host Global Entrepreneurship Laboratory (G-Lab) projects in collaboration with the MIT Sloan School of Management, founder of the international entrepreneurial program. The companies were chosen based on their business models, growth potential, and successes to date.

Teams of MBA students from MIT Sloan—one of the world’s top-ranked business schools—will be working on-site in Kenya throughout January to provide them with high-impact insight and analysis.

This year marks G-Lab’s 20th anniversary. Since 2000, nearly 2,500 MIT Sloan G-Lab students have worked with host companies on 643 projects at 482 startups in emerging and frontier markets in 54 countries. To date, approximately 15 G-Lab projects have been hosted in startups and companies across Kenya.

When determining project scope, host companies draw from a broad spectrum of business challenges such as growth, new market entry, pricing, marketing, benchmarking, fundraising, and financial strategy. G-Lab strongly emphasizes concrete “leave-behinds” as a primary component of the teams’ project deliverables.

In the process, the MBA students gain real-world experience in creating, developing and running young enterprises with diverse economic infrastructures as well as thinking about the role of politics, culture, and other non-economic variables.

Meet the Companies

A wholly-owned subsidiary of Africa’s Talking (AT), AT Labs is a startup studio that seeks to co-create companies with founders by giving them access to resources, including AT’s technology platform, engineering capacity, physical space, business services and access to capital.

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The MIT Sloan G-Lab team is working to create actionable insights to help refine for AT Labs the strategic approach to creating a sustainable operational formula for building successful startups in Africa.

An e-logistics marketplace for trucking, Lori Systems simplifies freight hauling across Africa. Their platform is revolutionizing the cargo-transport value chain, focusing on full truckloads. In the past year, Lori has seen significant growth in its operation footprint, business performance and team.

Having raised capital and now focusing on scaling, Lori sees an opportunity to “check-in” on its business and determine some clear internal and external priorities for 2020. The G-Lab team will recommend key areas to underpin and sustain their growth.

SunCulture’s water pumps and irrigation systems enable farmers to access a steady supply of water for agricultural and household use, engage in precision irrigation, store energy to power lights and appliances, and receive personalized farming recommendations.

As SunCulture embarks on their “scale-up” phase, the company is eager to refine and upgrade its pricing strategy. The MIT Sloan G-Lab team will assist in the development of an enhanced pricing model to support SunCulture’s growth and profitability targets.

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Chinese firm wins Sh740m Kenya Power meters tender

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PATRICK ALUSHULA

By PATRICK ALUSHULA
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Chinese firm Shenzhen Star Instruments Company has won a Sh746.2 million tender to supply single phase prepayment meters to Kenya Power..

The electricity distributor reveals in the tender awards that the Chinese company, with local directors, will deliver the meters as the utility firm continues connecting more people to the grid.

Electricity sales revenue for customers on prepaid metering is recognised when customers buy electricity units and then adjusted for the estimated amount of unconsumed power based on the consumption rate over a period of time.

The cash-strapped firm expects to add more customers through the return of its Last Mile Connectivity Project (LMCP) that links homes to the national grid under a subsidised programme.

The award comes barely two weeks after inviting bids for supply of nearly 200,000 post-paid meters, signalling that it favours a mix of prepaid and post-paid meters.

This is in contrast to earlier plan to completely switch to prepaid meters to reduce mounting customer debt.

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Shenzhen Star had in 2017 bid for another tender worth Sh1.25 billion to design, supply and install an advanced metering system to Kenyan Power but lost to rival Chinese firm ZTE Corporation.

The directors of Shenzhen Star are listed as Ronald Kingeru Kaburia, Netfast Communications Ltd and Vigelo and Gelo Construction Ltd.

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Mr Kaburia, who is in charge of Shenzhen Star operations in Kenya, said last year that the firm would build a manufacturing facility at Tatu Industrial Park beginning fourth quarter of 2019.

Kenya Power’s LMCP was launched in 2015 to scale up connectivity in rural and peri-urban areas by providing subsidy for grid extension to enable customers get electricity supply at affordable cost.

This has seen more people join the grid.

However, the monopoly’s performance has dwindled in recent years despite rising customer numbers.

It has issued back-to-back profit warnings as earnings tumbled to 10-year lows.

It now expects net profits for the year ending June 2019 to be more than 25 percent lower than the Sh1.92 billion after-tax profit posted in the prior year.

The firm said this was due to an increase in non-fuel costs in line with the company’s long term strategy to grow cheaper and cleaner renewable energy.

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Chinese firm wins $7.4m Kenya Power meters tender

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BUSINESS DAILY

By BUSINESS DAILY
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Chinese firm Shenzhen Star Instruments Company has won a Ksh746.2 million ($7.462 million) tender to supply single phase prepayment meters to Kenya Power..

The electricity distributor reveals in the tender awards that the Chinese company, with local directors, will deliver the meters as the utility firm continues connecting more people to the grid.

Electricity sales revenue for customers on prepaid metering is recognised when customers buy electricity units and then adjusted for the estimated amount of unconsumed power based on the consumption rate over a period of time.

The cash-strapped firm expects to add more customers through the return of its Last Mile Connectivity Project (LMCP) that links homes to the national grid under a subsidised programme.

The award comes barely two weeks after inviting bids for supply of nearly 200,000 post-paid meters, signalling that it favours a mix of prepaid and post-paid meters.

This is in contrast to earlier plan to completely switch to prepaid meters to reduce mounting customer debt.

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Shenzhen Star had in 2017 bid for another tender worth Ksh1.25 billion ($12.5 million) to design, supply and install an advanced metering system to Kenyan Power but lost to rival Chinese firm ZTE Corporation.

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The directors of Shenzhen Star are listed as Ronald Kingeru Kaburia, Netfast Communications Ltd and Vigelo and Gelo Construction Ltd.

Mr Kaburia, who is in charge of Shenzhen Star operations in Kenya, said last year that the firm would build a manufacturing facility at Tatu Industrial Park beginning fourth quarter of 2019.

Kenya Power’s LMCP was launched in 2015 to scale up connectivity in rural and peri-urban areas by providing subsidy for grid extension to enable customers get electricity supply at affordable cost.

This has seen more people join the grid.

However, the monopoly’s performance has dwindled in recent years despite rising customer numbers.

It has issued back-to-back profit warnings as earnings tumbled to 10-year lows.

It now expects net profits for the year ending June 2019 to be more than 25 percent lower than the Ksh1.92 billion ($19.2 million) after-tax profit posted in the prior year.

The firm said this was due to an increase in non-fuel costs in line with the company’s long term strategy to grow cheaper and cleaner renewable energy.

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