On Monday, August 9, Energicotel, a local private energy development firm became the first local Small and Medium Enterprise to debut on the Rwanda Stock Exchange by listing of a Rwf6.5 billion long-term fixed rate corporate bond.

The listing of the firm, which was previously largely unknown in the local corporate circles, is likely to set a precedent for local SMEs opening up avenues for the firms to raise capital without having to seek loans from banks.

On July 26, the firm announced that they had raised Rwf3.5bn in its first tranche with a 10 year bond with a 13.75 per cent per annum interest rate meaning they had a 100 per cent subscription rate.

The first tranche which received regulatory approval from Capital Markets Authority on June 18 is aimed at enabling the firm to refinance existing debt obligations to match its borrowing with long term contracts to optimize cash flow.

The firm on Monday debuted on the stock exchange listing an Rwf6.5 billion long-term fixed rate corporate bond to become the first SME business in Rwanda to list on RSE.

This is also the first firm owned by a Rwandan and operating in the energy sector and only the third corporate bond since the inception of Rwanda’s capital market industry.

Who are Energicotel?

Energicotel is Independent Power Producer (IPP) and Engineering Consulting Company in Rwanda with power purchase agreements and concessions to upgrade, operate and maintain five micro hydropower plants.

The firm has a 25 year concession to run; Keya, Nkora, Cyimbili, Nyamyotsi 1 and Nyamyotsi 2 hydro power plants. The five plants have an installed capacity of 3.4MW supplying a supply of 17M KwH of electricity to the national grid.

Energicotel is the power-generating subsidiary of EPCA Holding Ltd, a Rwanda-based engineering and business company, which provides services to the public and private sectors in the fields of engineering, infrastructure development and business and managerial services.

EPCA is the holding company of four companies operating in the energy and infrastructure sectors across Africa with operations in Rwanda, Zimbabwe, Kenya, DRC and Malawi. Their portfolio also include Supply Chain Management, Project Management Consultancy and ICT Solutions.

The firms include; Afrilott Ltd, Century Engineering Contractors (CEC), a Civil Engineering and Electromechanical Contractor and EPCA Housing a real estate development company to construct 3,00 apartments in the next 5 years.

Energicotel’s profit after tax for 2020 stood at Rwf303m with operating profit standing at over Rwf880M. In 2019, the firm had an after tax profit of Rwf248m.

The net assets of the company stand at Rwf606m.

Growth prospects

In the firm’s prospectus, Ferdy Turasenga, Executive Director, said that going forward, they are confident on operational cash flows of the existing profitable projects of the company.

Further, he noted that the firm has various Energy Projects, all in the Renewable Energy Space, at different stages of the project development cycle in Rwanda, Zimbabwe, Kenya, DRC and Malawi.

"Energicotel has laid out a comprehensive investment plan of the Rwf6.5bn including re-investing in the existing lines of business in terms of expansion plans plus investment in diversity of Greenfields such as Methane Gas on Lake Kivu,” he noted.

The firm is also largely banking on the government’s targets to phase out thermal energy from the energy mix to reduce the cost of power for both industrialists and households.

Celestin Rwabukumba, the Chief Executive of Rwanda Stock Exchange, welcomed the development noting that subscription of the first tranche of Rwf3.5bn, is a testimony of confidence investors have in the company.

"By having Energicotel additional fundraising through this bond, we are increasing our menu and diversification for investors in our market, and the fact that the company is one of the leading IPPs in Rwanda is an added value,” he added.

Capital Markets financing is cheaper and more sustainable in the long run in comparison to debt especially for firms with long term growth prospects. This is part of the reason firms such as Energicotel would move to pay off debt obligations which would allow them to optimize future cash flows.

This makes the firm the issuer of the third corporate bond to be listed since the establishment of the RSE after the ones by the International Finance Corporation (IFC) and local lender BCR—which was acquired by I&M Bank