Civicon, an engineering company that is majority owned by NSE-listed TransCentury, has won a contract extension to handle infrastructure projects for British exploration firm Tullow Oil.
The lucrative contract involves building of roads, airstrips and other supporting infrastructure around Tullow’s oil exploration blocks in northern Kenya.
“We inked a two-year contract with Tullow Oil to provide engineering services,” said Civicon business development manager Ben Kiilu at a briefing on Wednesday.
TransCentury has a 60 per cent stake in Civicon. Civicon could not give the potential value of the deals, citing listing rules for both Tullow Oil and TransCentury.
Analysts said that it costs at least $30 million or Sh2.6 billion to drill a well, part of which will end up in TransCentury’s books.
Civicon’s and by extension TransCentury’s payoff will also depend on the number of wells that Tullow drills in the next two years. Tullow Oil had said that it would spend up to Sh87 billion on exploration in 40 wells this year and part of this would go to drilling in the East Africa region.
“Activities consist of up to 13 wells in Kenya and Ethiopia, including high-risk wildcats, a testing programme on existing discoveries and follow-on drilling operations,” says Tullow Oil’s 2012 annual report.
On the local front, Civicon has signed a contract to construct a Liquefied Petroleum Gas (LPG) filling plant for the National Oil Corporation of Kenya (Nock) which should be completed in 2014.
The plant being constructed in partnership with a Belgian firm will be located in the Industrial Area.
“The objective of the LPG depot at Nock Nairobi Terminal is for the storage, filling and supply of LPG cylinders to domestic and commercial users in Nairobi and its environs .The emerging market demand of LPG is projected to grow to 12 metric tonnes per day by 2013,” said the plant’s Environmental Impact Assessment report.
“A total of 6,100 cylinders each weighing six kilogrammes and 1,300 cylinders each weighing 13 kilogrammes will be filled with LPG per day. The cylinders will be stacked to a level of four cylinders high for six kilogramme cylinders and two cylinders high for 13-Kg cylinders,” adds the report.
Civicon has been carving a niche in the oil and minerals sector by positioning itself as a local company that can service the new industry that requires high-level expertise.
READ: TransCentury eyes oil projects with Sh1bn deal
The TransCentury subsidiary had previously bagged the contracts to do works for Base Titanium, the Australian firm mining titanium in Kwale County. Recently, it won a contract to do engineering services for four gold mines in the Democratic Republic of Congo.
Analysts say that while Civicon may be the jewel in TransCentury’s crown, much focus has been on the listed firm’s other main investments.
Eric Musau, a research analyst at Standard Investment Bank says that Civicon is strategically placed to reap from mega projects that will come with exploration and eventual extraction of natural resources, but the main focus has been on TransCentury’s logistics and power subsidiaries.
“They have a really well positioned asset but investors are still thinking of Rift Valley Railways (RVR) and East African Cables,” said Mr Musau.
TransCentury has a 34 per cent stake in Rift Valley Railways (RVR), a 68.3 per cent stake in East African Cables which is also listed on the Nairobi Securities Exchange and a 10.7 per cent stake in Development Bank of Kenya
The firm’s profit stood at Sh740.6 million from Sh616 million over the same period, a 20 per cent increase.
TransCentury traces its roots from an investment club of 29 members started in 1997 which later evolved into an investment firm that is now a fully-fledged infrastructure company.