A filling station in Kisumu that belonged to the collapsed oil marketer Triton. Total Kenya says it will incur losses due to a payout linked to the firm. Photo/FILE
What you need to know:
The firm said its net loss would be larger than the Sh71.4 loss it recorded in 2011, mainly due to a settlement of at least Sh673.6 million to Glencore-- a Swiss trading conglomerate — over a supply dispute currently in London court.
Glencore demanded the money for supply of diesel to collapsed Triton, which Total had guaranteed following its partnership with the fallen marketer to supply power generator KenGen.
Triton collapsed in 2008 leaving in its wake huge debts after withdrawing oil amounting to Sh7.6 billion from Kenya Pipeline Company and sold it to the market without informing financiers.
Total Kenya is set to post a bigger net loss for the year ended December on what the oil marketer attributed to a large payout in a claim arising from the Triton scandal.
The firm said its net loss would be larger than the Sh71.4 loss it recorded in 2011, mainly due to a settlement of at least Sh673.6 million to Glencore-- a Swiss trading conglomerate — over a supply dispute currently in London court.
The marketer said Tuesday it could have returned to the profit zone were it not for the Glencore settlement — meaning that its shareholders are likely to go without a dividend for the second year in a row.
Glencore demanded the money for supply of diesel to collapsed Triton, which Total had guaranteed following its partnership with the fallen marketer to supply power generator Kenya Electricity Generating Company (KenGen), according to a PwC forensic audit report.
Triton collapsed in 2008 leaving in its wake huge debts after withdrawing oil amounting to Sh7.6 billion from Kenya Pipeline Company and sold it to the market without informing financiers, prompting the government to commission the PwC audit.
“Whilst the company has admitted liability in relation to the claim, in the interest of procuring a commercial resolution, which would also be in the best interest of shareholders, that claim may result in a substantial settlement within March 2013,” said Total in a statement.
“The directors and the independent auditors are in agreement that this must be adjusted in the 2012 accounts,” added the oil marketer without giving details.
“The company concludes that the profit for the year ending December 2012 will be materially lower than those reported for the same period in 2011.”
The firm disclosed a claim of $6.89 million (Sh590 million) and $1.04 million (Sh89.1 million) in interest by Glencore in its 2011 Annual Report.
It did not disclose whether the settlement would include meeting legal fees in a dispute that has been before the London Court in the past two years.
Triton Oil was owned by Yagnesh Devani. Kenya has issued a warrant to arrest him, but as of January 2010 he was still at large and believed to be in hiding abroad.
The Triton scandal has led to a series of multi-million shilling law suits involving local and international firms like Kenya Pipeline Company, KenolKobil, and BNP Paribas.
The profit warning portends a bad year for investors in oil company stocks since rival marketer KenolKobil has also issued an earnings alert.
Total share price Tuesday dropped to Sh14.05 compared to Monday’s close of Sh14.25 and has failed to benefit from the share price boom at the Nairobi Securities Exchange having shed 10 per cent over the past six months.
It made a net loss of Sh243.6 million in the nine months to September compared to a net profit of Sh69.4 million the year before on a higher debt burden.
Total reckons it had implemented a number of strategies that returned it to profitability by December, saying that its performance has been wrecked by the Glencore settlement. This signals an improved performance in the quarter ending December based on the company’s declaration that it was in the profitable ground by year-end.
Glencore’s claim on Total is rooted in a June 2008 diesel supply contract where the Swiss firm would deliver the products to Triton to feed Total, which would then supply KenGen to produce power from fuel driven generators.
In the arrangement, KenGen would pay Total before settling Triton that would ultimately pay Glencore.
Total had undertaken to pay Glencore on instructions from Triton for the June 2008 diesel supplies but Total cancelled the payment agreements after Triton delayed in supplying it with the products, according to details in the PwC report, which reckons that the consignment in dispute was not delivered to Total.
Triton’s finances worsened in the second half of 2008 as it was stuck with oil products whose international prices crushed to less than $50 per barrel.
This made it difficult for Triton to pay financiers and creditors. Glencore asked Total for payments for the June 2008 products but the oil marketer declined to do so after cancelling the payment undertakings to the Swiss firm. Triton had allegedly instructed Total to instead pay BNP Paribas, a financier of Triton.
The collapsed oil marketer later tried to convince Total to reinstate the undertakings of payments to Glencore and other financiers but Total refused. By the time Triton collapsed in December 2008, it owed financiers and creditors Sh7.6 billion.
Among them were KCB claiming Sh1.85 billion, Emirates National Oil Company (Sh2.5 billion), and Glencore (Sh2.3 billion) which later filed its claim on Total in 2011.
Triton and Total first secured the deal to supply KenGen with diesel in April 2006 and they continued with the contract until June 2008 when they mutually agreed to end their transactions after Triton’s failures mounted.
It later emerged that Triton’s former owner Yagnesh Devani used his political connections to clear fuel products worth $100 million from the state-owned Kenya Pipeline Company without notifying financiers.
