Essar Energy on Thursday announced that it intends to sell its entire 50 per cent shareholding in the Kenya Petroleum Refineries Limited to the government.
The exit deal, valued at Sh433 million ($5 million), is Sh173 million ($2 million) lower than what the Indian firm paid for when acquiring the stake in 2009; representing a 28.5 per cent depreciation.
Essar said it was no longer feasible to continue investing in the Changamwe-based refinery given the obsolete technology at the plant and Kenya’s current energy regulatory environment.
“This decision by Essar Energy follows an extensive series of studies by international consultants into the technical, economic and funding elements of an upgrade of the Mombasa refinery,” Essar said in a statement.
“Following these studies, Essar Energy believes that the upgrade is not economically viable in the current refining environment.”
It brings to an end a frosty four-year relationship between the energy company and the Kenyan government, in which the two shareholders differed on how to upgrade the refinery.
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Essar Energy acquired its 50 per cent stake in KPRL in July 2009 for a total consideration of Sh607 million ($7 million) from BP, Chevron and Royal Dutch Shell.