Interest and penalties have pushed up loans taken by cash-strapped National Oil Corporation of Kenya (NOC) by 75 percent to Sh8.56 billion, amid cash-flow woes that have hurt NOC’s ability to repay the facility.
A Treasury document tabled in Parliament shows NOC owed KCB Group Sh6.35 billion as at June from an original amount of Sh3.59 billion while its loans taken from Stanbic jumped to Sh2.21 billion in the same period from an initial amount of Sh1.3 billion.
The jump in the unpaid credit facility signals an accumulation of penalties and interest over the years that have further made it difficult for the firm to settle the debt.
“The increase is due to interest and penalties. We have not taken any new loans since 2019,” NOC CEO Gideon Morintat told the Business Daily in an interview.
But the spike comes at a time when the oil marketer is set to onboard one of the three leading oil marketers in Kenya as a strategic partner in the latest State-backed effort to revive NOC.
NOC has remained coy on whether the billions of shillings from the strategic partner will be partly used to help pay the loans.
“The strategic partner, which we are in the process of identifying, will inject working capital and capital expenditure for rebranding, renovation and expansion of our retail network,” Morintat said in an internal memo.
NOC tapped the credit facilities years ago to fund fuel purchases but deepening losses and stiff competition from well-oiled multinationals made it near impossible for NOC to raise enough cash and settle the arrears.
The oil marketer at its peak had 110 service stations that included 13 stations acquired from BP in 2009 and 33 stations from Somken a year later.
NOC’s market share has since shrunk to less than one percent highlighting the cash-low woes that have hit the firm.
KCB Group has in the past threatened to seize and auction NOC’s properties to recover the money, raising fears that the State-owned oil marketer risked being wound up.
The lender made the latest threat to auction NOC’s properties in August 2020, prompting the oil marketer to warn it risked winding up if the Treasury did not provide funds to start off-setting the arrears.
Early last year, NOC unsuccessfully sought the help of Parliament to get Sh13 billion from the National Treasury, with Sh6.6 billion earmarked for paying the two loans.
NOC has until the end of this month to onboard a strategic partner in line with a Cabinet directive meant to turn around the battered fortunes of the firm and cut its reliance on the Exchequer.
