Oil marketer Rubis Energy Kenya converted €30 million (Sh4.7 billion) worth of pending fuel subsidy dues into government bonds by the end of June as part of the State’s deal with oil marketers to settle the payment delays, new disclosures show.
The firm was among the oil marketers who agreed to settle Sh45 billion worth of pending bills via a swap into a three-year Treasury bond.
Disclosures by the Ministry of Energy prior to the swap deal indicated that Rubis was owed Sh4 billion, while fellow multinationals Vivo and TotalEnergies were owed Sh13.8 billion and Sh8.2 billion respectively.
Oryx was owed Sh3.5 billion and Ola Sh2.3 billion while arrears to other oil marketers were at the time estimated at Sh14.4 billion.
“The increase in loans to third parties of €30 million (Sh4.7 billion) corresponds to the swap of receivables on the Kenyan government for three-year Kenyan treasury bills [bond] in respect of the payment of the subsidy due on petroleum products,” Rubis’ French parent Rubis Energie said in its financial report for the half year to June 2023.
The State issued a tap sale of a three-year paper in late June to allow the oil marketers to convert their debt, raising Sh18.6 billion, at a rate of 14.23 percent.
The second tranche of the swap was pushed into this fiscal year. Although the Treasury is yet to disclose the particular bond for the second swap, it did issue a reopened 10-year bond in July with a maturity of 3.2 years, raising Sh15.7 billion.
The government rolled out the fuel price stabilisation plan in April 2021 to cushion consumers against high pump prices during a period when the economy was still affected by the measures put in place to fight the Covid-19 pandemic.
The subsidy was stopped by the Kenya Kwanza administration immediately after it took office in September 2022, terming it unsustainable.
After paying the oil marketers Sh124 billion under the plan, the State was left with arrears of Sh45 billion, which the bond was meant to address.
Those taking the bonds would then have the option of holding onto it until its maturity in 2026, and earning annual interest in the process.
They could also opt to sell their units in the secondary market at the Nairobi Securities Exchange (NSE), an option which would see them unlock working capital immediately.
Sellers would, however, risk a haircut due to the rise in yields in the secondary market, which meant lower prices for those selling bonds.
Oil firms tend to be cash-hungry due to the high volumes of product they move every month. The delays in compensation, therefore, saw them take up short-term loans to fund their working capital needs.
TotalEnergies, for example, disclosed it took Sh14.5 billion in short-term loans in the year ended December as a result of the compensation delays.