A parliamentary committee has poked holes in a revival plan for the National Oil Corporation of Kenya (NOC) over payment of Sh8.3 billion bank loans, amid a growing uncertainty over the deal seen as key to reviving the State-owned oil marketer.
The National Assembly's Committee on Energy faulted the ministries of Energy and Petroleum and National Treasury for lack of a plan on whether they will settle the loans that NOC owes KCB and Stanbic Bank or the liabilities will be transferred to a strategic partner.
NOC is seeking to tap an oil multinational as a strategic partner to inject at least Sh5.3 billion into the State-owned firm as part of its revival plans.
The parliamentary team gave the Energy ministry and Treasury up to the end of this month to come clean on the loan repayment.
“Though feasible, the plan does not address existing unpaid bank loans which amount to Sh8.3 billion, with Sh6.1 billion to KCB Group and Sh2.2 billion to Stanbic Bank,” the committee says in a report tabled before the House.
“There is a need for the Ministry of Energy and Petroleum in conjunction with the CS National Treasury to explore possible ways for the incoming non-strategic partner by January 31, 2024 to address the bank loan balance of NOC in order to enable the corporation to explore its mandate.”
Industry experts have also questioned how the government intends to handle the Sh8.3 billion and other debts that the oil firm owes suppliers, adding this could scuttle a possible deal.
The two bank loans have nearly doubled over the years from Sh3.5 billion for KCB and Stanbic's Sh1.3 billion on rising penalties and interest.
The Cabinet had given NOC up to the end of September last year to onboard an oil firm to be its strategic partner but the deadline was later pushed to end of October due to delays from the Treasury to give the corporation a go-ahead.
The government has since gone mum on the process even after NOC sounded out the three top oil multinationals in Kenya, Vivo Energy, TotalEnergies and Rubis Energy Kenya to gauge their keenness on a possible deal.
Officials who spoke on condition of anonymity said NOC was nearing a deal with one of the multinationals by November last year.
The firm continues to rely on the Treasury for all its funding needs amid a string of losses that have seen it fall from a once strong position in the 1990s.
At its peak, NOC had a retail footprint of 110 service stations that included 13 stations acquired from BP in 2009 and 33 stations from Somken a year later.
Privatisation plan
Years of perennial struggles and losses hit its competitiveness, cutting its market share to less than one percent as at June last year, from 2.2 percent in December 2021, highlighting the severity of its financial woes.
The losses have pushed it into a precarious financial situation, with liabilities for the year ended June 2021 having exceeded current assets by Sh6.3 billion, rendering the firm technically insolvent.
NOC is one of the 11 parastatals that the government has earmarked for privatisation in what has further added to the uncertainty of the firm’s revival plan.
The Treasury and the Energy ministry remain coy on whether NOC should still go ahead and onboard the strategic partner or drop the plan in favour of a full sale in line with the privatisation plan.
