Market News

Mombasa tycoon's takeover of rival LPG firm gets nod

jaffer

Billionaire businessman Mohammed Jaffer. FILE PHOTO | NMG

brianngugi_img

Summary

  • Proto Energy, associated with billionaire businessman Mohammed Jaffer, is the maker of Pro Gas and has now received regulatory approval to buy out Solutions East Africa, whose LPG products trade as SeaGas.
  • The buyout is expected to see the Mombasa business mogul firm his grip in the lucrative cooking gas market.
  • Africa Gas, which is partly controlled by Mr Jaffer who is also the owner of Grain Bulk Handlers, imports the bulk of the LPG consumed in Kenya.

Mombasa-based gas seller Proto Energy has snapped up a rival cooking gas company for an undisclosed sum in the latest dealers’ race for a larger market share of the liquefied petroleum gas (LPG) sector.

Proto Energy, associated with billionaire businessman Mohammed Jaffer, is the maker of Pro Gas and has now received regulatory approval to buy out Solutions East Africa, whose LPG products trade as SeaGas.

“The Competition Authority of Kenya (CAK) authorises the proposed acquisition…of business and assets of Solutions East Africa by Proto Energy Limited,” said director-general Wang’ombe Kariuki in a gazette notice.

The buyout is expected to see the Mombasa business mogul firm his grip in the lucrative cooking gas market.

Africa Gas, which is partly controlled by Mr Jaffer who is also the owner of Grain Bulk Handlers, imports the bulk of the LPG consumed in Kenya and also controls a significant transit market to neighbouring countries.

Unlike petroleum prices, cooking gas prices are not set by the regulator giving dealers a free hand to set margins.

Private companies have been angling to benefit from the growing use of cooking gas in Kenya in the absence of investments by the government via import and storage facilities.

The Proto Energy deal, however, coincides with the Treasury’s move to levy a 16 percent value-added tax on cooking gas, pushing prices to a six-year high and raising the prospect of lower demand by households, which are already grappling with high energy prices.

Households from this month are paying at least Sh350 more for the 13-kilogramme cylinder that is expected to retail at Sh2,600 on average — a price level last seen in March 2015.

LPG use in Kenya has been on the rise, with monthly consumption ranging from 15,000 to 23,750 tonnes, according to the energy regulator.

There are limited LPG handling facilities in Kenya, which has exposed the market to supply shocks and stunted the growth of consumption.