Kenya Pipeline denies knowledge of Ecobank loan in Sh5.2bn row

Kenya Pipeline Company (KPC) has denied knowledge of a loan repayment arrangement between Ecobank and Zakhem International Construction, a firm that built the recently completed Nairobi-Mombasa pipeline, in an ongoing Sh5.2 billion dispute.

The KPC in response to allegations by Ecobank, which accused it of failing to channel payment for the project through the lender, says it was not aware of any such arrangement.

The bank has sued Zakhem for allegedly diverting payment for construction of the pipeline to Stanbic Bank in breach of the loan agreement, putting at risk recovery of the amount.

“That further to the foregoing KPC was not and has never been a party to any credit arrangements between the Zakheem Group and the applicants and is therefore unaware of the alleged breaches,” says KPC acting general finance manager Stephen Mwendwa Pius.

The lender claims in the court documents that Zakhem Construction Nigeria approached it on behalf of its sister company registered in Cyprus seeking a loan to fund construction of the pipeline.

The KPC says Zakhem Group in 2016 directed it to channel all the proceeds from the contract through CfC Stanbic Bank as security for a loan of Sh890 million ($8.9 million) advanced to Zakheem Cyprus.

Mr Mwendwa says in April 2017, long after proceeds had been assigned to CfC Stanbic, Zakheem Cyprus wrote to it seeking to assign all the contract proceeds to Ecobank.

The KPC, however, rejected the move noting that it would not assign the contract proceeds to any other party other than CfC Stanbic, which had the first right and also drew the attention to terms of first consent, which stated that for reassignment to be done CFC Stanbic must give written consent.

Zakhem Cyprus got a Sh48 billion tender to build the 20-inch multi-product Mombasa-Nairobi oil pipeline in 2014.