Oil workers' union seeks restructuring of Kenya Pipeline board

Oil workers want Kenya Pipeline Company to reconstitute its board before hiring a new managing director. [File, Standard]

Petroleum workers have petitioned for the reconstitution of the Kenya Pipeline Company’s (KPC) board following an initial public offering early this year.

In a petition dated May 15, Kenya Petroleum Oil Workers Union (KPOWU) has written to Capital Markets Authority (CMA) Chief Executive Wyckliffe Shamiah, calling for the suspension of the recruitment of a new managing director until the board is reconstituted to reflect the company’s revised ownership structure following its listing on the Nairobi Securities Exchange.

The process was initiated by KPC’s board to replace former managing director Joe Sang, who resigned following a fuel importation scandal that also triggered the exit of Petroleum Principal Secretary Mohamed Liban and Daniel Kiptoo, Director General of the Energy and Petroleum Regulatory Authority.

“We write to formally petition the Capital Markets Authority regarding serious corporate governance concerns arising from the actions of the current Board of Directors of Kenya Pipeline Company Plc,” said KPOWU secretary-general George Okoth in the letter.

“The Company recently transitioned from a public company to a private company following changes in its shareholding structure,” added Mr Okoth. “Consequent to this transition, it is our understanding that the governance framework and board composition ought to be reconstituted to accurately reflect the current ownership and shareholder interests.”

The union cited the Companies Act 2015, principles of good corporate governance, applicable CMA governance codes and KPC’s Articles of Association as grounds for its objection.

“However, before undertaking a lawful and proper reconstitution of the Board to reflect the present shareholding structure, the current Board proceeded to advertise the position of Managing Director/Chief Executive Officer,” the union stated in the petition.

At the centre of the dispute is Uganda’s role in the management of KPC after Kampala, through the Uganda National Oil Company (UNOC), acquired a strategic 20.15 percent stake worth about Sh20 billion during KPC’s initial public offering.

Under the revised Memorandum of Association, Uganda secured veto powers over key decisions, including the appointment or removal of the managing director, as long as it retains its shareholding in the company.

“So long as the CST and GoU are eligible to nominate a CST Director and a GoU Director respectively, the following matters shall require the approval of a CST Director and a GoU Director: the appointment of the Managing Director,” reads part of the revised charter. 

The union in their petition further argued that failure to reconstitute the board before initiating the recruitment process could expose the company to governance disputes and possible legal challenges.

KPC officially ceased being a State corporation on April 22 after converting into a public limited company through a gazette notice. 

The Kenyan government sold a 65 per cent stake in KPC during the IPO, raising Sh106.3 billion in Kenya’s first major public offer in nearly two decades. Uganda’s Sh20 billion participation is widely credited with rescuing the transaction after investor subscriptions reportedly fell below the minimum threshold required for the IPO to succeed.

Following the IPO, which saw the Kenyan government offload a 35 percent stake in KPC, with Uganda playing a major role in the success of the sale by snapping up shares worth Sh20 billion, the petroleum logistics firm was converted into a publicly listed company and is now governed by a revised memorandum of association.

Other Kenyan and regional institutional investors had a combined 20.85 percent shareholding while KPC employees have five percent.

Uganda, through Uganda National Oil Company (UNOC), emerged as the single-largest non-government shareholder after acquiring a 20.15 percent strategic stake worth about Sh20 billion.