Six banks picked to finance Sh43 billion oil pipeline

Six commercial banks will finance the bulk of the Sh43 billion pipeline project between Nairobi and Mombasa in one of the single largest loans for a State corporation.

Newly appointed chairman of Kenya Pipeline Company (KPC), John Ngumi, said a deal had been struck with the local lenders to provide the credit facility for the mega project that could significantly slash the cost of transporting fuel products.

“The syndicated loan will be backed by the company’s balance sheet,” explained Mr Ngumi, an investment banker and lead transaction adviser. Some of the funds will be raised internally, he added, a decision reached after a board meeting held yesterday.

CFC Stanbic, Commercial Bank of Africa, Citi Bank, Co-operative Bank of Kenya, Standard Chartered and South Africa’s RMB Bank are the lenders KPC has contracted to raise the funds.

The announcement came a day after the firm was on the spot again allegedly for corruption relating to a fraudulent Sh600 million payment to a dodgy company.

Several top managers are suspected to be behind the emerging payment scandal. Insiders say the managers may have fast-tracked some ‘significant’ amounts already paid out.

Investigators from the Ethics and Anti-Corruption Commission are examining hundreds of documents seized in a raid at the company’s headquarters late last month.

In the scandal, a phony company with its registered offices in a small town outside Nairobi had been paid for delivery of specialised maintenance equipment. Sources who talked to The Standard said there had been no deliveries of such equipment, and that several senior officials knew about the embezzlement.

Ngumi, appointed chairman by President Uhuru Kenyatta in April, has acknowledged that the company is a den of corruption but vowed to fight the corruption network.

“This is a honey-pot and it is normal here for people to steal,” he said in reference to the size of the funds handled by the company.

KPC, which transports and stores the petroleum products consumed in Kenya and the region, is among the biggest and cash-rich parastatals in the country.

Annual consumption of petroleum products in the country is currently at 4.4 billion litres, from which KPC earns about Sh4 per litre pegged to the distance of the terminal from Mombasa. Add that to the revenues earned from the billions of litres destined for neighbouring countries and it becomes clearer the amount of funds in the corporation.