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Court rejects gas firm’s Sh5b claim against rivals

BUSINESS
By Frankline Sunday | June 25th 2021
The cylinder exchange pool allowing consumers to refill their cooking gas cylinders from any brand was scrapped in 2019. [Stafford Ondego, Standard]

Petroleum firm Proto Energy has suffered a setback after the High Court dismissed its claim of up to Sh5.6 billion from rival companies. 

In a ruling delivered earlier this week, the High Court declined the application by the oil company to bar the Energy and Petroleum Regulatory Authority (Epra) from licensing rivals Hashi Energy, Lake Gas, and Lake Oil over a deal gone bad. 

According to court documents, Proto Energy alleged it extended Sh87 million credit facilities to Lake Gas after transferring its cylinder deposit to the firm in August 2019.

“Further, that pursuant to the said agreement, it also incurred storage expenses in storing cylinders of the first interested party to the tune of Sh2.7 billion as of August 4, 2020, whose storage charges continue to accrue,” said Proto Energy in the court papers. 

The cylinder exchange pool was set up by the marketers in 2012 to allow consumers to refill cooking gas cylinders from any brand that is a party to the agreement.   

Proto Energy further argued that Lake Oil has taken over the filling, marketing and distribution of its gas cylinders in an attempt to skirt its debt obligations.    

It was seeking to have Epra stopped from licensing or renewing the operating licence for Lake Gas and Lake Oil.  

The two companies, however, denied owing any money, saying the cylinder exchange pool system provides for the exchange cylinders for cylinders and not for money as argued by Proto Energy. 

“That it is malicious and contrary to the exchange pools instruments of operations for the applicant to hoard their cylinders and claim storage charges, and is only meant to affect the interested parties’ LPG market,” said the firms in responding submissions.  

Proto Energy had also filed a similar suit against Hashi Energy, citing violation of the same agreement and is claiming a total of Sh2.9 billion. 

According to court documents, Proto Energy alleged that Hashi Energy owed it Sh4.1 million for delivery of cylinders under the LPG Cylinder Exchange Pool as of August 4, 2019.

“Further, that the applicant was also owed Sh2.9 billion by the Interested Party in unpaid storage charges and extended credit facilities by transfer of its cylinder deposit to the interested party in the amount of Sh91 million,” said Proto Energy in its submissions to the court in part. 

In her ruling dismissing the two cases, Justice Pauline Nyamweya said Proto Energy had failed to demonstrate an arguable case and its application was, therefore, unmerited. 

The cylinder exchange pool was scrapped in 2019 after 10 years by amendments to the Energy (Liquefied Petroleum Gas) Regulations of 2009.

This came after marketers gave the scheme a wide berth, preferring to manage their value chains.   

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