MPs say Essar Energy Overseas duped State, put Kenya Petroleum Refinery Limited on deathbed

KPRL chairman Suleiman Shakombo when he appeared before the parliamentary committee on Energy.  [PHOTO: BONIFACE OKENDO/STANDARD]

By ALPHONCE SHIUNDU

The government was conned in the partnership deal with Essar Energy Overseas Limited to run the country’s sole oil refinery, a parliamentary committee said Wednesday.

The lawmakers said Essar had duped the government into signing an agreement on the basis that they were going to upgrade the refinery, only for them to turn around, and fail to pump money into the refinery.

Jamleck Kamau, the chairman of the Energy Committee, led MPs in cornering the management of the Kenya Petroleum Refinery Limited (KPRL) about the huge losses realised at the refinery.

“The refinery is not modernised; it has not been upgraded; we’re making losses; we are here discussing the possible closure of the refinery; why are we still together with Essar on this thing yet the core reason as to why we got together was because they were going to upgrade the refinery” asked Moyale MP, Roba Duba.

The chief executive at KPRL Bansal Brij Mohan and the Chief Finance Officer Stephen Mbui said the refinery was now making losses and has not been operating since September 4.

“There’s nothing going on at the refinery. The company is virtually closed,” said Mbui.

Annual remission

The MPs accused the top bosses of the KPRL of fleecing the taxpayer of an annual management fee of USD2.2 million (Sh187 million), yet KPRL was a 50-50 shareholding between Essar and the government of Kenya.

Essar, the KPRL bosses said, had a contract with the firm for a standing fee of Sh187 million every year, for training and process audits at the refinery. The MPs realised KPRL had taken millions of dollars in loans to finance the services at the refinery.

So far, KPRL owes Standard Chartered Bank $62.5 million (Sh5.3 billion), Barclays Bank $13.5 million (Sh1.1 billion), and an overdraft of $5 million (Sh425 million) each from Commercial Bank of Africa and Citibank and $7 million (Sh595 million) is owed to suppliers and contractors.

“Why is Essar’s investment to the refinery done through bank loans?” posed Kamau, the chairman of the committee.

But the Essar bosses said there was enough money to pay off the Standard Chartered bank loan, because they had oil worth $68 million (Sh5.7 billion). Essar’s net investment in the refinery, according to the MPs was $3 million (Sh255 million) but to date, Essar has already gained $4.4 million (Sh374 million) in management fees.

With the MPs about to push the government to kick Essar out, the firm has now cancelled the annual remission of Sh187 million to the mother company, which is registered in the UK.