Rubis will get 30 percent from the profits of fuel sales that the National Oil Corporation of Kenya (Noc) will be making as part of the deal where the French oil major has agreed to inject Sh6 billion to revive the Kenyan oil company.
This is the revenue-sharing model agreement in a deal where Rubis has come in as a non-equity strategic investor to inject billions of shillings in a bid to jumpstart the cash-strapped Noc.
Energy and Petroleum Cabinet Secretary Opiyo Wandayi said that the deal, whose formalisation is awaiting the nod from the Attorney General, will be for an initial period of eight years.
The loss-making Noc opened the search for a non-equity investor last year, in line with a Cabinet directive to revive the State-owned oil firm, put an end year of losses, and ultimately stop relying on the National Treasury for bail-outs.
The deal will be a win for Noc given that the firm will get much-needed funds to revamp its collapsed network and help it compete in the local market.
“The strategic partnership agreement is not yet signed. It is still undergoing government regulatory approval in accordance with the AG’s advisory. The profit-sharing ratio will be 70 percent for Noc and 30 percent for Rubis,” Mr Wandayi said.
The Sh6 billion cash injection from Rubis will be split halfway with Noc set to use Sh3 billion as working capital while the remainder will be renovation and expansion of its footprint.
Noc’s latest financial performance has not been disclosed but the firm sank into negative equity with liabilities being nearly five times the assets, highlighting the dire state of the once-vibrant State oil firm.
Noc’s liabilities hit Sh11.45 billion against assets of Sh2.34 billion in the year that ended June 2023, a time when the firm posted a loss before tax of Sh2.34 billion.
At its peak, Noc had a footprint of 110 service stations that included 13 stations acquired from BP in 2009 and 33 stations acquired from Somken 14 years ago.
But years of perennial struggles and losses hit Nock’s competitiveness, cutting its market share to less than one as of the end of June this year.
“The Corporation was technically insolvent and its continued existence as a going concern is dependent upon the financial support of the Government, bankers, and its creditors unless Management puts in place measures to improve the performance of the Corporation and to reduce reliance on financial support from the shareholders,” the Auditor-General said in the latest review of Noc’s performance.
Noc had also sounded out Vivo Energy and TotalEnergies Marketing but the two declined to pursue a deal.
The anticipated signing of the deal is set to lift Noc and help it slowly regain its footing, at a time when stiff competition in a market pitting well-oiled foreign companies and local ones has sent Noc to oblivion, making the firm a pale shadow of its former self.
Vivo Energy dominates the market with a share of 22.2 percent having sold 1.22 trilli litres in the year ended June, followed by Rubis with a share of 15.56 percent or 850.194 billion litres. Total is third at 15.06 percent (822.8 billion litres).
Signing of the deal between Noc and Rubis will put to an end more than a year of wait, amid delays in approvals of the procurement process by the Treasury.
Concerns on how Noc would settle a defaulted Sh10.12 billion loan tapped from KCB Group and Stanbic Bank had also threatened to scuttle the deal.
Parliament had early this year given the National Treasury, Ministry of Energy, and Noc a month to come up with a clear plan on how the loan would be paid, in order to approve Noc’s pursuit for an investor.
The National Treasury later agreed to take over the loan and repay it, paving the way for Noc to go on and strike an agreement with Rubis.
