Vivo Energy Kenya made $2.6 million (Sh336 million) from the sale of a fuel-linked government bond in January, highlighting a rare gain for an industry that had initially expressed disquiet over being compensated using sovereign securities.
The oil marketer's parent company disclosed that its subsidiary had sold its bond for $101 million (Sh13.01 billion) at the start of this year, enabling it to profit from the security that was floated in May 2023.
The National Treasury and Ministry of Energy issued the three-year bond to oil marketers as settlement for an estimated Sh45 billion that was unpaid under the fuel subsidy scheme.
The bond has a coupon (fixed interest rate) of 14.228 percent and matures in May next year.
But, a section of oil companies had protested against the issuance of the bond on grounds that it was a unilateral government decision amid growing industry concern over delayed payments.
“In January 2025, due to favourable market conditions, Vivo Energy Kenya sold government bonds on the open market at a price of $101 million, resulting in a total gain (net of commission but including amortised discount to maturity) of $2.6 million,” the multinational said in disclosures.
Oil firms that failed to take up the bond offer risked facing further delays in receiving their cash, as the government was non-committal about when it would pay them.
This (uncertainty on settlement of the debt arrears) prompted the industry to accept the bond offer, which has since turned into a generated interest income for oil marketers and given them the opportunity to liquidate assets at a profit.
Vivo Energy, which is the retailer of Shell-branded fuels and lubricants, had not disclosed the size of the bond that its subsidiary took. However, bond sizes were an equivalent of the unpaid debt to each oil marketer.
The Kenyan subsidiary is the dominant player in the local fuel market, meaning that it had the biggest share of the unpaid Sh45 billion. Vivo Energy Kenya had a market share of 21.34 percent as at December 2024.
It is the only company to have publicly announced the sale of its bond for the fuel subsidy arrears.
The government floated the bond two years ago amid struggles to free up billions of shillings needed to clear money owed to oil marketers under the fuel subsidy scheme that was introduced in April 2021.
The bond was sold in two tranches, the first seeking to raise Sh17.5 billion, while the second targeted Sh28 billion.
Oil marketers had pocketed Sh124 billion between April 2021 and May 2023 before Treasury opted to settle the unpaid balance with a bond amid mounting exchequer cash flow pressures.
Vivo Energy made $50 million in interest on government bonds across its African markets last year, which was double the $25 million made in 2023.
The company recognises government bonds at fair value minus transaction costs and are subsequently measured at amortised cost, while interest earned on the bonds is calculated using the effective interest rate method and is recognised in profit or loss.
