Interests, Penalties Push National Oil Loans to Sh8.5B

Interest and penalties have increased loans taken by the cash-strapped National Oil Corporation of Kenya (NOC) by 75% to Sh8.56 billion, despite NOC’s inability to repay the facility.

According to a Treasury document released to Parliament, NOC owes KCB Group Sh6.35 billion as of June, up from Sh3.59 billion, while its borrowing from Stanbic increased to Sh2.21 billion in the same time, up from Sh1.3 billion.

The increase in the unpaid credit facility indicates an accumulation of penalties and interest throughout the years, making it even more difficult for the firm to clear the debt.

“The increase is due to interest and penalties. We have not taken any new loans since 2019,” NOC CEO Gideon Morintat.

However, the increase comes as the oil marketer prepares to sign one of Kenya’s three biggest oil marketers as a key partner in the latest State-backed drive to revive the NOC.

NOC has been tight-lipped about whether the billions of shillings from the strategic partner will be utilized to assist in paying off the loans.

“The strategic partner, which we are in the process of identifying, will inject working capital and capital expenditure for rebranding, renovation, and expansion of our retail network,” Morintat said in an internal memo.

NOC used the credit facilities to fund fuel imports years ago, but growing losses and intense competition from well-oiled corporations made raising enough cash and settling the arrears nearly difficult.

At its peak, the oil marketer operated 110 service stations, including 13 bought from BP in 2009 and 33 acquired from Somken a year later.

NOC’s market share has since shrunk to less than 1%, highlighting the company’s cash-flow problems.

KCB Group has previously threatened to seize and auction NOC’s properties in order to recover the money, raising fears that the State-owned oil marketer would be liquidated.

The lender’s latest threat to auction NOC’s properties in August 2020 prompted the oil marketer to warn that it faced insolvency unless the Treasury provided funds to begin offsetting the arrears.

Early last year, NOC unsuccessfully sought Parliament’s assistance in obtaining Sh13 billion from the National Treasury, with Sh6.6 billion earmarked for repayment of the two loans.

NOC has until the end of this month to find a strategic partner, in accordance with a Cabinet directive intended to turn around the firm’s battered fortunes and reduce its reliance on the Exchequer.