Rubis Accepts Sh4.7B in Bonds to Pay Fuel Subsidies

As part of the State’s agreement with oil marketers to resolve the payment delays, oil marketer Rubis Energy Kenya turned €30 million (Sh4.7 billion) in overdue fuel subsidy dues into government bonds by the end of June, according to recent disclosures.

The company was one of the oil marketers who consented to convert Sh45 billion in unpaid invoices into a three-year Treasury bond as part of a swap.

Prior to the swap agreement, the Ministry of Energy disclosed that Rubis owed Sh4 billion and that Vivo and TotalEnergies, two other multinational corporations, owing Sh13.8 billion and Sh8.2 billion, respectively.

Arrears to other oil marketers were at the time believed to be around Sh14.4 billion, with Oryx owed Sh3.5 billion and Ola Sh2.3 billion.

“The increase in loans to third parties of €30 million (Sh4.7 billion) corresponds to the swap of receivables on the Kenyan government for three-year Kenyan treasury bills [bond] in respect of the payment of the subsidy due on petroleum products,” Rubis’ French parent Rubis Energie said in its financial report for the half year to June 2023.

In order to enable the oil marketers to convert their debt and raise Sh18.6 billion at a rate of 14.23%, the State authorized a tap sale of a three-year paper in late June.

The swap’s second installment was delayed until current fiscal year. Despite not yet disclosing the specific bond for the second swap, the Treasury did issue a reopened 10-year bond in July with a 3.2-year maturity to raise Sh15.7 billion.

The government implemented the fuel price stabilization plan in April 2021 to protect customers from high pump costs at a time when the economy was still being impacted by the Covid-19 pandemic response measures.

The Kenya Kwanza administration promptly terminated the subsidies after taking power in September 2022, citing its unfeasibility.

The State had Sh45 billion in arrears after paying the oil merchants Sh124 billion under the plan, which the bond was supposed to cover.

The option to keep the bonds until they mature in 2026 and receive annual interest is then available to those who purchase them.

They could also choose to sell their shares on the NSE’s secondary market, which would enable them to quickly free up working capital.