The National Oil Corporation of Kenya (Nock) is pushing for a Sh13 billion bailout from the National Treasury to pay bank loans and meet operating costs in the latest effort to remain afloat amid mounting losses.
Nock chief executive Gideon Morintat on Tuesday told MPs that Sh6.6 billion will be used to pay bank loans, Sh3 billion for operating costs and a further Sh3 billion for oil exploration on Block 14T in the Rift Valley basin.
Mr Morintat told MPs that the Nock risks closure if Treasury does not provide the funding in the year starting July highlighting the dire financial state of the State-owned firm.
Nock is currently grappling with growing losses, a situation worsened by delayed compensation from the National Treasury over the price stabilisation that started in April last year.
‘If these things do not happen, then the easiest thing to do is to close down Nock,” Mr Morintat told the National Assembly Committee on Energy.
The Ministry of Petroleum estimates Nock’s monthly operating costs at Sh70 million, which have been compounded by growing losses as the State-owned firm struggles to cope with stiff competition from international oil firms.
Nock slumped into a Sh689 million loss in the six months ended December and Mr Leparan said that the firm projects losses for the full year to hit Sh1.4 billion.
But Petroleum Principal Secretary Andrew Kamau sought to allay the fears saying that the agency remains but needs radical changes to steer it from the losses.
“Am not a pessimist and I believe that Nock is a viable business but it has a serious business problem. They have monthly operating costs of over Sh70 million which is way higher than their peers. We need to do a triage of Nock,” Mr Kamau told the MPs.
Nock owes KCB Group Sh4.82 billion and Stanbic Bank Sh1.8 billion in defaults that have in the past seen the two banks push to auction its assets.
KCB Group had in a letter dated August 13, 2020, demanded full settlement of the loan in 30 days, failing which the bank would institute recovery measures.
The firm like its counterparts in the private sector is also grappling with delayed payments from the National Treasury, a situation that Mr Leparan said has further hit its already frail finances.
The compensation delays linked to cash-flow hitches at the Exchequer have forced Nock to endure long delays to cover the high costs of buying fuel for onward distribution.
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