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Interest and penalties have pushed up loans taken by cash-strapped National Oil Corporation (NOC) by 68.6 percent, amid persistent cash flow challenges for the State-owned oil marketer.
Disclosures from the National Treasury show that the loans NOC tapped from KCB Group and Stanbic Bank has grown from the initial Sh6 billion to hit Sh10.12 billion as of June this year, driven by a higher growth on the one tapped from KCB Group.
NOC has failed to make payments for the loan. Struggles to pay the facility was a major hurdle that had last year threatened to scuttle NOC’s efforts to ink a deal with an oil marketer as part of its rescue plan until the National Treasury intervened with a commitment to help settle the loan.
The State-owned oil marketer took the loan to fund operations, including fuel purchases decades ago when it sought to remain afloat and ward off competition from other local and foreign-owned firms.
The initial loan from KCB Group was Sh4.69 billion and has since hit Sh7.53 billion while that for Stanbic Bank has grown from Sh1.3 billion to Sh2.58 billion.
KCB Group had four years ago given a 30-day notice to NOC for payment of the full amount, failure to which it would auction its assets to recover the debt.
However, the lender did not make good its threat, handing NOC a lifeline.
Last year, it took the intervention of the Treasury to commit to settling the loan, helping unlock NOC’s push to onboard a strategic partner to rescue the company from the deathbed.
Potential investors had cited uncertainty on NOC’s ability to pay the loan as a major hurdle to a deal where the strategic investor will pump at least Sh5 billion into the cash-strapped firm. The concerns hinged on whether NOC would pay the loan or transfer the liability to the strategic investor.
The firm agreed to a deal with Rubis last year, where the French oil major will pump in billions of shillings for working capital and revamping NOC’s dilapidated fuel stations.
At the start of this year, Parliament gave NOC, the Ministry of Energy, and the Treasury a month to clarify how the debt will be settled.
At its peak, the oil marketer had over 110 fuel stations spread across the country. Some of these stations were acquired from BP and Somken between 2009 and 2010.
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