Treasury gives nod to oil pipeline financiers

A consortium of five banks that won a tender to finance the construction of a new oil pipeline between Mombasa and Nairobi has been named.

The winners are CFC Stanbic Bank, Commercial Bank of Africa, Citibank Kenya, Standard Chartered Bank, and Rand Merchant Bank of South Africa.

However, Co-operative Bank is understood to have joined the team.

The banks have offered to lend the Kenya Pipeline Company (KPC) $600 million at a 5.38 per cent interest, with a maturity period of 10 years.

“The Treasury has approved the loan. It offers us a very good rate, lower than the Eurobond,” KPC managing director Charles Tanui said.

The banks will provide 80 per cent of the funds, while the KPC will raise 20 per cent from internally generated funds.

“The financiers will do due diligence by August 8, when we will kick off the project officially,” Mr Tanui added.

Other bidders were a consortium led by Barclays Bank Kenya, which includes Ned Bank, also of South Africa, and Credit Suisse Group AG, a multinational financial services with its headquarters in Zürich, which had submitted a solo bid.

Zakhem International constructed the Mombasa-Nairobi multi-product pipeline that has been in use since 1978.

Apart from laying the 20-inch pipeline, the company is also expected to install four new pumps along the line at Changamwe, Maungu, Mtito Andei, and Sultan Hamud, and two booster pumps at Kipevu.

FIRE FIGHTING SYSTEM

It will upgrade its fire fighting system at the Jomo Kenyatta International Airport and the Nairobi terminal, and design a new fire fighting system for the new pump stations.

The construction of the pipeline is part of the KPC’s commitment to enhance efficiency at Mombasa Port through creation of extra capacity for handling, transporting, storing and transferring petroleum products to the hinterland.

In May, Zakhem International was declared the winner of the construction tender, beating 12 other companies.