Lawmakers have commenced investigations into the proposed Sh6 billion deal between the National Oil Corporation (NOC) and Rubis Energies Kenya (REK) as a non-equity strategic partner that will see the latter take over the state agency’s operations.

The MPs who sit on the Energy Committee directed NOC to convene a meeting with Rubis, Attorney General, and all stakeholders involved in the deal within the next two weeks to get details on how it was brokered.

At a meeting with NOC officials yesterday, Energy Committee members led by Nyatike MP Tom Odege who chaired the session, said the issue of the takeover was grave and requires adequate time to be canvassed before a decision is settled.

Said Odege: “We are asking NOC and all the companies under them to organise a retreat in the next two weeks so that we can discuss this matter. We also want the Attorney General to be present in the meeting so that we can know everything.”

Committee vice chairperson and Narok East MP Lemanken Aramat said the committee requires adequate time to go through the report tabled by NOC and then later meet with them to deliberate on the same.

He said: “The issues (with this contract) are very weighty and cannot be discussed in one meeting. We need a retreat where all the parties can attend and we are able to get details.”

The decision of the committee came after NOC Chief Executive Office Leparan ole Morintat tabled documents before the committee showing that the partnership is  premised on Rubis Energies injecting Sh6 billion into NOC for capital expenditure such as renovation, rehabilitation, and revitalization of assets) and working capital (to finance stocks).

This is aimed at creating shared business value as measured by Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA).

In order to enhance internal controls and promote efficiency and effectiveness, the document shows that REK will deploy a fully encrypted end-to-end integrated ERP system for the NOC downstream business as well as promote a business-first-class culture and operational excellence mindset through training, a staff exchange programme, and management support.

Strategic partnership

Reads the document: “The partnership is a non-equity strategic partnership premised on Rubis Energies injecting Sh6 billion into the National Oil Corporation.”

It adds: “The tenure of the non-equity strategic partnership will be eight years, renewable once. The strategic partnership agreements with REK will be assigned to NOC Downstream Ltd.”

Morintat explained that the decision to bring on board Rubis Energy follows a Cabinet decision that approved the revival and commercialisation of NOC and directed the cabinet secretaries for Energy and Petroleum and that of National Treasury & Economic Planning to take necessary steps to implement the said approval.

Reads the document: “The strategic partnership’s objective is to grow the value of NOC’s downstream business as measured by EBITDA through enhanced sales supported by modernised infrastructure and improved internal controls to regrow NOC’s market share and profitability and hence enhance the Corporation’s brand equity.”

He also explained that the process of restructuring the corporation into a holding company with three subsidiaries is ongoing and is expected to be completed in this quarter.

In its decision, the Cabinet, he said, directed NOC to undertake the conversion of the corporation to a holding company and oversee the creation of three subsidiaries (wholly owned by the holding company) for each of NOC’s strategic and unique mandates.

Inject capital

NOC Upstream Ltd – to undertake the exploration and production mandate alongside other upstream activities;

The Cabinet also directed the onboarding of a Non-Equity Strategic Partner on profit-sharing basis to inject working capital to finance stocks and capital expenditure for rebranding, renovation and expansion of the retail stations’ network, ensure there is Capacity building and technology transfer; as well as enhance efficiency and control through the deployment of a robust ERP system.

He said: “It is worthwhile to note that the Cabinet approved the onboarding of strategic partner(s) on a profit-sharing basis and NOT the privatization of Corporation.”

 The decision of the cabinet follows revelations that NOC total debt owed to various creditors and banks stood at Sh 7.98 billion.

Of this, Sh5 billion are owed to Kenya Commercial Bank (KCB) and Stanbic Bank, pending bills Sh1.53 billion, Sh548.4 million for dealers outstanding prepayment and Sh58.8 million as dealers cash deposits.

 The documents show that as of today the KCB Bank loan stands at Sh3 billion after the National Treasury entered into a payment plan with the bank and it took a haircut of Sh3.478 billion that saw the first instalment of Sh1.215 billion being paid last month.

Reads the document: “In FY22/23, the Corporation’s cumulative loss before tax stood at negative Sh6.7 billion. Its EBITDA was negative at Sh457 million, and shareholder equity was eroded at negative Sh2.6 billion, as shown in the annexed financial statements.”