•President William Ruto has warned that loss-making parastatals that have for long been on the government bail-out will be shut down.
•CS Njuguna reiterated that the government must get value from State-Owned Enterprises.
The Kenya Pipeline Company (KPC) has announced an interim dividend payment of Sh5 billion to the National Treasury for the financial year ended June 2023.
The dividend payment follows a 21 per cent increment in KPC’s profitability to Sh7.6 billion in the financial year 2022-2023, compared to Sh6.3 billion the previous year.
The announcement of the interim dividend was made during a cheque handover ceremony held at KPC’s headquarters.
Speaking at the ceremony, National Treasury CS Njuguna Ndung’u commended the Energy and Petroleum Ministry for its role in stewarding the sector, noting that key parastatals in the sector continue to deliver a return on investment to taxpayers with KPC paying out the highest dividend to taxpayers.
President William Ruto has warned that loss-making parastatals that have for long been on the government bailout will be shut down.
CS Njuguna reiterated that the government must get value from State-Owned Enterprises.
“Most parastatal are still dependent on the national government for their operations. This means that taxpayers have to incur an additional burden in supporting and bailing them out due to poor performance," the CS said.
According to the CS, the government has invested about Sh5.7 trillion through SOEs, but gets a return equivalent of 0.13 per cent, meaning they are only paying out about Sh7.4 billion.
"The returns are quite dismal," Njuguna said.
The Sh5 billion by KPC is the highest dividend paid by any state corporation, Ndung’u noted.
Energy and Petroleum Cabinet Secretary Davis Chirchir said: " As KPC marks 50 years of service delivery to Kenyans and the wider East African Region, it remains the most profitable State Corporation with both strategic roles and revenue targets."
He said KPC must continue to diversify its product offering while expanding its reach in the regional markets.
"Fuel security is a critical driver of the economy and that is why the government continues to invest in KPC by entrusting it with key assets," Chirchir said.
These include the takeover of Kenya Petroleum Refineries Limited (KPRL) Mombasa facility by KPC, which has been turned into a storage facility.
"This strategic decision is meant to enable KPC to enhance the petroleum supply chain infrastructure and thereby result in the security of supply and cost-efficiency through reduced demurrage costs,” CS Chirchir added.
The CS challenged KPC to leverage its existing infrastructure to boost efficiencies within the petroleum industry and generate additional cost savings that can be passed on to consumers.
KPC plays a strategic role in ensuring access to petroleum products to neighbouring countries across East Africa including; Uganda, Rwanda, Eastern DRC, Burundi, South Sudan and Northern Tanzania.
The recently launched Kisumu Oil Jetty (KOJ) cements Kenya’s strategic role to neighbouring countries by providing an efficient, safe and reliable mode of moving petroleum products, according to management.
KPC Board Chairman Faith Bett-Boinett said: “We are paying (dividends) from a position of strength not compulsion, bolstered by sound strategic decisions and operational efficiencies including cost-cutting measures.”
According to Boinett, the business undertook deliberate cost containment measures that resulted in a five per cent savings, equivalent to Sh1.8 billion.
Additionally, the company made a Sh4 billion advance payment of a syndicated loan facility and the resolution of some legacy contractual issues are some of the steps that have strengthened KPC’s cash position.
KPC managing director Joe Sang noted the company is looking to diversify its product offering by leveraging on both its expertise in the oil and gas sector and its existing infrastructure.
“Apart from growing our normal transportation and storage of petroleum products, we are looking at growing other business streams such as our Fiber Optic Cable , Morendat Institute of Oil and Gas and investments in LPG in the next financial year (2023/2024)," Sang said.
KPC has a dividend policy of paying 30 per cent of its profit after tax but has consistently surpassed the threshold, while maintaining operations and complying with the prescribed lending/ loan covenant ratios.
Cumulatively, KPC has paid Sh46 billion in dividends to the government over the last six years.
President Ruto has directed that all commercial state corporations commit 80 per cent of profit after tax to the payment of dividends, leaving 20 per cent thereof as retained earnings.