KPC restructures syndicated loan despite profit growth

KPC

Kenya Pipeline Company storage facilities at the firm's headquarters, Nairobi.

Photo credit: File | Nation Media Group

The Kenya Pipeline Company (KPC) restructured syndicated loan terms extended to it, even as it disclosed that it posted a Sh6.9 billion pre-tax profit for the financial year ending June 30, 2021.

KPC in 2015 tapped a $ 350 million (Sh45.8 billion) loan from a group of banks to finance part of the construction of the 450-km Line 1 multi-product fuel pipeline from Mombasa to Nairobi. The banks were the Co-operative Bank of Kenya, CfC Stanbic, Citibank NA, Commercial Bank of Africa, Standard Chartered Bank, and Rand Merchant Bank.

“The company was able to renegotiate for favourable syndicated loan terms which will lead to future cash position due to low-interest payments,” the company said in a disclosure.

Debt restructuring typically involves getting lenders to agree to reduce the interest rates on loans, extend the dates when the company’s liabilities are due to be paid, or both. These steps improve the company’s chances of paying back its obligations and staying in business.

The company posted a pre-tax profit of Sh6.9 billion in the year ended June 30, 2021, which is a 13 percent increase compared to the same period in 2020. The increase in profitability is mainly attributable to improved throughput performance and cost containment measures by management.

The company's cash reserves went up by 13.8 percent to Sh9.6 billion compared to Sh8.4 billion at the end of the previous year. The cash position went up as a result of austerity measures that management undertook at the beginning of the financial year, leading to a reduction in recurrent expenditure costs against the budget

During the year under review, KPC recorded a six percent growth in throughput volumes to 8.11 million cubic meters from 7.6 million in 2019/2020. On the domestic throughput front, the figures went up by seven percent from 4.19 cubic meters for the financial year that ended June 30, 2020, to 4.47 million for the year ended June 30, 2021.

Export volumes also went up slightly by four percent to 3.63 million cubic meters for the year ended June 30, 2021, compared to 3.49 million for the year ended June 30, 2020. Throughput revenue rose by seven percent to Sh28 billion during the year under review up from Sh26.1 billion recorded in the financial year 2019/2020.

The increase is attributed to the easement of Covid-19 containment measures.