The National Oil Corporation of Kenya (NOCK) will split into three units, NOC Upstream Ltd, NOC Downstream Ltd and NOC Trading Ltd as the State moves to shore up its fortunes.
In a Cabinet brief released on Tuesday, NOC Upstream Ltd will focus on the exploration and upstream production activities and services while NOC Downstream Ltd will market and distribute petroleum products.
The third spin off, NOC Trading Ltd will be charged with holding strategic stocks of petroleum products for import and export.
The latest spin-offs under President William Ruto are indicative that the State will continue shouldering heavy debt and financial obligations to the entity to keep it afloat. The restructuring is billed to shore up the country’s economy by reviving state corporations in the energy, and agriculture industries.
Other players in Kenya’s fuel business have continued to make huge profits, making inroads into new markets yet NOCK remains stuck in debt and mismanagement. Overall, NOCK is cracking under the weight of Kes8.3 billion debt and an impaired balance sheet. At the moment, NOCK employees cannot get their salaries nor can the corporation get any new loans without government intervention.
Under the latest rescue package, the Treasury, which is the main shareholder of Nock, will lead talks with lenders regarding the settlement of the current debts.
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NOCK turnaround strategy
“Under the proposed turnaround strategy, NOCK will benefit from a partnership that restructures it into three subsidiaries segmented around the petroleum products value-chain,” the Cabinet said.
NOCK, which currently enjoys 1.05 percent of Kenya’s fuel market share, had started leasing some of its pump stations in a deal aimed at allowing it to retain the brand but share profits with private investors.
The deal was set to see over 100 National Oil fuel stations handed to a private investor in order to save the State Corporation from death.
The struggling oil marketer is facing huge debt mount, owed to several suppliers and lenders such as Stanbic Bank and KCB Group. In the fiscal year ended June 30th, NOCK was facing Kes1.5 billion in financing costs arising from loan interest and penalties due to default.
NOCK, which is popularly known as National Oil, became operational in 1984. The State Corporation’s initial operations were limited to exploration activities. In 1988, however, National Oil went downstream and started participating in the importation and sale of petroleum products including crude oil, white fuels, lubricants and LPG.