The Senate is investigating National Oil Corporation amid reports that the state-owned company is in the red and risks being wound up by a lender.
Narok Senator Ledama Olekina petitioned the House through the Energy committee to probe the company after revelations the corporation is on the radar of the Kenya Commercial Bank that is seeking to liquidate it over Sh3.8 billion debt.
The lawmaker wants the committee chaired by Nyeri Senator Ephraim Maina to establish the current financial status of NOC and reveal the list of all the creditors and their debt portfolio.
According to a report on the financial status of the company released last year, NOC was technically insolvent with a debt to liquidity ratio standing at 8:1.
Its debt stood at Sh11.71 billion against the equity of Sh1.41 billion as per the audited financials of 2018-19.
The reports showed that NOC required a working capital injection of Sh500 million monthly for 16 months. This is a total of Sh8 billion.
Oleksa wants to know the number of marketers the company has engaged, amount of refined oil products that each supplier has supplied since 2010.
In 2010, the government issued a legal notice mandating NOC to import 30 percent of refined oil products to the country.
In addition, the committee to explain why MS Prisko Petroleum Network Limited, a company that was reportedly paid Sh9.23 billion in 2011 by the National Treasury on behalf of NOC to import refined oil products never delivered the product and whether the funds were refunded.
“The committee should explain why the Ministry of Petroleum and Mining has removed the 30 percent importation quota of finished petroleum products from NOC,” Olekina said.
In its probe, the legislator wants the committee to indicate the amount allocated to NOC by the Treasury to import refined oil products since the gazettement of Legal Notice No. 96 of 2010.
“It should state the number of oil products held by different oil marketers at strategic reserves of petroleum product for the country,” the senator implored the committee.
According to the report released last year, besides KCB, the corporation owes Stanbic Bank Sh1.46 billion, Sh1.29 billion being the principal amount, and Sh162.1 million in accrued interests as of the end of August this year.
It also owed suppliers Sh628 million. This is attributed to a shortfall in revenue arising from working capital constraints.
As the debts pile, its revenue has been shrinking, with its end-year loss growing to Sh1.3 billion up from Sh0.35 billion in 2018-19.
Sales volume declined from 322.8 million liters in 2018 to 124.8 million liters last year, an aspect attributed to limited working capital.
The financing cost rose to Sh881 million during the year under review from Sh725 million in 2018.
Consequently, the shareholder’s equity significantly reduced from Sh1.62 billion in 2018 to Sh0.28 billion by the end of 2019.
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