Broke National Oil lost Sh500m in single year, risks auction

The report says this exposes the parastatal to possible seizure of its assets by the lender. [Courtesy]

Cash-strapped National Oil Corporation of Kenya (Nock) lost nearly half a billion shillings in a single financial year, raising its accumulated losses to over Sh3 billion.

In addition, the auditor general report states that the State-owned corporation’s current liabilities stand at Sh7.5 billion, more than its current assets estimated at Sh2.3 billion.

Nock is further on the spot for defaulting a loan from Kenya Commercial Bank (KCB) amounting to Sh3.7 billion.

The report says this exposes the parastatal to possible seizure of its assets by the lender.

Auditor General Nancy Gathungu, in a report for the year ending June 30, 2020, tabled in the National Assembly yesterday, declared the corporation technically insolvent.

The report says the parastatal now entirely depends on financial support by the government, bankers and its creditors.

“The corporation recorded a loss of Sh494,502,000 during the year under review raising its accumulated losses to Sh3,055,436,000 from Sh2,560,934,000 in 2019. The corporation’s current liabilities balance of Sh7,546,665,000 exceeded its current assets of Sh2,298,510,000 by Sh5,248,155,000,” states the audit report. According to the report, the statement of financial position reflects borrowings amounting to Sh5,040,287,000.

The amount comprises bank overdrafts and term loans of Sh434,838,000 and Sh4,605,449,000 respectively. “However, the corporation had defaulted on repayments as per the terms of the borrowings. As a result of the default, one of the lenders, KCB, consolidated its outstanding loans and interests into one term loan of Sh3,664,121,000 reported as current borrowings,” states the report.

The report says the implication of the lender’s action to charge interest on the capitalised interest increases the corporation’s liabilities. Further, an offer from KCB in July 2020 to restructure the borrowing was yet to be accepted by the corporation.

Management indicated that they were not comfortable with the terms of restructuring as contained in the offer.

“The impasse may lead to the corporation losing strategic assets that were used as collateral to secure the loans to the financiers through repossession,” states the report.

At the same time, the report has flagged receivables that include provisions for doubtful debts for an amount of Sh40,000,000 due from a contracted transporter in respect of lost diesel. An estimated 390,000 litres of diesel destined for Geothermal Development Company’s Menengai offices were lost while in custody of the transporter.

The position was disputed by the transporter and the transportation contract terminated by the corporation before the consignment was recovered.