KPC warns revenues to fall Sh19bn on tariff cuts

Kenya Pipeline Company chairman John Ngumi. FILE PHOTO | NMG 

By JOHN MUTUA
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Summary

• The KPC board led by the chairman John Ngumi said the new tariffs will cut the State utility’s bottom-line by Sh6 billion in the year to June and a further Sh13 billion in the 2020/21 period.
• The forecast comes as KPC tussles with Energy and Petroleum Regulatory Authority (EPRA) after the regulator cut the tariffs by more than 50 percent, saying this will not hurt Pipeline’s revenues.

Kenya Pipeline Company (KPC) projects that its revenues for the year to next June and the 2020/21 financial year will fall Sh19 billion following the cuts in pipeline tariffs.

Appearing before the National Assembly committee on Energy, the KPC board led by the chairman John Ngumi said the new tariffs will cut the State utility’s bottom-line by Sh6 billion in the year to June and a further Sh13 billion in the 2020/21 period.

The forecast comes as KPC tussles with Energy and Petroleum Regulatory Authority (EPRA) after the regulator cut the tariffs by more than 50 percent, saying this will not hurt Pipeline’s revenues.

EPRA set the rate at Sh3,089 ($30.89) per 1,000 litres of transit fuel from the Sh6,000 ($60) for the same volume in the new tariffs announced last month.

The rates will fall to Sh3,065 ($30.65) in 2020 and later to Sh2,907 ($29.07) in 2021.

“We had targeted revenues of Sh28 billion for the financial year 2019/20, but now expect to make Sh22 billion, a visible year end loss,” KPC said in a statement to the energy committee yesterday.

EPRA cut the tariffs to win back importers from landlocked countries to its network who had opted to transport oil through Tanzania due to the high KPC charges.

Mr Ngumi said that KPC was betting on the government to reverse the cuts to forestall the anticipated revenue falls adding this could see it struggle to service its debts and force non-renewal of a leasing deal for storage facilities.

“We have appealed and the government is looking at them (proposals). This is not final,” Mr Ngumi told MPs yesterday.

KPC had proposed tariffs at Sh4,635 per 1,000 litres for the export market and various increases in all the local market tariffs.

Oil marketers pay on average Sh8,000 ($80) to ferry oil from Dar es Salaam on trucks but pay Sh6,000 ($60) tariff on pipeline to Kisumu and a further Sh3,500 ($35) to truck the product to Uganda, Rwanda and northern Tanzania.