Kenya Government to Agree Equity Stake With Essar Oil

This comes barley a week after the government gave Essar Oil the nod to buy a 50 per cent stake in the refinery that was held by  three oil firms— Shell, BP and Chevron for $10 million. The remainder of the shares were held by the government

Essar had agreed to buy 50% stake  from Shell, BP & Chevron in January, 2008, but had been awaiting approval from the Kenyan government, which had pre-emptive rights over the sale on the strength of its 50 per cent stake.

The talks between the Kenyan government and executives from the Indian oil firm will centre on the board and management composition, the financing model for the upgrade and negotiations on the exit of either of the twin shareholders in the future.

Mr Patrick Nyoike, the permanent secretary in the Ministry of Energy, has said  the first meeting will be held this week  to discuss “modalities for the exit of the private co -owners before parties can append their signatures to a new shareholder pact. We will insist that they write the cheque to the exiting shareholders. We must redefine our rules of engagement with our new partner. This will pave the way for a new shareholders’ agreement,”.

He added that the critical point in the talks will be the financing structure for the upgrade of the plant, with the Kenyan government having a bias for combination of commercial debt and cash injection by the two shareholders.

“The best financing model is where 70 per cent is commercial debt and 30 per cent cash injection by the shareholders. The two co owners will each raise 15 per cent of the cash injection,” said Mr  Nyoike in an interview with local press.

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