Is the government overvaluing Kenya Pipeline Company?

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

17 August 2025

When I wrote about investing in The Kenya Pipeline Company (KPC) two weeks ago, no details of the sale were available in the public domain. Some information has now come to light with the tabling of Sessional Paper in parliament. In this document, the Cabinet Secretary for the National Treasury states that the government “expects to raise approximately Sh100 billion from the transaction”.

Unfortunately, this statement is not supported by any explanation. The CS does not say why Sh100B and not, say, Sh200B. Furthermore, there is no indication of what proportion of the company will be sold and nothing about the estimated market value. The only thing attached to the Sessional Paper are summary extracts from the audited financial statements for the last five years – income statements and balance sheets form 30th June 2020 to 30th June 2024.

As a Kenyan citizen, I cannot give my permission for privatisation of KPC (or any other public company, for that matter) without knowing what proportion we are selling off. I think this was a major failure on the part of the CS Treasury – especially considering that he is a fully qualified accountant!

Still; looking at the balance sheet, it turns out that the net worth of KPC, that is, its assets minus its liabilities, stood at about Sh89 billion on 30th June 2024. Now, it wouldn’t be unusual to sell a company worth Sh89B for more that Sh100B; after all, even Safaricom has a net worth of Sh225B yet its market value is over one trillion shillings (Sh1.05T). But, let’s be clear about one thing: Kenya Pipeline Company is not “a Safaricom”!

The treasury CS told parliament verbally that the government intends to sell 65 per cent of KPC and raise the targeted Sh100B. I don’t know why such crucial information was left out of the official Sessional Paper; nevertheless, it means that The National Treasury has valued the company at about Sh155B. Is that a fair valuation?

In the year ended 30th June 2024, KPC reported a profit of Sh6.87B. This means that, at a valuation of Sh155B, the company would take about 22 years to earn its market value. Now that’s a very long time. For comparison, the ratio of profits-to-market value of TotalEnergies Marketing Kenya PLC is 6 years while that of KenGen is 7.22. Is the National Treasury being overly ambitious? Lets wait and see.