The government of Kenya is seeking compensation over the Kisumu loading pier, which was completed in 2018 but cannot be used until Uganda has finished a similar facility on its side of Lake Victoria.
The country wants Indian group Mahathi, which is building Uganda’s jetty and has accumulated delays, to pay some US $22.8m. The newly built Sh 2bn Kisumu oil was devalued by the Kenya Pipeline Company (KPC) due to uncertainty over its use following delays by Uganda to construct its side of the docking facilities.
Idle jetty
The Kisumu jetty, which has remained idle since February 2018, can only function once the Uganda facility is ready to allow evacuation of oil from tankers arriving from Kenya via Lake Victoria. This has resulted in KPC losing millions of shillings in potential revenue due to the delayed construction of the Uganda facility. An asset is impaired when its market value is less than the value listed on the company’s balance sheet.
“Further delay in operationalization of the project may require the Kisumu Jetty assets to be assessed for impairment of their book values. Although the management have indicated that some progress has been made in construction of one of the two planned similar jetties in Uganda, there is no certainty when these will be completed and operationalised. Therefore, the country is not deriving any value from the use of the jetty,” said Auditor General Nancy Gathugu.
The firm had already depreciated the jetty by Sh158 million a year after it was completed and left idle, leaving KPC to rely on a slower and less capacity tankers to ship fuel to Uganda through a rail wagon ship. The Ugandan jetty and storage tanks are now 36 months behind schedule. t is estimated that the Ugandan part of the project will cost Sh27 billion and will have an oil jetty, fuel tankers and storage tanks.
