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Govt inks $350 mln deal with local banks

16 July 2015, 10:41

Nairobi - The government signed a $350 million loan with six commercial banks on Wednesday to help finance a refined products pipeline between Mombasa and Nairobi, one of the lenders said on Wednesday.

State-run Kenya Pipeline Co (KPC) had awarded construction of the 450-km pipeline to Lebanon's Zakhem International, which started work in July 2014.

Co-operative Bank of Kenya, one of the banks in the deal, said each of the six banks will lend KPC $58.33 million.

"The successful fundraising of such substantial magnitude notably in foreign currency marks the coming of age of Kenyan banks in large-scale infrastructure financing," Co-operative Bank of Kenya said in a statement.

The pipeline is separate from an oil pipeline that will take crude from newly discovered Kenyan and Ugandan oilfields to the coast.

"The $350 million loan will partly finance the construction of an ultramodern refined products pipeline from Mombasa to Nairobi," Flora Okoth, KPC's acting managing director, said in a statement published in the Daily Nation and other newspapers.

Read Also: East African oil safe from price drop - policies are the problem

KPC has said an existing pipeline linking the two cities, built by Zakhem International in 1973, has outlived its 30-year lifespan and was prone to ruptures.

Many of Kenya's refined fuel imports, as well as those in transit to neighbouring countries, have to be transported by truck, a slow and unreliable method that clogs roads.

Other banks involved are CFC Stanbic Bank, Citibank Kenya, Commercial Bank of Africa, Rand Merchant Bank and Standard Chartered Bank, Co-operative Bank said.

The 10-year loan is to have an interest rate of 5.38 percent above the London interbank offered rate (Libor), KPC said.

Zakhem International will also build a fibre optic cable along the route, will install four pumping stations for the pipeline and will upgrade firefighting equipment in Nairobi.

KPC said last year construction was expected to take 18 months.

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- Reuters


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