Government to spend Sh2.99 billion on Kenya Pipeline sale, advisors to get lion share
Government to spend Sh2.99 billion on Kenya Pipeline sale, advisors to get lion share
The planned privatisation of Kenya Pipeline Company (KPC) is set to cost the government an estimated Sh2.99 billion, with advisers and professional consultants emerging as the biggest beneficiaries.
At the centre of the process is Faida Investment Bank, the lead transaction adviser, which will earn advisory fees of Sh98.6 million, in addition to a success fee equivalent to one per cent of the gross proceeds raised, plus 16 per cent VAT.
While the final success fee will depend on the amount mobilised through the offer, the fixed advisory component alone makes Faida one of the top earners.
Legal and accounting advisers also feature prominently in the cost structure.
TripleOKLaw LLP, incorporating G&A Advocates, has been appointed legal adviser at a fee of Sh31.9 million, while PricewaterhouseCoopers (PwC), acting as reporting accountant, will receive Sh13.45 million.
Another advisory-linked cost is borne by Image Registrars, engaged as registrar and data processing agent.
Of its total allocation of Sh70.35 million, advisory fees account for Sh28.3 million, with the balance classified as reimbursable expenses tied to execution of the offer.
Public relations consultancy firm Apex Communications has also been allocated Sh42.13 million, reflecting the emphasis placed on investor communication and public messaging.
Taken together, the identifiable advisory and consultancy fees, excluding variable success fees and reimbursable costs, amount to approximately Sh214.4 million.
This highlights why advisers are the biggest winners of the IPO, regardless of how the market responds to the offer.
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By contrast, receiving banks: Stanbic, KCB, and Co-operative Bank are set to share a combined Sh16.3 million, while regulatory charges payable to the Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE) are capped at Sh31.5 million.
Notably, the single largest cost item overall is the placement fee, set at 1.5 per cent of the offer and estimated at Sh1.59 billion, benefiting sponsoring and placing brokers.
Placement fee refers to the fee paid to brokers or intermediaries for placing shares with investors during an IPO or other new securities issuance.
According to the Fifth Schedule of the 2002 Capital Markets (Licensing) Regulations, the standard placement fee for any new issue coming to the market is capped at 1.5 per cent of the total value of shares placed.
The Kenyan government expects to raise about Sh106.3 billion from the sale of a 65 per cent stake in KPC, providing a rare source of non-debt financing amid a large FY2025/26 funding gap caused by delayed external support.
The IPO is part of a broader strategy to monetise state assets and fund the budget without increasing public debt.
The transaction involves the sale of 11.81 billion existing shares at Sh9.00 per share.
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