Kenya’s Sh106 Billion Pipeline IPO Extended as Valuation Doubts and Payment Delays Stall East Africa’s Most Ambitious Share Sale

The clock is ticking louder than the government had hoped. Kenya Pipeline Company’s landmark Initial Public Offering — billed as the largest equity sale in East Africa’s history — has been extended by three days after brokers and investment banks disclosed that only a fraction of the targeted Sh106.3 billion had been raised as the original closing deadline arrived. The Capital Markets Authority approved the extension on February 19, 2026, moving the offer closing time from 5pm that day to 5pm on Tuesday, February 24, 2026. All other terms and conditions of the offer remain unchanged.

The three-day reprieve is officially framed as a response to feedback from retail investors gathered during public participation forums tied to the government’s broader privatisation programme. Acting Privatization Authority Managing Director Dr. Janerose Omondi said the extension was about inclusion and transparency. “The extension is aimed at ensuring broader participation and will provide investors adequate time to finalise their investment decisions in line with our commitment to inclusivity and transparency,” she said. But behind that carefully worded statement sits a more uncomfortable reality: top stockbrokers and investment banks have struggled to sell the state oil pipeline company, particularly among the high-net-worth investors who expressed interest but failed to follow through with actual payment.

According to multiple senior brokers who spoke to the press anonymously, only around 20 percent — or approximately Sh23 billion — of the total offer had been sold by Tuesday this week, reflecting a yawning gap between stated investor interest and committed capital. For an offer that requires valid applications equivalent to at least 50 percent of the shares on offer around Sh53.1 billion to even proceed, this represents a live threat to the entire transaction.

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An Offer for Sale, Not a Company Raising Capital

To fully understand the stakes here, it is important to clarify what the Kenya Pipeline IPO actually is. Unlike a traditional IPO where a company raises fresh capital to fund expansion, the KPC offering is structured as an Offer for Sale by the Government of Kenya, meaning every shilling raised flows directly to the National Treasury rather than into KPC’s operations. The government is offering 11,812,644,350 ordinary shares, representing 65% of the company, at an offer price of Sh9 per share. If fully subscribed, that yields Sh106.3 billion for the state’s coffers. The government will retain a 35 percent stake.

The transaction’s importance to the Kenyan state cannot be overstated. Annual debt repayments now absorb 40% of government revenues, leaving successive budgets squeezed between a ballooning public debt pile and limited fiscal space for development spending. The National Assembly’s Finance and National Planning Committee has itself noted that only Sh29.8 billion will be available for development expenditure in the 2025/26 financial year after accounting for interest payments of Sh1.097 trillion and a public wage bill of Sh960 billion. Against that backdrop, the KPC IPO is not just a capital market event — it is a fiscal lifeline.

The listing forms part of a sweeping privatisation agenda that also includes the government’s proposed sale of a 15% Safaricom stake to South Africa’s Vodacom for Sh204 billion — a deal currently under parliamentary scrutiny. Taken together, these two transactions represent the most aggressive divestiture programme Kenya has attempted since it sold a 25% stake in Safaricom in 2008 for approximately USD 800 million, a listing that was oversubscribed 4.63 times and remained the benchmark for East African capital market activity for nearly two decades.

The Case For KPC: A Profitable Infrastructure Monopoly

On paper, KPC is a compelling asset. Established in 1973, the company is the principal operator of Kenya’s national petroleum pipeline and storage network, providing essential midstream services — transportation, storage, and distribution of refined petroleum products from the Port of Mombasa to the hinterland and beyond. Its pipeline network spans approximately 1,342 kilometres, serving as the backbone of the petroleum supply chain for Kenya and the wider East and Central African region, including Uganda, Rwanda, and Eastern DRC.

For the financial year ended June 30, 2025, KPC reported revenue of Sh38.6 billion and profit after tax of Sh7.49 billion, with net cash from operating activities of Sh14.3 billion. The EBITDA margin stands at approximately 45%, reflecting the operational leverage embedded in a regulated infrastructure monopoly. Over the past 12 months, the company paid Sh10.5 billion in dividends to the Treasury, making it one of the government’s most reliable dividend contributors among state-owned enterprises. Following the IPO, KPC intends to distribute 50% of net earnings as dividends — a post-listing policy that represents a significant reduction from the pre-IPO payout ratio of over 90% to the Treasury.

The company’s regional significance is equally notable. Uganda accounts for more than 30% of KPC’s throughput and revenue, with approximately 2.7 billion litres of fuel transported to Uganda annually. More than 90% of Uganda’s fuel imports transit through Kenya’s pipeline system, creating an interdependence that gives KPC a quasi-monopoly position across the regional petroleum supply chain. KPC has also been given a mandate to triple its five-year capital spending to Sh110 billion, including a new pipeline from Eldoret to Kampala and Rwanda, and the development of an oil trading hub in Mombasa.

The Valuation Dispute That Is Derailing the Offer

Despite the solid financials, the IPO has run headlong into a wall of analyst scepticism centred on one number: Sh9 per share. Old Mutual Investment Group Uganda, in a detailed initiation note released in late January 2026, valued KPC shares at just Sh4.61 — barely half the offer price — warning of limited upside due to what it characterised as an “embedded premium” in the current pricing. “The current IPO pricing embeds a valuation premium that may constrain near-term upside for public market investors. We anticipate a post-listing repricing as investor expectations normalise and improved trading liquidity enables clearer price discovery,” the OMIG report concluded.

The Ugandan firm is not alone in its discomfort. At Sh9 per share, KPC is being priced at approximately 22 times earnings — a multiple that towers over comparably positioned Nairobi Securities Exchange-listed companies. Kenya Power trades at approximately 1.2 times earnings. KenGen at 4 times. Even Safaricom, Kenya’s most profitable listed company and the NSE’s dominant blue chip, trades at around 8 to 9 times earnings. For a state-owned infrastructure company facing a 42% capital budget underspend and governance scrutiny — including an Ethics and Anti-Corruption Commission investigation into an alleged Sh70 billion scandal at KPC — the pricing has struck many seasoned investors as difficult to justify.

A further structural concern involves the planned reduction of dividends from over 90% to 50% of net earnings post-listing. For income-focused retail investors who were attracted by KPC’s dividend-paying track record, that shift significantly alters the yield calculus. Combined with the fact that IPO proceeds flow to the Treasury rather than into the business, institutional investors have been left asking what, precisely, the money raised does for KPC’s long-term competitive position. The Standard Investment Bank has noted that KPC’s enterprise value-to-EBITDA multiple at the offer price comes in at 8.1 times a figure that leaves limited room for error if operational or regulatory conditions shift post-listing.

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Structure of the Offer and Minimum Thresholds

The IPO’s allocation structure reflects the government’s intent to spread ownership broadly across different investor categories. Of the 65% stake on offer, 20% is reserved for local retail investors, 20% for local institutional investors, 5% for KPC employees, 20% for East African Community citizens, 15% for oil marketing companies, and 20% for international investors. The government will retain a 35% stake in the company post-listing.

For the offer to proceed at all, valid applications must be received from at least 250 applicants representing 50% of the offer shares — meaning at least Sh53.1 billion must be raised. In cases of undersubscription within specific categories, unallocated shares will cascade to the next priority group, starting with local retail investors. In any oversubscription scenario, Kenyan investors receive priority for allocation — a condition that underlines the government’s intent to use the IPO as a vehicle for expanding domestic capital market participation rather than simply a foreign capital attraction exercise.

Investors can submit applications through stockbrokers, investment banks, authorised selling agents such as commercial banks, via the KPC IPO online portal, or by dialling the designated mobile short code *483*816#. The CMA also approved the integration of electronic CDS account opening into the KPC IPO platform shortly before the extension — a move designed to remove the procedural barrier of account registration that has historically deterred retail participation in Kenyan public offerings.

Ziidi Trader and the Digital Retail Mobilisation Strategy

Perhaps the most significant structural innovation in this IPO — and the one the government is most visibly betting on in the final stretch — is the integration of share trading into M-Pesa. On February 10, 2026, just days before the original closing deadline, Safaricom launched Ziidi Trader, a platform integrated directly into the M-Pesa mobile money application that allows Kenya’s 37.9 million M-Pesa users to buy and sell NSE-listed shares directly from their mobile phones. At the Ziidi Trader launch, Safaricom CEO Peter Ndegwa said: “For eighteen years, M-Pesa has transformed how Kenyans live, work and do business. Today, in partnership with the NSE, we are extending that impact to how our customers build and grow their wealth.”

The timing of the rollout — just nine days before the original IPO closing — was clearly designed to open a mass retail channel for last-minute KPC subscriptions. Whether the extension to February 24 will give Ziidi Trader enough runway to meaningfully move subscription volumes remains to be seen. The IPO already stands as Kenya’s first fully electronic public offer on the NSE, making it the broadest-access capital markets exercise the country has attempted. The digital access question is less about willingness and more about whether investor confidence at the prevailing valuation can be rebuilt in the remaining days.

Key Remaining Dates

With the closing extended to February 24, the remaining process timeline is unchanged in substance. Allocation results are scheduled to be announced on March 4, 2026, followed by electronic crediting of shares to Central Depository System accounts and processing of refunds by March 6, 2026. Listing and trading of KPC shares on the Nairobi Securities Exchange is set to commence on March 9, 2026, subject to the offer reaching its minimum subscription threshold.

The Regional and Historical Significance

If the KPC IPO clears its minimum threshold and proceeds to listing, it will surpass the 2008 Safaricom offering as the region’s largest equity sale in local currency terms. The Safaricom IPO raised just over Sh50 billion — now dwarfed by KPC’s Sh106.3 billion target. In US dollar terms, the Safaricom listing may still rank as the larger transaction given the significant depreciation of the Kenyan shilling over the intervening 17 years, but the local currency headline remains a symbolic milestone for Kenya’s capital markets.

The stakes for the country’s privatisation programme extend beyond KPC itself. A clean, well-subscribed listing would signal renewed confidence in the Nairobi Securities Exchange as a credible venue for large public offerings — important at a time when Kenya is simultaneously pushing through the Safaricom stake sale to Vodacom and has earmarked at least 18 state enterprises for divestiture under its broadened privatisation programme. A stumble on KPC, by contrast, would cast a long shadow over the government’s broader asset monetisation strategy — the centrepiece of its plan to reduce dependence on debt financing while funding critical infrastructure through the newly established National Infrastructure Fund and Sovereign Wealth Fund.

The extension buys time, but not confidence. For the government, the next five days are a critical test of whether Kenya’s market infrastructure — and the valuation proposition it has put to investors — can close one of the most consequential financial transactions in East African capital markets history.

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By: Montel Kamau

Serrari Financial Analyst

20th February, 2026