Uganda’s UNOC to acquire shares in Kenya Pipeline Company’s landmark $825M IPO

In a move that signals both commercial ambition and strategic necessity, Uganda has formalised its participation in the Kenya Pipeline Company’s landmark Initial Public Offering, acquiring shares through the Uganda National Oil Company (UNOC) — the state-owned entity mandated to manage Uganda’s commercial interests in the petroleum sector. The agreement, finalised in Nairobi by Energy Minister Ruth Nankabirwa Ssentamu, Attorney General Kiryowa Kiwanuka, and a senior technical delegation, elevates Uganda from a passive transit customer to an active shareholder in one of East Africa’s most strategically important pieces of infrastructure.

“Kenya Pipeline Company is not just a Kenyan asset,” Nankabirwa told reporters after the signing. “It is a regional energy lifeline that underpins Uganda’s fuel security and economic stability.” The words were carefully chosen. Uganda depends on KPC’s pipeline network for virtually all of its imported refined petroleum, and the decision to take a stake in the company is as much about geopolitics as it is about financial returns.

The KPC IPO — Kenya’s largest public offering since Safaricom’s 2008 listing involves the Government of Kenya divesting 65 percent of its shareholding in the company, offering 11.81 billion ordinary shares at KES 9.00 per share. The transaction carries an implied total equity valuation of approximately KES 163.6 billion, or roughly $1.27 billion at current exchange rates. If fully subscribed, the offer for sale will generate gross proceeds of approximately KES 106.3 billion roughly $825 million accruing to the Government of Kenya’s national budget rather than directly to KPC’s balance sheet. The offer, which opened on January 19, 2026 and was subsequently extended, will see shares begin trading on the Nairobi Securities Exchange on March 9.

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The Anatomy of the Deal: Governance, Funding, and the 20% Threshold

Uganda’s entry into KPC’s shareholding structure comes with specific governance rights attached. According to a revision approved by the Capital Markets Authority, Uganda will gain the right to nominate at least two directors to the KPC board, provided it holds no less than 20 percent of the company’s issued share capital. Certain reserved matters will now require the affirmative vote of a Ugandan-appointed director alongside a director nominated by the Kenyan government — a formal mechanism giving Kampala influence over key strategic decisions affecting tariffs, supply continuity, and infrastructure planning.

This governance arrangement represents a significant upgrade from Uganda’s previous status. As a transit country relying on KPC’s network, Uganda had visibility into the pipeline’s importance but no formal voice in its management. Owning a 20 percent-plus stake changes that fundamentally, granting UNOC — and by extension the Ugandan government — a seat at the boardroom table where decisions about expansion, pricing, and maintenance are made.

Funding the acquisition forms part of a much broader financial architecture. Uganda’s Parliament approved a proposal for UNOC to borrow up to $2 billion from Vitol Bahrain E.C., a global crude oil trader, through a seven-year facility. Finance ministry documents explicitly identify the “acquisition of shares in Kenya Pipeline Company” as one of the eligible uses of those funds, alongside the pipeline extension from Eldoret to Kampala, expansion of storage infrastructure, and the first year of construction of the Uganda Oil Refinery in Hoima. Repayments are to be secured against revenues from UNOC’s petroleum product sales and project cash flows — tethering the investment’s financing structure directly to the commercial performance of Uganda’s growing energy sector.

Why KPC: The Artery That Feeds Uganda’s Economy

To understand the strategic logic of Uganda’s decision, it is necessary to understand what KPC actually does and how central it is to Uganda’s daily economic functioning. Established in 1973, KPC operates Kenya’s national petroleum pipeline and storage network, transporting refined petroleum products from the port of Mombasa to inland depots across Kenya and into the region. The pipeline network spans more than 1,300 kilometres across Kenya and into neighbouring countries, with Uganda accounting for 65 percent of the oil moving up the pipeline — by far the largest single-country share.

In 2025, KPC transported 2.7 billion litres of fuel to Uganda, with volumes expected to rise to 2.9 billion litres in 2026. Uganda imports approximately 18 million litres of petrol per month, representing a significant and growing revenue stream for KPC. With approximately 135 oil marketing companies operating in Uganda, petroleum imports are not a marginal concern — they are a structural pillar of the country’s energy supply, underpinning transport, agriculture, industry, and commerce.

For the financial year ended June 30, 2025, KPC reported revenue of KES 38.6 billion and after-tax profits of KES 7.49 billion, demonstrating the company’s position as one of Kenya’s most profitable state enterprises. The company paid total dividends of KES 5.9 billion for FY2025 and has committed to a 50 percent dividend payout policy post-listing — making it an income-generating asset as well as a strategic one for Uganda. Total assets stood at KES 139 billion by June 2025, with shareholders’ equity of KES 98.4 billion.

By owning shares in KPC, Uganda moves well beyond being a transit customer. It gains visibility into KPC’s tariff structures, infrastructure expansion plans, and maintenance schedules — all factors that directly affect the reliability and cost of Uganda’s fuel supply. Permanent Secretary at Uganda’s Energy Ministry, Eng. Irene Pauline Bateebe, described Kenya’s recognition of Uganda’s strategic role in KPC operations as signalling a new phase in bilateral cooperation.

The IPO in Context: East Africa’s Landmark Capital Market Event

The Kenya Pipeline Company IPO is not merely a transaction — it is a defining moment for East African capital markets. The KES 163.6 billion implied valuation makes KPC’s listing the second-largest in the Nairobi Securities Exchange’s history, surpassed only by Safaricom’s landmark 2008 offering. It is also Kenya’s first fully electronic IPO (E-IPO), a modernisation milestone that enables broader retail participation through digital subscription platforms.

The offer structure reserves 15 percent of IPO shares for oil marketers in Uganda, Rwanda, and the Democratic Republic of Congo, with a further 20 percent set aside for East African Community citizens — a deliberate design to distribute ownership of a regional asset across its regional beneficiaries. President William Ruto explicitly encouraged Ugandan and East African participation, describing KPC as “a regional facility” during remarks in eastern Uganda.

The IPO forms part of a KES 149 billion privatisation programme aimed at supporting Kenya’s 2025/2026 national budget and reducing fiscal pressure from public debt. Cabinet Secretary for National Treasury, John Mbadi, has framed the listing within a broader push to mobilise domestic and regional capital as foreign investment flows into Africa face structural headwinds. Proceeds from the IPO flow entirely to the Kenyan government rather than KPC’s operations — meaning the listing is a revenue event for the state, not a capital raise for the company.

However, valuation questions have cast a shadow over the IPO’s reception in some investor circles. Analysis by Old Mutual Investment Group Uganda estimated a fair value of KES 4.61 per share — roughly half the KES 9.00 offer price — citing concerns that the IPO embeds a premium that may constrain near-term upside for public market investors. Independent discounted cash flow analyses have placed intrinsic value estimates in the KES 4.50 to KES 5.30 range, suggesting that post-listing returns may depend more on dividend income than capital appreciation. The IPO’s closing date was subsequently extended by three days to February 24, 2026, following slower-than-expected retail subscription in some categories.

KPC plans to triple its five-year capital expenditure to KES 110 billion and will pursue financing through internally generated cash flows, debt capital markets access, special purpose vehicles, joint ventures, and partnerships. Key expansion projects include a new pipeline from Eldoret to Kampala and then onward to Rwanda — a development that directly serves Uganda’s interest in diversifying fuel supply infrastructure.

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Uganda’s Petroleum Pivot: From Customer to Stakeholder

Uganda’s KPC stake acquisition arrives at a pivotal juncture in the country’s own petroleum journey. The country is approaching the first oil production from its Tilenga and Kingfisher oilfields, with first oil expected in late 2026 or 2027 — already delayed by as much as two years from original targets. The Tilenga project, operated by TotalEnergies, is projected to produce up to 190,000 barrels per day, while the Kingfisher field, managed by China National Offshore Oil Corporation (CNOOC), will add approximately 40,000 barrels per day, for a combined peak output of 230,000 barrels per day.

Progress on the integrated development is notable. The Kingfisher project has completed all 19 wells required for initial production, while the Tilenga project has drilled 164 of 170 planned wells. The 1,443-kilometre East African Crude Oil Pipeline (EACOP), which will transport Ugandan crude to the Tanzanian port of Tanga for export, is approximately 75 percent complete. EACOP secured a $1 billion syndicated loan in March 2025 from a consortium of African banks to finance remaining construction works. Total investment in Uganda’s oil sector reached $11.11 billion by June 2025, with an additional $4 billion expected between 2025 and 2027.

Critically, however, Uganda will export crude oil through Tanzania — not import refined products domestically. Until the proposed 60,000-barrel-per-day Hoima refinery — to be built in partnership with UAE-based Alpha MBM Investments under a 60:40 ownership structure — becomes operational (expected no sooner than 2029 or 2030), Uganda will remain structurally reliant on imported refined petroleum products flowing through KPC’s network. This is the fundamental tension at the heart of Uganda’s energy strategy: the country is becoming an oil exporter while remaining a refined fuel importer, and the KPC shareholding addresses the latter half of that equation.

Attorney General Kiryowa Kiwanuka described the KPC agreement as consistent with Uganda’s obligations and ambitions under the East African Community (EAC) framework, which promotes economic integration, infrastructure harmonisation, and free movement of goods and services. UNOC’s acquisition complements its 15 percent stake in EACOP — the pipeline that will carry Uganda’s crude to the coast — giving the company a strategic footprint across both the import and export corridors of Uganda’s petroleum value chain.

Regional Energy Integration: The Bigger Picture

Uganda’s move needs to be understood within the broader context of East African energy integration. The Mombasa-to-Kampala pipeline corridor is not merely a bilateral arrangement — it is a regional artery serving Uganda, Rwanda, Burundi, South Sudan, and parts of the eastern Democratic Republic of Congo. As demand for petroleum products continues to grow across the region, driven by urbanisation, industrialisation, and population growth, the strategic importance of this infrastructure only increases.

KPC is already planning the extension of its pipeline from Eldoret to Kampala, and then potentially onward to Rwanda. For Uganda, having a formal stake and board representation in KPC during this expansion phase is essential. Infrastructure decisions — route selection, tariff structure, investment priorities — will be made in the boardroom. Uganda, as a 20-percent-plus shareholder, will be present at that table rather than lobbying from the outside.

The Vitol-backed financing facility that underpins UNOC’s investment also funds the acquisition of petroleum storage facilities in Mombasa, the development of the Kampala Storage Terminal, and enhancements to the Jinja Storage Terminal — a portfolio of investments that collectively strengthen Uganda’s control over its own supply chain at multiple points along the Mombasa-Kampala corridor. Together, these projects represent a deliberate, well-capitalised strategy to reduce the supply disruption risks that have historically driven fuel price volatility in Uganda.

Risks and Scrutiny: The Questions That Remain

Uganda’s acquisition of a KPC stake is not without commercial and governance risks. Financial analysts note that IPO participation carries market risks — the valuation of KPC at the offer price, the governance structure post-listing, and the actual commercial returns on the investment are still to be tested in the market. Transparency advocates are likely to scrutinise the transaction, particularly the size of the stake ultimately acquired, the exact quantum of funds deployed, and the return expectations built into Uganda’s investment case.

The IPO’s valuation debate — with independent analysis placing fair value at roughly half the offer price — raises a legitimate question: is Uganda paying a premium for strategic access that the market itself would not justify on purely financial grounds? The answer likely lies in the distinction between commercial and strategic value. For Uganda, the board seat, the tariff visibility, the supply chain influence, and the alignment with regional integration objectives may justify a price that pure dividend-focused investors would not accept. What is certain is that officials have not yet publicly disclosed the size of the investment or the exact percentage stake Uganda intends to acquire — details that will matter significantly when assessing whether the transaction represents value for money for the Ugandan taxpayer.

Conclusion: A Forward-Looking Energy Diplomacy

Uganda’s acquisition of shares in the Kenya Pipeline Company through UNOC represents a maturation of the country’s energy diplomacy. It is a recognition that fuel security in a landlocked nation depends not only on having access to pipelines but on having influence over them. As Uganda prepares to transition from a pure petroleum importer to a dual-role oil producer and importer of refined products, owning a strategic stake in the infrastructure that underpins the latter position is both logical and necessary.

The investment also sends a signal to the wider region: that the East African Community’s vision of shared infrastructure and integrated energy markets is not merely aspirational but is being operationalised through tangible cross-border capital deployment. Kenya’s decision to structure the KPC IPO to include regional government and citizen participation — and to grant Uganda board-level representation upon crossing the 20 percent threshold — reflects a complementary willingness in Nairobi to build infrastructure ownership structures that mirror the region’s operational interdependencies.

For UNOC, the KPC stake is the latest step in a deliberate effort to build a diversified portfolio across upstream, midstream, and downstream energy sectors — from its 15 percent stake in EACOP to its role in the Hoima refinery project and now to a shareholding in the region’s most critical fuel transport artery. It is a strategy that positions Uganda not as a passive beneficiary of regional energy infrastructure, but as an active investor in it.

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By: Montel Kamau

Serrari Financial Analyst

23rd February, 2026