Kenya Pipeline Company IPO Crosses the Line: Institutional Investors Rescue East Africa’s Biggest-Ever Share Sale

Kenya Pipeline Company’s landmark initial public offering has closed oversubscribed, with institutional investors providing the decisive demand that allowed East Africa’s largest-ever IPO in local currency terms to cross the line, the deal’s lead transaction adviser confirmed on Wednesday — pushing back against weeks of reports depicting an offer struggling to attract interest.

The IPO, which ran from January 19 to February 24, 2026, offered a 65% stake in Kenya Pipeline Company at Sh9 per share, targeting Sh106.3 billion ($825.31 million) in proceeds. Belgrad Kenne, lead adviser for the transaction at Nairobi-based Faida Investment Bank, declined to disclose the oversubscription level or name the institutional investors involved, but confirmed they had generated excess demand beyond the shares on offer, supplemented by what he described as a “sizeable” retail investor participation. Final reconciliation of the IPO’s results is scheduled for March 4, with KPC shares set to begin trading on the Nairobi Securities Exchange on March 9, 2026.

The oversubscription announcement marks a significant turnaround for a deal that had been widely described as struggling. Reports from multiple top stockbrokers indicated that at one point only approximately 20% of the offer had been sold — roughly Sh23 billion — prompting the Capital Markets Authority to approve an extension of the offer period by three working days to February 24. The extension, the Privatisation Authority’s managing director Janerose Omondi said, was “aimed at ensuring broader participation and will provide investors adequate time to finalise their investment decisions.”

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What Kenya Pipeline Company Is — and Why It Matters

Before assessing the IPO’s ultimate success or failure, it is worth understanding the nature of the asset being offered to the public. Kenya Pipeline Company (KPC) is not a startup or a speculative growth story. Established in 1973 and operational since 1978, it is a natural monopoly that controls approximately 91% of Kenya’s refined petroleum transportation market, operating a pipeline network spanning approximately 1,342 kilometres from the port of Mombasa to Nairobi, Nakuru, Eldoret, Kisumu and beyond — and onward by road to Uganda, Rwanda, Burundi, and the Democratic Republic of Congo.

The company’s financial profile is that of a regulated infrastructure monopoly. 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. Revenue grew from Sh28 billion in FY2021, representing a five-year CAGR of approximately 8%. EBITDA margins sit in the mid-40% range — a structural indicator of the pricing power embedded in an asset that faces no meaningful direct competition. The company has paid as much as Sh10.5 billion annually to the Treasury in dividends, and has committed post-listing to distributing 50% of net earnings as dividends — a significant reduction from its pre-IPO payout ratio of over 90% to the state.

KPC’s infrastructure extends well beyond pipelines. The company operates a 96-core fibre optic cable network running the length of its pipeline corridor, licensed by the Communications Authority of Kenya in 2018 to offer telecommunications services — a revenue diversification that complements core petroleum logistics. It also wholly owns the Morendat Institute of Oil and Gas, a regional training institution for the oil and gas sector. In a further strategic move, KPC recently acquired Kenya Petroleum Refineries Limited (KPRL) as a fully owned subsidiary, increasing storage capacity and positioning KPC as a more vertically integrated energy infrastructure company.

The Offer Structure and Stakeholder Breakdown

The Kenya Pipeline IPO is structured as an Offer for Sale by the Government of Kenya — meaning that the proceeds flow directly to the National Treasury rather than into KPC’s own operations or capital expenditure. This distinction matters for investors: the IPO does not fund expansion; it funds the state’s fiscal position. The government is divesting a 65% stake while retaining a 35% holding.

Of the total stake on offer, the allocation framework is as follows: 15% is reserved for oil marketing companies, 5% for KPC employees, and the remaining 80% is divided equally — at 20% each — among local retail investors, local institutional investors, East African investors, and foreign investors. The KPC investor memorandum specifies that in the event of oversubscription, Kenyan investors will be given priority, while undersubscribed categories will have their allocations reallocated in order of local retail, local institutional, East African, international, and then oil marketing companies.

The IPO’s price of Sh9 per share, applied to 11,812,644,350 ordinary shares representing the 65% stake, implies a total company valuation of approximately Sh163.6 billion at listing. Critics — including several banks and financial institutions — argued the price represented a premium to fair value, with lower independent valuations casting doubt on the offer price. These concerns, combined with payment delays among high-net-worth investors who expressed interest but failed to complete applications, contributed significantly to the slow initial subscription pace.

Uganda Secures a Strategic 20% Stake

The most politically significant dimension of the IPO is Uganda’s participation. The government of Uganda confirmed it secured a 20.15% shareholding in Kenya Pipeline Company through the offering — a stake that comes with two seats on KPC’s board of directors, according to The Africa Report.

Uganda’s Energy Minister Ruth Nankabirwa explained the rationale directly at a news briefing on February 24: “Imports through Kenya account for over 95% of Uganda’s monthly demand.” That single statistic encapsulates the strategic logic of the investment. Uganda, a landlocked country of approximately 50 million people, is entirely dependent on the Kenyan pipeline corridor — running from the Indian Ocean port of Mombasa through Kenya’s interior — to receive the petroleum products that power its economy. KPC derives 35% of its revenue from Uganda alone. Owning a 20% stake in the infrastructure that moves over 95% of your country’s fuel imports is not a passive financial investment; it is strategic economic self-insurance.

Uganda’s direct participation also resolves a long-standing vulnerability for Kampala. As a non-owner relying entirely on a foreign state-controlled entity for fuel transit, Uganda had limited leverage in tariff negotiations and no formal governance role in the company’s decisions. The IPO stake and accompanying board seats change that calculus fundamentally, giving Uganda a formal voice in the management of an asset it depends on absolutely. The terms were supported by the Kenyan government as part of negotiations that helped shore up late-stage investor demand.

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A Turbulent Road to the Finish Line

The path to oversubscription was neither smooth nor straightforward. When the offer opened on January 19, 2026, KPC was widely positioned as Kenya’s most significant public offering since the 2008 Safaricom IPO, which raised just over Sh50 billion and remains the region’s largest in dollar terms despite the weakening of the Kenyan shilling over the intervening years. Analysts and bankers initially described the KPC offering as a transformative moment for the Nairobi Securities Exchange — a chance to democratise ownership of nationally critical infrastructure and revive retail investor participation in capital markets.

Instead, the early weeks brought a stream of troubling reports. By mid-February, brokers indicated that only around 20% of the offer had been subscribed. Valuation concerns dominated investment circles, with several banks issuing lower valuations than the Sh9 offer price. High-net-worth investors who signalled interest failed to convert, citing payment logistics and uncertainty about the post-listing liquidity profile. The illiquidity concern was particularly pointed: unlike retail investors, pension funds and banks tend to hold shares for longer periods, raising concerns that once listed, KPC’s stock could become thinly traded — a deterrent for sophisticated investors seeking an active secondary market.

Serrari Group’s earlier analysis of the IPO noted that the extension bought time but not necessarily confidence, arguing that the government needed a combination of institutional anchor commitments, Uganda’s strategic stake, and a strong last-minute retail push to rescue the offer. That analysis proved prescient — the oversubscription announcement on February 25 suggests that all three factors ultimately converged in the final days of the offer window.

Part of a Broader Privatisation Push Under President Ruto

The KPC IPO does not stand alone. It is part of a systematic privatisation programme that President William Ruto has accelerated since taking office, driven by Kenya’s acute fiscal challenges. Annual debt repayments now absorb 40% of government revenues, leaving successive budgets squeezed between a ballooning public debt stock and constrained tax revenues. The Privatisation Act, 2025, passed and took effect on October 21, 2025, providing a legislative framework for the government to sell state assets.

Running in parallel to the KPC listing is the government’s proposed sale of a 15% stake in Safaricom to South Africa’s Vodacom for Sh204 billion, subject to parliamentary approval. Vodacom would additionally acquire Vodafone’s remaining 12.5% stake for Sh68.1 billion, lifting its effective holding to 55% and leaving the government with 20%. Together with an upfront payment of Sh40.2 billion on future dividend rights, the total proceeds to the government from the Safaricom transaction are estimated at Sh244.5 billion. Treasury Cabinet Secretary John Mbadi told parliamentary committees in January 2026 that the government had established a National Infrastructure Fund as a dedicated vehicle to hold and deploy privatisation proceeds toward roads, dams, and other commercially viable infrastructure.

President Ruto personally directed that some portion of these proceeds would support research and innovation in Kenyan universities, speaking at the National Intelligence and Research University’s graduation ceremony on February 17, 2026. The broader message is consistent: the government views asset monetisation as a substitute for debt and a lever for long-term development spending — rather than a sign of financial distress. Whether markets and voters accept that framing will depend heavily on how KPC performs once its shares begin trading on March 9.

What the IPO Result Means for East Africa’s Capital Markets

The oversubscription of the Kenya Pipeline IPO — however fragile and last-minute it may have been — carries significance well beyond KPC itself. The Nairobi Securities Exchange has struggled with liquidity and depth in recent years, and a high-profile failure of East Africa’s largest-ever local currency IPO would have been damaging to the market’s credibility as a venue for large listings.

The fact that the deal closed above target, even after a slow start and a deadline extension, suggests that the Nairobi market retains the institutional capacity to absorb large infrastructure transactions — provided the price is right and anchor investors are properly secured. The deal team’s choice to keep institutional identities confidential raises questions about concentration of ownership, but the structural participation of Uganda as a sovereign investor adds a dimension of regional institutional depth that is unusual for East African public offerings.

The Kenyan Wallstreet’s pre-IPO analysis described the transaction as a “once-in-a-generation listing” designed to revive retail participation and deepen market liquidity. Whether that ambition is realised will ultimately depend on the post-listing price trajectory — and whether the retail investors who subscribed during the offer find themselves holding a dividend-paying infrastructure stock or trapped in an illiquid position. With KPC’s 50% dividend payout policy in place and a dominant market position that faces no near-term competitive threat, the fundamental investment case remains intact. The market opens on March 9.

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By: Montel Kamau

Serrari Financial Analyst

26th February, 2026