7 September 2010

Kenya: Kenolkobil Shares Tumble in Panic Over Licence Row

KenolKobil's shares slid to a three-month low on Monday on fears over the impact a licensing dispute with the energy sector regulator would have on the company's business.

The oil marketer's shares closed the day trading at Sh9.15, down from Friday's price of Sh9.3, a level the security last touched on June 30 this year.

The price is just five cents off a five month low of Sh9.10 last touched on May 11.

"Retail investors have panicked and are therefore selling. Institutional investors are, however holding out, waiting to see how the situation develops. The company is very profitable, but is being bogged down by the regulatory actions," said an equities trader at Dyer and Blair Investment Bank who did not want to be named as he is not the firm's spokesperson.

The dealer said that the settlement of the actions against KenolKobil will greatly influence the firm's stock in the future.

KenolKobil said on Monday it had filed an application in the English High Court of Justice in London to appoint an arbitrator following the recent court ruling by Judge A.

Koome that the arbitration proceeding between KenolKobil and KPRL are governed by the English Arbitration Act.

In a press release filed through the Nairobi Stock Exchange in line with its recent communications, the company said it had served KPRL with the necessary orders, without specifying what those orders were.

Later, KPRL's chief executive Mr Raj Varma said that the current impasse between it and Kenol remains and is independent of whatever reprieve the oil marketer may get with regard to the Energy Regulatory Commission (ERC) action last week.

In a letter dated September 2, 2010, ERC issued a notice to Kenol revoking its retail petroleum licence and instead providing the oil marketer with a set of new licences that would limit its business to the wholesale and export of petroleum products, excluding liquefied petroleum gas.

But Kenol rushed to court and secured an injunction against ERC's move as it prepared for a legal battle with the regulator to protect its commercial interests.

Through its lawyers Shapley Barret & Co, Kenol wants the ERC's action nullified and KPRL compelled to process its crude imports.

"Our client further requests you to tackle appropriate action to ensure that KPRL complies with the law and does not abuse its position as a statutory monopoly by refusing to render a public service to our client which is its captive customer," the law firm said in a letter to ERC.

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