Gapco Kenya

completed

Gapco Kenya is an oil company that imports, bulk stores and distributes oil products in the East African countries of Kenya, Tanzania, Uganda and Rwanda. The Company began operation in June 1999 with a focus on penetrating the Kenyan wholesale market. The project is to build a fuel oil terminal and blending unit at the port of Mombasa. The project will enable Gapco Kenya to import larger parcels, store in-house, lower costs, provide tailored products, improve reliability of supply and grow its fuel distribution business. The project will have a strong developmental impact as it supports the expansion of the oil distribution sector and improves the availability of fuel oil in East Africa. All oil is imported in East Africa and the project increases and improves the infrastructure for handling oil products, the lifeblood for any developing economy. The project is a natural backward linkage to the IPPs supported by the World Bank Group in Kenya. Kenya over the past three years faced an acute power deficit due to a lack of investment in power generation and a drought that reduced hydro supply. The WB group has encouraged the Kenyan government to allow independent suppliers to generate power to reduce the deficit. These IPPs all use fuel oil to generate electricity. With the revival of the East African Community and the goal of creating a regional market and trading block, there will be a demonstration effect as Gapco is one of the first local companies that is adopting a regional rather than national strategy. The project will provide Gapco Kenya the infrastructure facilities to compete more effectively with the multinationals, leading to better service and lower fuel costs for consumers. IFC will provide long-term debt financing. Availability of long-term financing denominated in foreign currencies is limited in East Africa. Local banks have limited access to long-term funding and focus on short-term trade finance. IFC’s investment will complete the financial plan. To date capital expenditure has been funded from shareholder funds and internally generated cashflow. IFC''s financing will allow the project to be completed in a timely manner and free up the Company''s working capital to grow the business. IFC has assisted greatly in project structuring and implementation. This is Gapco’s first time to construct a greenfield terminal. IFC’s petrochemical engineer has provided considerable input to the sponsors to the requirements necessary to build the terminal to international safety and environmental standards.