Proscovia Nabbanja, the CEO, Uganda National Oil Company (UNOC), thinks that owning a stake – and a significant one at that – in Kenya Pipeline Company (KPC) is a no brainer.

After all 65 percent of the transit volumes through the Kenya pipeline system is destined for Uganda, which translates to about $110 million (35 percent) of KPC’s annual revenues.

“Of course it helps (holding equity in KPC). We are the major transporters within the pipeline. Therefore, it is in our interest to have some control in it,” she told this website last year.

Uganda this week announced that it had agreed to take up 20.15 percent stake in KPC for a cash consideration of $255.4 million (UGX 915.37 billion), making the country the second biggest investor in the company.

Uganda relies on the company’s transport and storage infrastructure to import up to 95 percent (2.96 billion litres annually) of its fuel products through the port of Mombasa; with the rest arriving through Tanzania.

Since July 2024, UNOC, which manages the government’s commercial interests in the petroleum industry, serves as Uganda’s sole importer and wholesaler of petroleum products under the Petroleum Supply (Amendment) Act 2023, supplying fuel in bulk to Oil Marketing Companies (OMCs); who then distribute it to the market.

Hurdles

Getting this prominent stake in KPC was never as straightforward as initially imagined, though.

This is because of the 11,812,644,350 ordinary shares that were put up for sale (at KShs 9 per share), the original IPO structure reserved 20 percent each for four main investor categories (EAC investors – where UNOC fell, Kenyan retail, Kenyan institutional, and international investors – outside the EAC).

The remaining 20 percent was set aside for OMCs (15%) and KPC employees (5%).

With 20 percent of the IPO shares only translating to 13 percent of KPC in its entirety, it meant that even if UNOC were to scoop up all that were allocated to the East African Community (EAC) investors, Uganda would not acquire the influential stake it sought in the company.

But as the IPO closure date of February 19, 2026 approached, it increasingly became obvious that a number of the shares on offer would not be bought; necessitating the Kenya’s Capital Markets Authority (CMA) to extend the IPO by three days.

Under the rules, any shares not taken up by Kenyan retail or institutional investors were to be reallocated to the EAC category.

It is here that Uganda swooped in to buy whatever shares remained unclaimed.

UNOC storage tanks in Jinja

In the end, Uganda had acquired 20.15 percent of KPC; which it had initially applied for – a strategic number that gave it the second highest stake in the company after the Kenyan government’s 35 percent.

Ruth Nankabirwa, the Minister of Energy and Mineral Development, said Uganda was specifically concerned that with KPC privatized, it would no longer rely on only its “strong bilateral relationship (with Kenya) to ensure a reliable and secure supply of petroleum products” – with new investors likely to be more profit-driven and expecting dividends, annually.

“The 20.15 percent shareholding is deliberate as it guarantees us the G-to-G (government to government) engagement with Kenya, which ensures we have a say in key decisions pertaining the KPC system,” Nankabirwa said.

Throwing weight

Uganda’s last gasp acquisition of the unclaimed KPC shares not only gave it the stake it desired, but it also rescued the IPO from the ignominy of undersubscription.

It is the latter deed that gave Uganda the wiggle-room to demand for concessions that it would otherwise have never expected to get from the Kenyans.

According to Nankabirwa, the Nairobi negotiations were so intense that at some point Uganda’s delegation had to fly back to Kampala as Kenya declined to budge.

However the Ugandan team was quickly recalled to finalize the agreement with the decisive strategic concessions the icing on the cake.

Now the country has the right to appoint at least two directors to the KPC board in addition to obtaining veto power over any changes to the pipeline tariff or revisions to the company’s dividend policy.

Furthermore, to safeguard its 20.15% stake from potential dilution, Uganda holds veto power over any changes to share capital, as well as any material adjustments to the business plan or alterations to the company’s Memorandum and Articles of Association

“We had to sign a Side Letter to capture all these concessions,” said Nankabirwa.

A side letter is a legally binding document used to amend, supplement or clarify specific terms of a primary contract.

(L-R) Chris Baryomunsi, ICT Minister, Irene Bateebe, PS Energy Ministry, Nabbanja, UNOC CEO and Tony Otoa, UNOC’s spokesperson

With official trading of KPC shares on the Nairobi Securities Exchange (NSE) scheduled to commence on March 9, 2026, it remains to be seen whether this was a masterstroke on Uganda’s part or of little consequence.

In the meantime Uganda continues to keep an eye on the Tanzanian route, including commencing feasibility studies for a fuel products pipeline from Tanzania and new infrastructure at Mwanza and Tanga, as a strategic alternative to secure its fuel supply and diversify beyond Kenyan imports.

Nabbanja noted that the Tanzania aspirations will not undermine UNOC’s KPC stake, insisting that Uganda’s growing industrialization characterized by its economic growth model around the ATMS – agro-industrialization, tourism, minerals and science – needs as much fuel as it can get going forward.