Tough Questions raised to as Hundred of Millions go missing, unexplained by KPA OAG report

KPA –  Un-Confirmed Licenses Revenue

Financial statements shows licenses revenue of Kshs 176,143,000, out of which Kshs 65,915,532 relates to revenue earned on Liquefied Petroleum Gas (LPG) handled by African Gas and Oil Company Limited. A review of the license agreement dated 21 September 2007 between Kenya Ports Authority (KPA) and African Gas and Oil Company Limited indicated that the Company was to pay a license fee in US Dollars for an amount equal to twenty-five percent (25%) of the Company’s revenue derived directly from each tonne of LPG discharged, payable on a quarterly basis.

Records provided for audit indicated that KPA charged the license fees based on a calculation of estimated service revenue of the Company charged at US Dollars twenty – two and sixty-five cents (USD 22.65) exclusive of taxes for each tonne of LPG discharged at the facility as per Clause 7.7 of the Agreement without verifying the actual revenue of the Company. The rate charged was US Dollar one cent (USD 0.01) higher than the US Dollar twenty-two and sixty-four cents (USD 22.64) provided in the agreement. However, KPA did not provide evidence that this was the service fee charged by the Company to base the revenue billed on the same.

Consequently, the accuracy and validity of the license fee of Kshs 92,566,974 collected for the year ended 30 June 2020 could not be confirmed.

On their part of response they said that African Oil and Gas Ltd (AGOL) remits to the Authority every quarter a Quarter of their annual revenue share generated from the use of the facility as provided for under clause 7 of the License Agreement. The data of the actual units handled is certified by an independent surveyor before being submitted to the Authority for revenue recognition. During FY 2019-2020 a total of Kshs 166,577,228 was earned as revenue. Attached is a copy of the agreement, invoices and supporting schedules as Appendix 3

Quarter
Invoice
Amount USD

(VAT Exclsv.)

Exchange

Rate

Amount

(Kshs)

Q1
90081463
448,017.94
103.35
46,302,654.10

Q2
90082435
330,921.16
101.59
33,618,280.64

Q3
90083706
373,351.27
101.26
37,805,549.60

Q4
90084360
458,219.15
106.61
48,850,743.58

1,610,509.52

166,577,227.92

Further, Clause 7.7 of the Agreement provides a rate of USD 22.64 per ton. The tonnages are provided in three decimal places. Africa Oil and Gas Ltd computation and remittances are rounded up to two decimal places resulting in USD 22.65 per ton. The rounding up increased the rate by 0.01.

The following are the highlights of the agreement.

The agreement is dated 21.9.2007 and is titled “General Works Agreement”, the recital states that AGOL will develop the facility and use and maintain certain mooring buoys, anchorage for the mooring buoys, pipelines, pumps and a common user manifold and other works and installations within the port area for the conveyance of a LPG discharge or loaded at the facility to and from storage tanks and other facilities.
The License Agreement dated 21.9.2007 relates to the development and operation of a common user handling facility for LPG in the Port of Kilindini.
Recital A-KPA has followed due process and the laws and regulations relating to procurement in Kenya, agreed to grant AGOL a license and the right and privilege to develop a common user handling facility for the loading and discharge of LPG at the Port.
Clause 2.2 A non-exclusive license to develop, construct, operate use and maintain the Facility for 33 years.

Clause 2.5 non-discrimination. Should KPA permit another entity to engage in a similar business, KPA is to ensure the competitor does not enjoy any preference or advantage over AGOL.

Clause 7.6 Tariff Charge; tariff rate to be charged by KPA to users of the Facility shall be limited to KPAs tariff for shore-handling services only. There will be no discrimination.
Clause 7.7’ AGOL to charge user service fees of USD. 22.64.
Clause 11.1; AGOL shall provide discharge and loading services at the Facility for all persons seeking to discharge or load LPG at the Port in accordance with the agreement.
Clause 11.2; services to be offered on a commercial basis but subject to tariff collection procedures and conditions-not to discriminate against any person who wishes to use it.
Clause 11.4; AGOL shall not refuse any user unless the facility is damaged, for safety reasons.

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