Participation is secured, but profitability and prudence remain under scrutiny
Kampala, Uganda | RONALD MUSOKE | For more than 50 years, Uganda depended on its eastern neighbour, Kenya, to transport the fuel that powers its economy, but had little influence over the infrastructure and pricing decisions shaping that supply.
That dynamic shifted at the start of the year when Kenya listed 65% of shares of Kenya Pipeline Company (KPC) on the Nairobi Securities Exchange, opening the state-run petroleum products transporter to private and regional investors.
Within weeks, Uganda moved to secure a strategic foothold, with the Uganda National Oil Company (UNOC) acquiring a 20.15% stake in the pipeline operator in a deal valued at US$255 million (about UShs 930.75 billion). Uganda’s Energy Minister, Ruth Nankabirwa Ssentamu, described the purchase as “insurance for the security, accessibility and affordability of petroleum products in our country.”
Uganda’s reliance on KPC is structural and longstanding. Almost all of its imported petroleum products flow inland from the Indian Ocean port of Mombasa through KPC’s infrastructure before crossing the border. Roughly 95% of Uganda’s fuel imports — about 2.96 billion litres annually — transit via the Kenyan route, accounting for close to 65% of KPC’s transit volumes and about 35% of its revenues. Yet, despite that reliance, Kampala had no formal influence over tariff adjustments, infrastructure planning, dividend policy, or strategic direction.
Speaking to the media at the Uganda Media Centre in Kampala on Feb. 24, Nankabirwa framed the acquisition as both a commercial investment and a safeguard for national energy security. “This was not just about buying shares,” she said. “It was about securing our energy lifeline. Sixty-five percent of the products that move through that pipeline are destined for Uganda, yet previously we had no seat at the table. We, therefore, chose to be a shareholder instead.”
The media briefing followed Nankabirwa’s presentation to Cabinet, a day earlier, on the negotiations in Nairobi, where she stressed that the share purchase was not merely a financial transaction but a strategic decision. Nankabirwa had just returned from Nairobi where she led a high-level government delegation that included the Attorney General, Kiryowa Kiwanuka, the Solicitor General, senior Energy Ministry officials and executives from the Uganda National Oil Company (UNOC).
“The Government of Uganda through UNOC was strategic enough to determine the number of shares that will put her as a country in a proper strategic position in the management of the business of the Kenya Pipeline Company,” she said. “The government of Kenya welcomed UNOC, and we purchased the shares at the established cost by the Government of Kenya, which was Kshs 9 (Ushs 250) per share.” But while officials hailed the transaction as a significant diplomatic and economic milestone, independent analysts questioned whether the timing, valuation and long-term returns ultimately justify the investment.
Why Kenya divested
To understand Uganda’s move, it is necessary to examine Kenya’s decision to partially privatize one of its most strategic assets. Established in 1973, KPC operates a 1,342-kilometre network of pipelines connecting Mombasa to Nairobi and onward to the eastern African hinterland markets. The company owns eight storage depots, road tank loading facilities, aviation fueling infrastructure, and fibre-optic lines. For years, it has functioned as a wholly state-owned enterprise under the Government of Kenya.
The decision to float 65% (11,812,644,350 shares) through an Initial Public Offering (IPO) marked a significant shift. Kenya retained 35% stake, but opened majority ownership to private investors — institutional and retail alike. The IPO was structured as an Offer for Sale, meaning proceeds flowed directly to the Kenyan exchequer rather than into new company capital.
Financially, KPC had shown notable improvement in recent years. According to a recent assessment done by Old Mutual Investment Group (Uganda), between 2021 and 2025, KPC’s revenues grew at a compound annual growth rate of 8.4%, reaching KShs 38.6 billion while EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) margins expanded from 12.5% in 2021 to 47.7% in 2025. Net profit swung from a KShs 1.7 billion loss to a KShs 8.5 billion gain over the same period.
On paper, the numbers suggested a turnaround story. But observers noted that the IPO, which opened at 5pm of Jan.24 to 5pm of Feb.19 (pushed further to 5pm on Feb.24) did not generate overwhelming investor enthusiasm.
In short, it did not produce the level of subscription many had anticipated for such a strategic infrastructure asset. Questions circulated in regional financial circles about long-term return prospects, regulatory risks, and the company’s heavy reliance on transit markets such as Uganda. Infact, KPC’s IPO could have flopped had Uganda not stepped into purchase a third of the shares on Offer.
Uganda’s strategic rationale
But, it appears, from Kampala’s perspective, the logic was straightforward: influence follows ownership. “Sixty-five percent of the products that go through this pipeline come to Uganda and that means we are a big market for this infrastructure. So, when you make a calculation… Uganda contributes about 35% of the revenues of the company,” Nankabirwa said.
“During the period when KPC was 100% governed by the (Kenyan government), Uganda was basing our relationship on the strong bilateral relationship to ensure a reliable and secure supply of petroleum products. We didn’t have any share, but we are contributing 35% to its revenues. Now we have a say on the company’s operations”
As part of the transaction, she said, Uganda had negotiated a legally binding side letter granting key protections. These include; veto powers over tariff adjustments, dividend policy changes, material amendments to the business plan, share dilution, and governance restructuring. Uganda will also appoint two directors to the nine-member KPC Board.
Irene Bateebe, the Permanent Secretary at the Ministry of Energy and Mineral Development, reinforced this strategic framing in a statement issued following the conclusion of the transaction in Nairobi. With major infrastructure developments underway, she noted, UNOC is positioning itself to manage supply chains more assertively. The KPC stake, in this view, is part of a broader architecture of energy security.
Uganda intends to pursue pipeline extension from Eldoret to Kampala, with long-term ambitions of linking it to Kigali and the Democratic Republic of Congo. The vision includes a bi-directional pipeline system that could eventually enable Uganda not only to import but also to export refined petroleum products once domestic production begins.
Moreover, parallel feasibility studies are exploring alternative supply routes through Tanzania, including storage terminals and pipeline infrastructure at Mwanza on the southern shores of Lake Victoria and the Indian Ocean port of Tanga. These initiatives suggest that Kampala’s strategy is not singularly dependent on Kenya, but rather diversified across multiple corridors.
Political strategy or economic calculation?
But not all stakeholders are convinced about the deal. Dickens Kamugisha, the Chief Executive Officer of the African Institute for Energy Governance (AFIEGO), a Kampala-based non-profit that is dedicated to influencing energy policies to benefit poor and vulnerable communities in Uganda, said: “The government’s participation in the KPC IPO was nothing but a political strategy, not an economic one.”
“When an IPO struggles to attract investors, you must ask why. Potential investors look at performance over the years and expect a return (on investment),” he told The Independent on Feb.27.
Kamugisha argues that for a resource-constrained country, large-scale investments abroad demand rigorous cost-benefit scrutiny. “For a poor country like Uganda, spending money without calculating the long-term benefits of such an investment is not prudent. That is not how poor countries operate,” he said.
Pointing to countries like Angola and Nigeria, he further contends that ownership does not automatically translate into energy security. “What secures a poor country’s energy is nurturing a healthy economy. It does not make economic sense, but for politics, it does make sense,” he told The Independent.
His views reflect a broader debate on whether Uganda entered the IPO primarily to secure strategic influence or to support regional diplomatic positioning. The history of pipeline geopolitics in East Africa adds context. The East African Crude Oil Pipeline (EACOP) was initially expected to route northwards to Kenya’s port of Lamu. It ultimately shifted southwards to Tanzania’s port of Tanga, a decision widely interpreted as both economic and geopolitical. Some analysts see Uganda’s KPC investment as part of an ongoing recalibration of regional energy alliances.
A regional energy analyst, speaking on condition of anonymity, suggested Uganda may have found itself in a tight corner. “KPC decisions directly affect Uganda’s economy. If you don’t have a stake, you have no formal leverage. But whether 20% materially changes long-term outcomes depends on how governance dynamics evolve,” noted the analyst.
Questions also remain about scale. Two board seats on a nine-member Board structure offer representation — but not control, the analyst said. Kenya retains the single largest shareholding block at 35%. The analyst told The Independent that although he is yet to find and read the share agreement, he doubts whether even if Uganda has the power to appoint two members on the KPC Board, those two Ugandans can hold sway on a 9-member board dominated by Kenyans. “Remember, this is one of Kenya’s most important strategic companies. The Kenyans will still have a bigger say in their company.”
Financial realities and future risks
Beyond politics lies the harder question of returns. KPC’s financial turnaround is clear. But infrastructure assets carry long-term risks: regulatory changes, shifts in regional trade patterns, competition from alternative routes, and potential disruptions tied to domestic refinery developments in Uganda and neighbouring states.
If Uganda’s domestic refinery becomes operational, petroleum product flows could change significantly. A bi-directional pipeline may enable exports, but it may also reduce reliance on Kenyan imports over time. How that scenario affects KPC’s transit revenues — and Uganda’s dividend expectations — remains to be seen.
At the same time, Uganda’s investment is funded through borrowing capacity. While officials stress that funds were already approved and allocated, critics argue that opportunity costs must be examined. Could the capital have generated higher economic returns elsewhere?
But ssupporters counter that dividends, tariff stability, and strategic leverage collectively justify the cost. Don Bwesigye Binyina, the Executive Director of the African Centre for Energy and Mineral Policy, a Kampala-based extractive industries policy, research and advocacy think-tank, sees tangible benefits.
“Strategically, this places Uganda at the negotiation table to influence tariff decisions affecting our consumers. As a dividend recipient UNOC will be able to recover some of its investments in the IPO in the long-run,” Binyina told The Independent. “Strategically speaking, this is a welcome government decision in terms of promoting national security through the protection of the country’s primary energy supply route under KPC.”
Binyina emphasized that national security is inseparable from energy security, and therefore commended the Ministry of Energy and Mineral Development (MEMD) and UNOC for their proactive steps.
But Binyina said dynamics could change once Uganda’s refinery comes on board. “Alternative markets in the Great Lakes Region might be needed to consume both the KPC and Ugandan refinery petroleum products. We want to believe that UNOC and the Ministry of Energy and Mineral Development have modelled and forecast all these different scenarios,” he added.
Between leverage and exposure
Ultimately, Uganda’s 20.15% stake in KPC sits at the intersection of economics and statecraft. For the government, it represents leverage, a structural safeguard against decisions that could undermine supply stability. It signals confidence in regional integration and positions UNOC as a serious commercial actor within East Africa’s energy architecture.
For critics, it introduces exposure; financial risk tied to a foreign sovereign asset, potential political entanglements, and uncertain long-term returns. What is clear is that the acquisition reflects a maturing energy policy posture. Uganda is no longer content to remain a downstream consumer dependent entirely on external decisions. Whether through equity stakes, alternative corridors, or refinery ambitions, it is actively reshaping its energy footprint.
Whether history will record the KPC investment as a masterstroke or a costly gamble depends on factors that will unfold over the coming years: tariff trajectories, dividend flows, refinery timelines, and regional geopolitics.
For now, it stands as one of the most consequential energy-sector decisions Uganda has made in recent years — a calculated bet that ownership, even minority ownership, is preferable to dependence without representation. And in a region where pipelines often double as instruments of political influence, that distinction may prove as valuable as the dividends themselves. In the words of the regional energy sector analyst, “Uganda found itself in a tight spot; it had to participate in the IPO but, whether the incentives it has been given are realistic, only time will tell.”
