APRIL 2018
EXECUTIVE SUMMARY
Doris Akol, the commissioner of Uganda Revenue Authority, has a task of ensuring that investors pay their fair share of tax
The government tabled its broadest Income Tax Amend-
ment bill in five years, with some proposals that could place a
burden on companies sourcing for loans to invest in capital-in-
tensive projects.
In this edition, we discuss the amendment of the Thin Capi-
talisation rules and what that means for companies that were
looking to put up investments using debt.
The battle to win the Engineering, Procurement and Con-
struction contract for the Tilenga oil project is nearing its end
as both companies, Flour and Chicago Bridge & Iron Company,
submit their second proposals on the price. We discuss what
is at stake and what plans the companies have in case they
win the contract. We also touch on some of ongoing Front
End Engineering Design works at the Kingfisher oil field, and
some of the risks that the project faces.
In the March edition, we told you how Black Mountain
Resources Limited had decided to relinquish its license for the
Namekara vermiculite mine in exchange for a debt relief. In
this edition, we discuss what the company is doing as it plans
to embark on phosphate production at the Bukusu complex.
Canadian firm M2 Cobalt has some positive news coming
out of its geological surveys for the Bujagali cobalt targets.
Find more about that and what the company is doing at its
other cobalt target in Kasese.
For more than two years, one of the main discussions in the
power industry has been the refinancing of the loan for the
Bujagali hydropower project. In this edition, we give you some
of the exclusive details of the costs of this refinancing.
Across the border in Kenya, the national oil company had a
busy April, signing key agreements that position it as a strong
player in the country’s petroleum industry. The national oil
company signed a deal with Schlumberger for a field devel-
opment plan for the Lokichar basin and also one that will see
it supply petroleum products for some geothermal power
projects.
In Tanzania, Swala Oil and Gas, which wanted to carry out
some oil drilling in the Kilosa-Kilombero basin, has hit through
a brick wall. The Australian junior firm is crying foul over frus-
tration from some government agencies and decided to call a
force majeure on its Production Sharing Agreement.
There is a change of guard at two key ministries in Rwanda.
Claver Gatete was transferred from his position as minister of
Finance to the ministry of Infrastructure. We discuss some of
Gatete’s plans for his new ministry and what that could mean
for local content in the country.
 OIL AND GAS
New tax rules to hit oil industry
Tullow Oil's country manager for Uganda Jimmy Mugerwa (L) chats with former Vivo Energy Uganda MD Paul Hansen
Uganda has introduced new income tax
measures that are bound to impact on
how much debt international companies
can use to finance their projects.
The scrapping of thin capitalization rules,
which determined how much debt a
company was allowed to hold compared
to its equity, could present multinational
firms a challenge on how to finance their
investment projects such as those in the
oil midstream industry. Finding the debt
to invest in Uganda has just got harder.
As part of the new rules, Uganda has
amended section 25 of the Income Tax Act
to read as follows: “the amount of deduct-
ible interest in respect of all debts owed
by a taxpayer who is a member of a group
shall not exceed thirty per cent of the tax
earnings before interest, tax, depreciation
and amortisation.”
It adds: “A taxpayer whose interest
exceeds thirty per cent of the tax earnings
before interest, tax, depreciation and
amortization may carry forward the excess
interest for not more than three years,
and the excess interest shall be treated as
incurred during the next year of income.”
This amendment borrows from the
Organisation for Economic Cooperation
and Development’s Base Erosion Profit
Shifting policy, which seeks to become
a blueprint for a model global taxation
policy. The OECD is in favour of a fixed
ratio that limits interest deductions that
companies make.
The limitation of interest deductions
and capping it at three years could
hamper the financing of long-term
projects, which usually face delays
in completion. Companies will
now have to look at efficient
ways of sourcing and using debt.
There was growing fear within
Uganda Revenue Authority that
some multinational companies
were exploiting thin capitalization
rules to abuse the tax system by limiting
their tax bills. Many companies were said
to be front-loading a lot of debt – much of
it through shareholder loans – into their
Uganda subsidiaries as a way of reducing
their tax burden and extracting more
revenues out of the country.
Uganda has struggled to come up with
a conducive thin capitalization rule, with
the policy being a subject of amendments
over the last five years.
Also, Uganda has abolished the VAT
exemptions that investors enjoyed for
supplies of passenger automobiles and
entertainment for the extractive sector
and donor-funded projects. The catch
here is the definition of entertainment
in regards to Uganda’s tax law. In
Uganda’s tax law, entertainment is
defined as the provision of accom-
modation, food, beverages, and
a couple of other amusement
activities.
The scrapping of this VAT re-
prieve might make it more expen-
sive for the construction of projects
like the East Africa crude oil pipeline,
which is supposed to go through remote
areas where food and accommodation
are in drastic short supply.
TO NEXT PAGE
 OIL AND GAS

New tax
rules to hit
oil industry
The amendment of the Income Tax
Act comes at a time when the project
owners and the financiers of the crude
oil pipeline are in the final stretch of
concluding negotiations over the Final
Investment Decision for the project. The
announcement over the completion of
the FID is expected to come in the third
quarter of this year.
It had been anticipated that the
amendment of this year’s income tax
law would make a pronouncement on
the validity of taxing carries, especially
as Tullow Oil continues to push for gov-
ernment approval of its second farmout
to Total E&P and Cnooc. The $900 mil-
lion farmout, which was announced in
the first quarter of 2017, is yet to receive
Uganda government’s approval partly
because of negotiations on whether this
kind of transaction should be taxed. As
part of the farmout, Tullow Oil agreed

Flour, CB&I enter

to carry $700 million as part of its
contribution to the development stage
of Uganda’s oil industry. The question

final stretch in fight

then remains: should the $700 million
be treated as an income that Tullow Oil

for Tilenga EPC deal

earned or an investment into the oil
industry?
The income tax act was expected to
clarify on this confusion. Instead, the
Income Tax Amendment Bill only went
as far as expounding on what defines
a farmout. The act says that any partial
or full sale of a mining or petroleum
agreement will be considered to be a
farm-out.
It is not clear if these amendments will
have a huge impact on the outcome of
the final investment decision for the oil
pipeline, although it is anticipated com-
panies will have to find new avenues of
limiting their investment costs if they
are to record a handsome return. The
amendments in the income tax bill are
expected to come in force at the start of
the new financial year on July 1, 2018.
Flour, a global company headquartered
in Texas, USA, which is leading a consor-
tium of companies vying for the Engineer-
ing, Procurement and Construction (EPC)
contract for Total E&P’s Tilenga oil proj-
ect, is set to submit its second proposal
for the project’s front end engineering
design in the second week of May as
the country prepares to make key pro-
nouncements in the oil industry.
Chicago Bridge & Iron Company,
the other US company that Flour
is competing with for the Tilenga
EPC contract, also plans to hand
in its second proposal in early
May and offer its bid price.
Flour, which has partnered Ponticelli
from France and China Petroleum Engi-
neering and Construction to bid for the
Tilenga contract, says it has so far com-
pleted three project capital cost estimates
over the last 16 months that it has been
working on the Front End Engineering
Design (FEED).
The FEED will give Total E&P and its
joint venture partners – Cnooc and
Tullow Oil – the technical specifica-
tions, costs and timeline esti-
mates for the development of
the Tilenga project so that all the
parties can make a final invest-
ment decision for the project.
 OIL AND GAS

Flour, CB&I enter final stretch

in fight for Tilenga EPC deal
It is not clear when the joint venture partners will make a deci-
sion on the EPC contract for Tilenga.
There are two crucial parameters that will determine who wins
the EPC contract for the Tilenga – the cost of the project and the
national content strategy.
The Tilenga project comprises of Exploration Area 1 and Explo-
ration Area -2N, formerly operated by Tullow Oil, which cover
much of Nwoya and Buliisa districts.
The development of the Tilenga project is huge. The project
includes a central processing facility (CPF) with capacity to
process 190,000 barrels of oil per day, and more than 412 wells
(including 189 injectors, 190 producers and 33 observers) which
are planned to be drilled on 35 well pads, according to figures
from the Petroleum Authority of Uganda.
The authority further says the Tilenga project plans to have
250-kilometre flow lines, which will transport crude oil within
the oil fields and a 110km feeder pipeline which will transport
the processed crude oil from the CPF in Buliisa to Kabaale,
where the export hub and refinery will be located.
It is estimated that these field activities need about 70MW of
associated gas power to operate efficiently. However, due to
the excess gas in the area, Total E&P is working on developing a
130MW gas power plant.
The development of the FEED for the Tilenga project is going
on concurrently with the one for the Kingfisher oil field, which
is operated by Cnooc. Cnooc chose its subsidiary, COOEC (China
Offshore Oil Engineering Company Limited), as the lead contrac-
tor for the FEED.
At group level, COOEC and Flour have a stronger bond. As early
as 2015, Fluor and COOEC announced the launch of a new joint
venture, COOEC-Fluor Heavy Industries Co., Ltd, which has won
quite some huge contracts in China. It is not clear at this point
whether this relationship at group level favours Flour in the bid
for the Tilenga EPC contract, considering Cnooc will take part in
the decision process on who wins that award.
The Kingfisher project will have a CPF with a capacity to pro-
cess 40,000 barrels of oil per day and 31 wells. There will be 11
water injectors and 20 oil producers, drilled on four well pads.
The project is planned to have 16 kilometres of flow lines and a
50km feeder pipeline from the CPF in Hoima district to the ex-
port hub and refinery in Kabaale. COOEC’s FEED study has given
the Kingfisher oil field a design life of 25 years.
All the gas from the Kingfisher field will be converted into elec-
tricity. The electricity to be produced exceeds the requirement
for the oil field. Some studies show that the gas at the Kingfisher
is enough to produce 35MW of power. It is estimated the field
needs just about 20MW of power, according to Xin Shun, the
design manager for COOEC.
COOEC has undertaken 29 critical studies that identified 808
risks within its FEED study for the Kingfisher oil field. The com-
pany has made 365 suggestions on how to mitigate those risks.
Perhaps the most eye-catching recommendation is the one that
stops any flights around the Kingfisher’s well pads. The company
says small airplanes should not fly around the area, and says it is
much safer if the nearby airfield is closed.
Uganda is expected to make key pronouncements on the Tilen-
ga and Kingfisher EPCs in the third quarter of this year, on top of
the final investment decision for the crude oil pipeline.

Host Agreement for oil pipeline set for May

Negotiations between the Uganda
government, Total E&P, Cnooc and Tullow
Oil over the Host Agreement for the East
African crude oil pipeline are expected to be
concluded in May.
Officials from both sides were locked up in
closed-door meetings in late April at Serena
hotel trying to thresh out the finer details
of an agreement, which will spell out the
commitments needed to have the pipeline
constructed with less risks.
The same negotiations, which started in
February this year, are happening in Tanza-
nia too.
The host agreement stipulates the
obligations of both the governments and
the oil companies in regards to issues such
as access to land, local content, financial
obligations, and the raising of debt for the
project. It is not yet clear what concessions
both parties have agreed to. The Host
Agreement must be in place before the
companies can shore up debt for the crude
oil pipeline. A final investment decision for
the pipeline is expected to be concluded in
the third quarter of this year.
The Uganda negotiation team is being led
by officials from the Uganda National Oil
Company, with support coming from the
Petroleum Authority of Uganda and the
Directorate of Petroleum.

Details of Bujagali power dam
debt refinancing revealed
New details of what price Uganda will
pay in the restructuring of the debt for
the 250MW Bujagali hydro power dam
have emerged. The power dam attracted
a debt facility of $702 million, whose
maturity was scheduled for 2023. With
the new refinancing, the maturity date
has been pushed to 2032.
Discussions between government and
the key lenders to the power project –
the World Bank’s International Finance
Corporation and the Africa Development
Bank – over the last two years have final-
ly come to some concrete conclusion.
The lenders were by April expected
to deliver their terms and conditions
to government before they can fully
commit to the restructuring of the
debt, whose remaining balance is $410
million.
According to information we have re-
ceived, the lenders were expected to ask
for an interest rate of 6.75 per cent per
annum, which is higher than the 2.44
per cent quoted at close of debt more
than a decade ago.
The lenders are also expected to ask for
a new loan tenor of 15 years – a time-
line that reduces the installments that
government has to pay but increases the
total amount to be paid back.
At least $19.1 million will be set aside
as a top-up to the liquidity facility. This
amount will be released to the con-
sumers, through the Uganda Electricity
Transmission Company Limited, after the
loan repayment. This amount might ease
the tariff consumers pay.
Another condition that the lenders
were expected to put on the table was
the creation of a new debt service
reserve account, amounting to $26.7
million. The account will act as a fallback
position for the lenders in case govern-
ment falters on its payment schedules.
Uganda is expected to pay $21.2 mil-
lion in issuance fees, an amount that is
expected to be paid upfront.
As a result of the debt rescheduling
for the Bujagali dam loan, a $13 million
fee is to be slapped on Uganda in Loan
ELECTRICITY
credit to run its operations and make
critical investments.
There were hopes that Bujagali’s cool
19 per cent return on investment would
be reduced to at least 15 per cent. How-
ever, the return on investment has been
left intact.
The Bujagali power dam is at the heart
of Uganda’s energy industry. At 250MW,
it is currently the biggest power dam in
the country, accounting for 40 per cent
of the total energy output. The power
dam’s tariff of 10.7 US cents/kWh – one
of the highest around the region - has a
huge influence on the overall tariff that
the public pays. Capacity payments for
Bujagali account for 38.6 per cent of
the end user tariff, according to official
government data.
With power tariffs still a source of
concern among different sectors of the
private sector, President Yoweri Musev-
eni led the call for a restructuring of the
Bujagali power dam loan. The idea was
simple: increase the loan repayment
period and reduce the installments, all of
which should ultimately bring down the
tariff.
There was a major breakthrough in the
discussions to fully restructure the debt
when government agreed to waive cor-
porate income taxes for Bujagali Energy
Limited for 15 years in mid 2017. Corpo-
rate Income Tax charges account for 14
per cent of the capacity payments.
However, Members of Parliament
knocked back the tax waiver to five years
in order to monitor whether the effects
of the tax waiver will lead to a reduc-
tion of the power tariff. The lenders are
expected to ask for the other 10 years of
the waiver after 2023.
The Electricity Regulatory Authority in
March this year modified Bujagali Energy
Limited’s license to take care of the new
license terms.
However, the impact on the power tariff
as a result of the Bujagali debt resched-
uling could be felt in the third quarter of
Breakage Penalty costs.
this year. Indications show that the tariff
For Bujagali Energy Limited, the com-
will reduce in the initial period – believed
pany that built and operates the power
to be the first five years - but shoot up
plant, the debt rescheduling comes with
after that.
some risks. Due to the rescheduling, BEL
Uganda’s government will have to sup-
will carry the liabilities for the repayment
port the private sector so that demand
of the loans on its balance sheet. With
for the power is increased. The more
this huge amount of liabilities, it is feared
the demand for electricity, the more the
BEL might find it hard to access cheaper
power tariff goes down.
 ELECTRICITY

9.6MW Nkusi power plant Proparco,

FMO lend
ready for commissioning €40 million
to SCOUL
At least 9.6MW of electricity from the Nku-
si hydro power plant should be connected
to the national grid before the end of May. Sugar Corporation of
The power plant, found deep in rural Uganda, the third largest
Kibaale, is expected to undergo full commis- sugar plant in Uganda,
sioning by the second week of May. recently received €40
So far, spinning of unit one is done. Tests million from France’s
on the second unit are supposed to be Proparco to finance a
concluded by the second week of May. Each new 26MW co-genera-
unit has a capacity of 4.8MW. tion power plant.
By the end of April, the power plant had According to the finan-
undergone dry testing, while the process of cial arrangement, Propar-
wet testing was expected to start right away. co granted a €20 million
The tests are meant to give a strong indica- loan and catalyzed funds
tion of the efficiency of the power plant. from the Dutch develop-
The main challenge at the moment is con- ment bank, FMO, which
necting the power to another line from the contributed a similar
Hoima substation. However, the connection amount to the project.
of the power lines is expected to be done The new power plant,
before the end of May. FMO said, “will allow
Construction of Nkusi power plant started the company to produce
in 2016 and commissioning was expected green electricity at a
in late 2017. Delays in closing financing of competitive price to
up to $14 million of debt was part of the meet its own needs and
reason as to why the commission date was to be sold to the national
Asa Katama, one of the top directors in the Nkusi
missed. grid.”
power project The generation of the

Uganda receives €37.1 million

electricity will be done
by burning bagasse, a
residue of sugarcane.

for power transmission line

This is the second time
Proparco has made an
investment in SCOUL
after an initial $23 million
loan it granted the sugar
Uganda will receive €37.1 million (about $44.2 Trust Fund three years ago. firm in 2012. That loan
million) from the Agence Française de Dével- Uganda continues to face a lot of challenges in “allowed the sugar
opement (AFD) after the two parties signed a the transmission of its power. Many electricity company to increase
financing agreement for the upgrading of a key generation projects such as Karuma and Isimba its production capacity
transmission line. hydro power plant are expected to come on line and expand its technical
The financing of the 400 kV transmission line over the next nine months, with worries that assistance to smallholder
upgrade project will cover a distance of 135km the transmission network might not be able to farmers.”
between the towns of Masaka and Mbarara, ac- evacuate all this power. Electricity generation
cording to a statement from the AFD. At the end Government has come up with policies that from the use of bagasse
of the upgrade, it is expected the transmission will compensate large consumers that are able has become popular,
line will help in the evacuation of power from to put up power distribution networks. Also, attracting a number of
different sources and enable exports of electric- the Nile Equatorial Lakes Subsidiary Action factories into the indus-
ity to neighbouring countries such as Rwanda Programme regional interconnection project is try, which has in turn
and the Democratic Republic of Congo. expected to ease on the burden of the transmis- shrunk the margins of
Germany’s KfW is the co-financier of this proj- sion network. the older firms from the
ect, which follows feasibility studies that were sale of sugar.
financed by the European Union Infrastructure
 MINING

Black Mountain
launches rights
issue to raise
$1.7 million for
Busumbu and
Bukusu mines
Black Mountain Resources Limited is to spend much
of the month of May trying to convince its shareholders
to participate in a $3.2 million rights issue, the substan-
tial amount of which is planned to be invested in the
Busumbu phosphate project in eastern Uganda.
The launch of the rights issue comes less than three
months after Black Mountain Resources, an Australian
mining company, agreed to relinquish its license over
the Namekara vermiculite mine for a debt relief.
According to some of the terms of the rights issue,
$1.7 million of the proceeds will be booked as explora-
tion funding for the Busumbu project and other existing
copper and rare earth targets identified in the Bukusu
complex.
For the Busumbu project, Black Mountain Resources
has planned to spend $500,000 for drilling; $200,000
for preliminary mine planning and optimization studies;
$150,000 for broad sampling and metallurgical test
work; and $150,000 for preliminary processing plant
optimisation studies.
In a statement, Black Mountain Resources said:
“Previous exploration on the Busumbu Phosphate
Project identified up to a 3km of strike extent of phos-
phate mineralisation likely between Busumbu and the
Namekara Vermiculite Mine. The results also indicated
a substantial phosphate mineralisation footprint for
future exploration.”
For the Bukusu project, the Australian mining com-
pany intends to spend $150,000 for ground survey
geophysics and sampling and $250,000 for drilling in
some areas.
A recent baseline study estimated that there are
about 50 million tonnes of phosphate at Bukusu.
Black Mountain says it is preparing an exploration
programme for the Bukusu carbonatite complex, which
hosts the Busumbu phosphate mine. The company says
it is engaged in “advanced negotiations with a strategic
partner to progress the Busumbu phosphate project.”
 MINING
M2 Cobalt
survey
reveals
two strong
mineral
sites
Uganda is vying to develop its cobalt minerals to almost the size of DR Congo, which is the biggest producer of the mineral in the world.
Canadian firm M2 Cobalt Corporation has confirmed two dif-
ferent discoveries of mineral anomalies at one of its two licensed
areas, reaffirming its belief of the potential to generate mining
revenues in Uganda.
M2 Cobalt, in early April, said “results from rock and soil sam-
pling and high-resolution ground magnetics have con-
firmed the discovery of a large-scale nickel-cobalt-cop-
per anomaly (characteristic of a presence of minerals)
at Bombo, one of the company’s principal exploration
targets at its Bujagali licenses in South-Central Uganda.”
A week later, the company announced that it had also
discovered “a new cobalt and copper anomaly delineat-
ed by both soil and rock samples (named the ‘Waragi
Target’).
From a company perspective, the results offer M2 Co-
balt a fairly good idea on how to get the licensed areas
to production, and what kind of commitments need to be made.
On a national level, the initial results from the soil samples go a
long way in de-risking the mineral potential of the country, and
offer critical data on which other investors can build on to make
investment decisions.
The company noted that “all samples were sent to ALS Chemex
South Africa (Pty) Ltd., an independent and fully
accredited laboratory in South Africa, for further
analysis. It is expected that after results from the
South African lab come through, M2 Cobalt will mo-
bilize teams to conduct infill sampling, trenching and
drilling on its licensed area.
At its other mineral target in Kilembe, Kasese
district in western Uganda, M2 Cobalt embarked on
a high resolution airborne geophysical survey. The
survey, which was undertaken using a helicopter, was
done by Geotech Ltd. The results of that survey are
yet to be formally announced.
 MINING

Hima
Hon. Amelia Kyambadde (R) hands over a certificate of appreciation to Hima Cement's
Trade Marketing Manager Sophie Mirembe during the Masons' training
Hima Cement will launch its new For much of March and April, the main

Cement
grinding station in Tororo in May in what
should ease cement prices in the country,
which had shot up by about 20 per cent
in April.
cement companies – Hima and Tororo
Cement – were undertaking maintenance
works, creating a shortage of cement
in the country. Kampala Cement, the

to launch
The grinding station is valued at $40 other company, is said to have exploited
million and it is expect- this shortage and sold most of its
ed to increase Hima cement, nearly wiping out its clinker
Cement’s capacity to in order to meet market demand.

Tororo
produce about 1.9 million Also, it is believed that the biggest
tonnes per year from cause of the price jump was down
the current one million to traders hoarding the cement.
tonnes. That was partly why the minister of

grinding
The launch of the Trade, Industry and Cooperatives
Tororo station comes a Amelia Kyambadde, warned that
few months after Hima she would allow cheap imported
Cement got a new chief cement in the market if the price

station
executive officer, Nicolas George, who,
among his other plans, is to get the
company’s Kasese plant operating at near
full capacity.
did not reduce. Imported cement would
not only push prices further down, but it
would hurt the big cement companies as
their margins would narrow.
 KENYA

National Oil Company

in massive turnaround,
signs deals with
Schlumberger, GDC
National Oil Corporation Kenya (NOCK) has Power, the company that operates the Me-
signed a one-year deal with Schlumberger, nengai geothermal project, recently
where the global midstream company will told President Uhuru Kenyatta
come up with a field development plan for the that they are ready to ramp
Lokichar oil basin. up the current production of
According to NOCK, the development plan 35MW five-fold. Such plans
will be the blueprint that will provide Kenya offer NOCK a ready market
“with an independent view to evaluate the to tap into.
development of the oil discoveries being done NOCK has embarked on a
by Tullow Oil.” plan to turn around its for-
Schlumberger is one of the top four mid- tunes. The board, in setting
stream companies in the world, which spe- targets for the turnaround of
cializes in providing technologies for reservoir the company, said there was
characterization, drilling and oil and gas a need to reduce the inven-
production. tory holding from an average
Kenya has discovered just over 700 million 30 days to a minimum set of
barrels of oil in the Lokichar basin. Tullow Oil 14 days. Also, the company
is the main exploration firm in Lokichar. It has has set an ambitious target
two partners, Africa Oil and Total E&P, which to double its market share
recently acquired Maersk Oil and Gas. to 10 per cent in the next
The country had planned to kick off an early two to two-and-half
oil production scheme in June 2017, where years. Part of the plan
crude oil would be transported in heated is to grow its retail
tanks, placed on top of trucks, to the port station footprint from
of Mombasa for export. Those plans were the current 115 sta-
postponed partly because of a lack of a strong tions to 300 stations.
regulatory regime. NOCK will sign up to
Kenya is making progress with the construc- different partnerships
tion of the crude oil pipeline. Recently, there with other players to
were reports that the country had picked achieve this.
Wood Group Plc to design a crude oil pipeline NOCK is also ex-
from the Lokichar basin to the port of Lamu pected to be listed
along the Indian Ocean. It is estimated the on two exchanges
design work for the pipeline would take eight – the Nairobi Se-
months, which is before the start of 2019. curities Exchange
Away from the upstream, NOCK signed an and the London
agreement to supply diesel to Geothermal Stock Exchange
Development Company for drilling and water – to attract
pumping activities for the Lake Baringo – Silali investment
and Menengai geothermal projects. The agree- capital into the Mary Jane Mwangi, the chief executive officer of National Oil
ment comes after top officials of Quantum company. Company Kenya
 KENYA

New Mombasa-Nairobi pipeline

undergoes pre-commissioning tests
The new Mombasa-Nairobi petroleum hour. The old Mombasa-Nairobi line was
pipeline for finished products underwent commissioned in the 1970s.
pre-commissioning testing in the month of In early April, the Kenya Pipeline Company
April ahead of its launch by June. Limited, which is in charge of the super-
The 20-inch wide pipeline, which is some- vision of the construction of the pipeline,
times referred to as Line 5, will replace an held its annual general meeting, where the
old line along the same route and organization reported a 48.8 per cent
boost the flow of petroleum prod- The growth in assets due to increased
ucts in East Africa. new pipeline, investment in property, plant
Also, four additional petro- which is being installation and acquisition of
leum products tanks with constructed by Zakhem new equipment.
a total capacity of 133,000 International, is expect- The company announced
cubic metres were set to ed to meet demand for that its assets stood at
be launched in April 2018, petroleum products for KShs 105.8 billion (about $1
increasing the storage Kenya and the entire billion).
capacity. region until the year While assets grew, profits
The new pipeline, which is 2044. slumped. KPC said “the slight
being constructed by Zakhem decline in profitability is mainly
International, is expected to meet attributed to an increase in direct
demand for petroleum products for Kenya expenses which went up by KShs 1.5 billion
and the entire region until the year 2044. ($15 million) to meet the cost of key one-off
According to Kenya Pipeline Company, the initiatives such as maintaining the aging
flow rates to Nairobi for the new line will be Mombasa–Nairobi Pipeline.”
about 1.9 million litres per hour by 2023 and Still, KPC said it recorded a five per cent
2.6 million litres per hour by 2044. growth in product throughput volumes to
This is a much more improvement com- 6.2 billion litres from 5.9 billion litres in the
pared to the old 14-inch wide line, where 2015/2016 financial year.
the flow rates were about 830,000 litres per
 KENYA
Goldplat drafts global sourcing plan
as it eyes Kilimapesa turnaround
Goldplat Plc, the British company en-
gaged in gold production at the Kilimape-
sa mine, says it has developed a strategic
global sourcing plan, which focuses on
opening up new markets in South and
North America, and West Africa.
The company, while announcing its
results for the first three months of 2018,
said its senior teams had concluded com-
prehensive road shows to North America
and Peru.
The company said it was working on
turning around the fortunes of its gold
mine at Kenya’s Kilimapesa, where
production remains below targets.
Goldplat blames the woes at Kilimapesa
to “lower-than-expected grades from the
underground mine.” The gold mine is still
making losses, the company said.
At least 6,966 ounces of gold and gold
equivalents were produced at Kilimapesa
during the first quarter of the year. The
company did not say how much it was
targeting.
Goldplat said one of the strategies of
turning around Kilimapesa is to cut down
on costs. The company also said the pro-
cess of approving the installation of grid
power at one of its plants is ongoing. The
company is also making strong inroads at
its new gold target, the Teng Teng mine,
with positive results expected in the near
future.
 TANZANIA

Swala, Govt
relations
hit new low
Relations between Swala Oil and Gas and the government of
Tanzania have turned sour and hit new depths. After months of
negotiations over the Production Sharing Agreement (PSA) for the
Kilosa-Kilombero basin, the Australian company is fed up with the
delays from government agencies to issue it with permits needed
to drill an oil well that it says could be worth $10 billion. Left with
no choice, the company declared a force majeure on the PSA.
Swala blames its woes on Tanzania Wildlife Authority and the
ministry of Natural Resources and Tourism for the delays in issuing
it with a permit to proceed with drilling in the Kilosa-Kilombero
basin, which is located in an environmentally sensitive area. The
company says it has incorporated all of government’s concerns in
the Environmental Impact Assessment studies but still it has not
received the permits.
In a statement, the company said it “considers the time taken for
such an MNRT [Ministry of Natural Resources and Tourism] inter-
nal assessment to be unjustifiably long. The assessment had not
been completed, and the TAWA (Tanzania Wildlife Authority) per-
mit not been received, by 20th April 2018 and the Joint Venture
had no alternative but to declare Force Majeure under the PSA.”
Swala has been planning to drill the Kito prospect, which is locat-
ed in the Kilosa-Kilombero basin, for the last four years. The basin
is thought to hold about 185 million barrels of oil.
The company received the PSA for the basin in 2012. The follow-
ing year, it undertook a seismic survey over 370km in the basin. In
2014, it carried out another seismic survey over a longer distance.
However, despite making some progress, Swala started hitting
brick walls when the Tanzania Wildlife Authority and the ministry
of Natural Resources and Tourism started making demands. By
this time, the company says it had invested at least $20 million on
making preparations to drill an oil well in the basin.
One of the worries by the Tanzanian government is the impact
of the drilling in Kilosa-Kilombero on the water from River Rufiji,
especially as construction of a power plant, Rufiji hydropower, is
ongoing. Swala says the water they will use during drilling cannot
even fill up an Olympic-size swimming pool, and they see govern-
ment’s demands as a mere form of frustrating their project.
The declaration of force majeure means the company has
dropped its plans to go ahead with the PSA over the Kilosa-Ki-
lombero basin in its current form.
President John Pombe Magufuli
 TANZANIA

East Africa Metals’ deal on

Handeni gold collapses

Canada’s East Africa Metals Inc is engaged in arbitration with
Tanzanian Goldfields Company Limited over the violation of two
separate agreements. The arbitration is taking place in Vancouver,
Canada.
The announcement of the arbitration is the first official state-
ment about the collapse of the agreement that the company had
with Tanzanian Goldfields.
In March 2016, more than two years ago, East Africa Metals
announced that it had “completed the execution of the Definitive
Agreement with [Tanzanian Goldfields] to develop East Africa’s
Magambazi project in Tanzania.”
One of the conditions under the terms of the deal was that
Goldfields was to pay East Africa Metals $1 million in cash for the
entire interest in the Handeni property, which includes the Mag-
ambazi project, and all properties owned by East Africa Metals in
Tanzania.
In January this year, East Africa Metals announced that it had
completed the updated addendum for the definitive agreement
for the purchase of the Handeni property. In the addendum, East
Africa Metals said Tanzanian Goldfields had paid “$688,972 to set-
tle outstanding payables owed to East Africa Metals and provide
advance payments towards the final purchase of the Assets…”
East Africa Metals was supposed to receive other payments
from Tanzanian Goldfields. It is not clear if these payments came
through.
The announcement that the two parties are in arbitration
appears that some sections of the definitive agreement, and the
amended one, were breached. It could mean that East Africa
Metals might pay less attention to its Tanzania assets in favour of
its Ethiopia interests where the company is a lot more active.
There is no timetable as to when this arbitration will be con-
cluded. Should the parties fail to agree in the arbitration, then a
lawsuit in a court of law will be the next option.

Coal power plants hunting for money

Coal power plants are sourcing for
capital, mainly from their shareholders,
to invest in their projects as demand for
power across the region heightens.
Edenville Energy Plc, the UK company
developing the Rukwa Coal to Power Proj-
ect in southern Tanzania, is “sourcing for
£740,000 [about $1 million] to advance
its current mining operations.”
Kibo Mining Plc, which operates the
Mbeya Coal to Power Project, also an-
nounced that it will collect £1.5 million
(about $2 million) from its shareholders.
The company said a substantial amount
of the money will go towards “strength-
ening [its] financial position ahead of the
commencement of further work at the
Mbeya Coal to Power Project following
the signing of the Power Purchase Agree-
ment, which is expected shortly.
The funds are expected to be shored up
in May.
Edenville said it was operating at up to
4,000 tonnes of coal per month at the
Rukwa plant, which is below the market
demand. The company said it will use the
funds “to increase production rates in or-
der to fulfill current and potential orders.
The balance of the net placing proceeds
will be used for general working capital
purposes.”
Kibo said the process on agreeing with
government officials on the deliverables
for the Mbeya Coal to Power Project are
going on well. Government officials main-
ly from Tanzania Electric Supply Company
will also review the progress of the coal
plant.
 RWANDA

Change of guard at key ministries

Claver Gatete, the new minister of Infrastructure

Claver Gatete, the new minister of Infrastructure, is expect- Local Content Unit will help the country realize the benefits
ed to stick to the old script of ramping up investments in the of the Made in Rwanda policy.
electricity and roads sector. The IMF says Rwanda’s economy is projected to grow by
Gatete, who was the minister of Finance, joins the infra- 7.2 per cent – one of the highest in the region - in 2018 on
structure ministry at a time when local content is the buzz account of the services industry and the boom in the con-
word whenever discussions on procurement come up. struction industry.
At his welcome ceremony, Gatete said he intends to place “Growth will be supported by the rebound in the construc-
a lot of effort in ensuring there is efficient distribution of tion sector as well as growth in the manufacturing sector
electricity as the country strives to make it possible for every especially in the context of Made in Rwanda,” the IMF said
person to access power by 2025. in March this year. The construction boom increases
An economist by profession, Gatete comes to the A n the margins in the cement industry due to the
ministry of infrastructure with a rich curriculum economist by huge demand.
vitae. Before he was appointed the minister of profession, Gatete Supporting local players in the construction
Finance, he was the governor of the National comes to the ministry of in- sector will require strong revenue alloca-
Bank of Rwanda. Earlier, he was the secre- frastructure with a rich curricu- tion to these areas.
tary to the treasury of Rwanda between lum vitae. Before he was appoint- At the ministry of Finance, Gatete has
ed the minister of Finance, he was
2003 and 2005. He holds a master’s degree been replaced by Uzziel Ndagijima-
the governor of the National Bank
in Agricultural Economics from the Univer- of Rwanda. Earlier, he was the sec- na, who, before his appointment was
sity of British Columbia in Canada. retary to the treasury of Rwanda Gatete’s deputy. Ndagijimana is also an
It is Gatete’s plan of attracting investments between 2003 and 2005. economist who once chaired the Eco-
and promoting local content that will be the nomic Advisory Council of the President of
focus of many industry players. Rwanda.
Rwanda has a draft policy called “Made in That the two worked together at the min-
Rwanda” that seeks to limit the amount of imported istry of Finance, it is expected that Gatete and
materials in favour of consumption of local products within Ndagijimana will compare notes and coordinate policies
the country. There have also been discussions to establish to ensure that the construction industry drives Rwanda’s
a Local Content Unit that connects new investors with po- economy to greater heights.
tential local suppliers. Experts say the establishment of the
 RWANDA
CIMERWA resumes cement supplies
after tensions over drastic shortages
CIMERWA is the biggest producer of cement in Rwanda.
CIMERWA, the main pro-
ducer of cement in Rwanda,
says it is clearing the backlog
of orders for cement after the
plant resumed production
in April following a break
for a couple of weeks. The
company announced that
maintenance works on the
plant were completed and
that supply to the market had
resumed.
The closure of the plant led
to a shortage of cement in
the market, with some deal-
ers taking advantage of the
situation to hike prices.
“Plant maintenance is
complete and production
has resumed. We are now
embarking on the steady
ramp-up phase while clearing
order backlogs [that] accrued
over the past four weeks of
our maintenance period. We
envisage that the process
of getting cement stock
supplies back to normality,
through our distribution
channels across the country
could take a period of two to
three weeks,” the company
announced in April.
Earlier in April, while
embarking on maintenance
works, CIMERWA announced
that it had kept its prices
fixed and that there was no
need for traders to hike pric-
es. The company further said
the ministry of Trade would
is operating
clamp down on whichever
trader pushed up the price,
and that such traders even
faced a penalty.
CIMERWA produces
600,000 tonnes of cement
per year, although it is oper-
ating at less than 70 per cent
capacity. The company says it
expects to reach full capacity
in mid-2019.
PPC Ltd, Southern Africa’s
largest cement producer,
owns 51 per cent of CI-
MERWA.
REG eases
electricity
connection for
investors
Rwanda Energy Group
intends to bring down the
number of days an investor
can get new power connec-
tion to 20 days from the
current 34. The plan is to
create a conducive environ-
ment to conduct business.
REG announced it will re-
duce the number of proce-
dures to get a connection.
It will now take one day to
hand in an application, five
days to undertake surveys,
and 14 days to get connect-
ed.
The electricity regulator
said consumers will be in a
better position to demand
for better services.
CIMERWA “In order to ensure ef-
produces fective service delivery,
Rwanda Energy Group has
600,000 reviewed its service charter
tonnes of detailing service standards
and showing customers
cement
what they can expect from
per year, REG, their rights and obli-
gations, when and where
although it they can contact REG in
order to lodge a query or a
complaint,” the body said in
at less than a statement.
REG is expected to lead
70 per cent the drive towards Rwan-
capacity. da achieving 100 per cent
access to electricity by the
year 2025. According to
REG, at least 41 per cent
of the households have ac-
cess to electricity, up from
10 per cent in 2010. About
11 per cent of this figure
accesses electricity through
off-grid solutions such as
solar power.
 PEOPLE TO WATCH
Irene Batebe, Acting Commissioner, Sam Zimbe, new board member of
Midstream at the Petroleum Directorate Stanbic bank

Irene Batebe is the new acting Commissioner, Midstream at At its next annual general meeting,
the Petroleum Directorate. Her position is crucial in light of the Stanbic bank is expected to announce
recent signing of the framework contract for the construction of the appointment of Sam Zimbe, the
an oil refinery in Kabaale. She is also the board chairperson of deputy managing director of Umeme
the Uganda Refinery Holding Company. Limited, on the board of its directors.
Her key roles as commissioner, midstream will be to review The appointment of Zimbe is reasonable.
technical designs, formulate legislation to govern the midstream Stanbic bank is one of the main bankers
petroleum section and promote the refinery project. She is also of Umeme Limited. Also, Stanbic bank
part of a team of Ugandan officials who are taking care of Ugan- was one of two banks that organized
da’s interests in the different negotiations around the crude oil term facilities worth $30 million for
pipeline project. Umeme in 2013.
Batebe has a Bachelor of Science degree in Chemical and Also, Stanbic has undergone a cor-
Process Engineering from the University of Dar es Salaam. She porate reorganization, where it has es-
also holds a master of Science degree in Sustainable Energy En- tablished a holding company, a banking
gineering from the Royal Institute of Technology, Stockholm, subsidiary and other non-banking sub-
Sweden. She also has a Master of Science in refinery design and sidiaries.
operations from the University of Manchester, United Kingdom. The bank is looking at deepening its
footprint in the energy space by provid-
ing products, especially long-term instru-
ments like corporate bonds, and risk-mit-
igating facilities such as derivatives to
Jennifer Hinton, Director, M2 Cobalt generate more non-interest income.

Canadian firm M2 Cobalt has made strong in-

roads into Uganda’s mining industry, less than eight
months after it acquired exploration licenses. Part
of this aggressive foray into the country is down to
Jennifer Hinton, the company’s director, East Africa
operations.
M2 Cobalt has acquired data that shows prospec-
tive results at its Bujagali targets, and is awaiting
results for its Kilembe licensed area. The success
of these projects is expected to further de-risk the
mining potential of Uganda.
Hinton has been in Uganda long enough to know
what it takes to make it in the mining industry. On
top of owning a license to a mine, she has under-
taken a lot of research in Uganda and Rwanda,
where she specializes on the impact of artisanal
mining, gender issues, and community livelihoods.
Hinton has a PhD in mining engineering from the
University of British Columbia.

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