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Stanbic Bank to Raise Capital for Crude Oil Pipeline

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The two financial institutions are expected to help government of Uganda to raise over 12.6 trillion Shillings 3.55 Billion required for financing the 1,445km pipeline by the second half of next year. The pipeline will connect Hoima oilfields to the port of Tanga in Tanzania.
16 Aug 2017 15:30
Energy Minister, Engineer Irene Muloni(L) exchanging signed agreements wit Tanzania Constitutional Affairs Miniter , Professor Palamagambi Kabudi

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Government has appointed Japan's Sumitomo Mitsui Financial Group (SMFG) and Stanbic Bank Uganda to help it raise funds for the construction of the crude pipeline.

The two financial institutions are expected to help government of Uganda to raise over 12.6 trillion Shillings ($3.55 Billion)) required for financing the 1,445km pipeline by the second half of next year. The pipeline will connect Hoima oilfields to the port of Tanga in Tanzania.

President Yoweri Museveni and his Counterpart John Magufuli commissioned the construction of the pipeline earlier this month. However, A report carried earlier by Irish news indicates that the project will be financed through debt financing from the international markets due to shortage of funding in Uganda and Tanzania.

Stanbic Bank's Chief Executive Officer, Patrick Mweheire told Uganda Radio Network in an interview that Stanbic bank is positive about the success of the joint financial advisory role on the pipeline funding.  He adds that the companies are considering several options for raising the required funding.

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Stanbic Bank has of recent been strategically preparing itself in the oil and gas sector in Uganda. Mweheire says the Standard Bank Group has had vast experience with oil and gas developments in other African countries and hopes to transfer that to Uganda.

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Stanbic Bank and Japan's Sumitomo Mitsui Financial Group are expected to advise government on the selection of a suitable investor for the project.

There are discussions to form a Special Purpose Vehicle or Pipe Co to construct, own and operate the East African Crude Oil Pipeline. Pipe Co will then negotiate Shareholder's Agreement, Project Financing Agreements and Transportation Agreement between shippers of oil from Tanga Port to the international market.

It is expected that Pipe Co shareholders will fund East African Crude Oil Pipeline (EACOP) through a mix of equity and project financing.