| Reference | KPC/PU/006-OT/16 |
| Date | 7/14/2016 |
| Location | Africa |
| Scope | The company invites bids for the provision of transaction advisory services on acquisition of Kenya Petroleum Refineries Ltd by Kenya Pipeline Company Ltd. The Transaction Advisor will be expected to carry out a detailed due diligence on the following five (5) components of the assignment; Financial/Accounting and Tax; Technical; Environmental; Legal; and Human Resources. * 1 st Component: Technical Due Diligence (TDD):- The technical due diligence exercise will examine and assess the current integrity status of all facilities and determine the necessary refurbishment and associated costs for the wide range of refinery hardware, refining processes, buildings and fixtures, supporting infrastructure for access to and from the properties, energy supply sources, utilities complete with supporting historical data. This information will enable the client to ascertain and confirm the levels of risk pertinent to asset usability, compliance, safety and plant value among others. The assessment will include but not be limited to: i. Assessing and opining on past current and future operation in accordance to stated recognised international standards and best practices. ii. Assess the technical condition of the assets and their expected performance in terms of actual throughput, capacity for designated crude oils, product pattern, on stream availability and the residual service life based on original design life. iii. Review of berthing capabilities at Kipevu Oil Terminal location and arrangements and any existing restrictions. iv. Pipeline integrity and the existing degradation management systems. v. Review crude and product handling and storage facilities and their adequacy for current and future operations. vi. Tank farm condition, management and maintenance. vii. Tank integrity and the existing degradation management systems, tank calibrations, auto gauge reliability and sludge volume control and management. viii. Technical design and operating standards, and upgrade mandates of storage tanks. ix. The status and operability of the entire refining plant (fractionating columns, pumps, steam generators, gauging, heating, etc.) x. Product segregation systems. xi. Stock evacuation facilities. xii. Refinery on-site laboratory - scope, equipment maintenance and performance records, compliance and accreditations. xiii. Waste water treatment systems. xiv. Fire detection and prevention safety systems. xv. Compliance with local and industry health & safety regulations and practices. xvi. Oil processing records. xvii. Review of refinery documentation and contractual provisions. xviii. Review operations & maintenance records. xix. Review external access road infrastructure and opine on the current state and possible future use. xx. Review rail network and opine on the current conditions and its suitability. xxi. Review the power supply and back up to the refinery and opine on its ability to meet the required demand. xxii. Review all building and fixtures at Changamwe and Kipevu locations and opine on the current conditions and its suitability. xxiii. Review of all ongoing infrastructure projects including their current states and condition and opine on ‘best for client’ recommendation. * 2 nd Component: Environmental Due Diligence (EDD):- Environmental due diligence will assess the impact on the environment and to check mandatory environmental standards and voluntary requirements to the minimum of Environmental Management and Co-Ordination Act (EMCA), 1999. It will assist the client to understand the potential future environmental risks and implications associated with the assets being considered. The environmental due diligence assessments include: i. Environmental site assessment ii. Liability for historic contamination iii. Establishing a baseline to distinguish between pre-existing and post-transactional conditions. iv. Review of documentation i.e. permits and governmental approvals, discharge monitoring reports, environmental assessments and compliance audits etc. v. Review existence and functioning status of environmental management systems. vi. Review litigation files relating to pending or recent litigation, including compliance proceedings, and toxic tort/property damage claims. vii. Review of all existing potential environmental concerns. viii. Evaluation of nearby oil and gas operations for their potential to affect the asset. ix. Inventory of recognized environmental, health and safety issues. x. Exterior and interior inspection of properties. xi. Interviews with owners, occupants and government officials xii. Physical sampling and laboratory analysis. xiii. Exploratory soil and groundwater investigation. xiv. An overview of hidden environmental liabilities. It is critical that the existing partners’ environmental liabilities and commitments are understood. xv. A basis for evaluating the cost impact of the environmental liabilities. xvi. An overview of expected future environmental investments. xvii. Information on the demands of the authorities, both today and in the future. xviii. An overview of contracts related to the environmental liabilities, and the possible responsibility lines for any clean up. xix. Potential permitting and compliance issues. xx. Waste management (classification, storage, treatment, disposal). * 3 rd Component: Financial/Accounting Due Diligence:- To prepare and put in place adequate mitigation measures for any financial risks that may be associated to the planned acquisition, the Transaction Advisor will carry out a Financial Due diligence which will cover the following: 1. Pre take over assessment of the KPRL to identify key risks and potential deal breakers and any financial liabilities/commitments that would impact KPC during and after the takeover. 2. Investigative analysis of KPRL to assess key issues facing the current business and likely to face future business and also assess the drivers of value. 3. Recommend strategy for restructuring the balance sheet, including the liabilities thereon. 4. Stakeholder management strategy for effective public relations and communication on the transaction. 5. Financial due diligence to identify inherent risks associated with information as they appear in the Books of Accounts and to avoid any un-pleasant surprises, financial due diligence shall be carried and, inter alia will have the following but not limited to major objectives: i. To ascertain whether or not the financial statements present a true and fair view ii. To ascertain systems and controls established are adequately in place and are actually followed iii. To ascertain uniformity of accounting policies iv. To ascertain availability of record and quality of record keeping v. To examine existence of fixed assets and ownership of those assets vi. To ascertain if there exists any undisclosed liabilities vii. To ascertain possible exposure to future liabilities viii. To examine contingent liabilities, their nature and quantum of commitments made by the entity that might have future implication ix. Recommend appropriate strategies for handling of the liabilities. x. To analyse cash flow, sustainability of earnings as well as forecasted performance xi. To ascertain realizable value of business xii. Any Informal arrangements likely to impact KPC post acquisition xiii. Any related party transactions In essence the scope of the financial due diligence will include a detailed review and analysis of the Assets, Liabilities, Off Balance sheet, Liquidity, Cash flow, Income & expenses, Intangible assets and Accounting policies and compliances. The tax due diligence assessments includes: i. Opine on any entitlement to tax preferences arising from the acquisition and or planned investment to upgrade the KPRL facilities ii. Any past non-compliance with tax and or customs regulations iii. Any unfulfilled tax responsibilities * 4 th Component: Legal Due Diligence (LDD):- Legal due diligence assesses the impact of proposed acquisition on KPC and identifies potential tax liabilities. This is important because the liabilities, together with any interest and penalties thereon, may be significant enough to negatively impact / destroy the value that the transaction is supposed to create. The legal due diligence will clarify and elaborate on what KPC is taking over. The assessment will include: i. Legal opinion that transaction is binding on its terms. ii. Legal opinion on security and financial management structure. iii. Legal opinion on current regulatory mechanism iv. Distinguish between any pre-existing and post-transactional legal responsibilities/conditions * 5 th Component: Human Resources Due Diligence (HRDD):- An organisation’s people are key to achieving competitive advantage in a transaction. It is thus essential that transactional issues associated with people are identified early and are properly addressed. To do this, KPC requires that all the people issues are carefully assessed as part of the due diligence process. Only by making sound cultural, financial and risk assessments and addressing the harmonisation and integration issues associated with them, can the full value of this acquisition be achieved. The HR due diligence review aims at identifying and quantifying the HR impact on the acquisition thus enabling the development of a harmonisation and integration plan, addressing all identified issues. Therefore the HR due diligence will examine the corporate culture and HR strategy of KPRL for compatibility with KPC’s and identification of any related financial risks. The HR due diligence assessments include: i. The KPRL HR strategy, policy design and processes ii. The current total KPRL establishment: by age, gender, functional area, highest academic and professional qualification iii. KPRLs current approved organisation structure i.e. executive and management and other level structures. iv. Existing employee contracts, compensation, equity plans, retirement and benefit plans v. KPRLs employment and labour rule compliance vi. Cultural compatibility / change readiness assessment vii. Communications audit viii. Development of transition plan – key tasks/activities |
| Offer Validity | 120 days |
