Governance & Ethics
KPC–Zakhem Deal: Debt, Disputes, Billions
Subcontractors claim hundreds of millions in unpaid dues linked to the project. Their legal battles reveal the downstream impact of large-scale infrastructure disputes.
Inside the KPC–Zakhem pipeline deal, Ecobank financing, court battles, and the billions at stake in Kenya’s biggest infrastructure dispute.
A Flagship Project That Became a Legal Battlefield
In 2014, Kenya Pipeline Company (KPC) awarded a high-value engineering contract to Zakhem International Construction Limited for the replacement of the Mombasa–Nairobi fuel pipeline, commonly referred to as Line 5. The contract, valued at approximately $484 million (KES 60+ billion), was positioned as a critical infrastructure upgrade aligned to Kenya’s long-term development ambitions.
More than a decade later, that same project sits at the center of multi-billion shilling disputes, cross-border financing battles, and complex litigation involving lenders, contractors, and the State corporation itself.
The Ecobank Financing Structure: Standard Practice or Strategic Control?
At the core of the dispute is financing provided by Ecobank Nigeria PLC, later involving Ecobank Kenya Limited.
In 2014, Zakhem secured a $300 million credit facility, backed by an all-assets debenture—a legal instrument that allows a lender to take security over a borrower’s present and future assets, including receivables.
Crucially, Zakhem issued Letters of Domiciliation, instructing KPC to route a significant portion of contract payments through Ecobank-controlled accounts. According to court filings, up to 70% of proceeds were directed to Nigeria-linked accounts, with the remainder flowing through Kenyan channels.
A Nairobi-based infrastructure lawyer familiar with the matter notes:
“Domiciliation is not unusual in project finance. The question is not whether it exists, but whether it was transparently disclosed and consistently adhered to.”
When Payments, Guarantees and Defaults Collide
Disputes escalated when Ecobank alleged that Zakhem defaulted on its obligations under the facility. In 2018, Ecobank entities filed HCCC No. 292 of 2018, naming Zakhem-linked companies and KPC as defendants.
The bank argued that:
- It had issued performance and financial guarantees on behalf of Zakhem
- Funds advanced under the facility had not been fully repaid
- Payment flows were disrupted, allegedly contrary to domiciliation instructions
Court records indicate claims exceeding $50 million (KES 6+ billion), alongside additional interest and enforcement actions.
Legal proceedings expanded into multiple suits, appeals, and garnishee applications, reflecting the complexity of cross-border enforcement where Kenyan public funds intersect with offshore financing structures.
Subcontractors Caught in the Middle
Beyond the headline figures, the dispute has exposed a deeper fault line: local contractors left unpaid.
Companies such as:
- Azicon Kenya Limited (claims exceeding KES 400 million)
- Oil Fields Engineering and Supplies Limited
- Independent inspection firms with arbitration awards
have pursued recovery through courts and injunctions. Some have alleged asset transfers and difficulties executing court decrees.
An industry executive involved in subcontracting disputes observed:
“In large EPC projects, the main contractor’s financing structure can determine who gets paid first—and who gets stuck.”
The Legal Maze: A Web of Cases and Claims
The KPC–Zakhem dispute is now spread across a dense network of legal proceedings, including:
- HCCC No. 292 of 2018 (Ecobank vs Zakhem & KPC)
- Subsequent commercial and appellate cases
- Garnishee proceedings targeting KPC payment flows
The scale of litigation reflects not just contractual disagreements, but competing claims over the same revenue streams—a hallmark of stressed infrastructure financing.
Legal costs have also surged into the hundreds of millions of shillings, underlining the high stakes involved.
Governance Questions Around KPC Leadership
The timeline overlaps significantly with the tenure of Joe Sang, who first assumed office in 2015.
During this period:
- The pipeline project was actively executed
- Payment structures tied to domiciliation were operational
- Disputes with Zakhem and financiers intensified
Sang later exited office in 2018 amid separate legal challenges, before returning in 2023 and overseeing a reported “full and final” settlement with Zakhem.
However, fresh claims emerging in 2026 have raised questions about the durability and scope of that settlement.
A former public sector official familiar with infrastructure contracting remarked:
“A ‘full and final’ settlement that reopens within two years suggests either unresolved liabilities or ambiguities in contract closure.”
Context: A Sector With a History of Controversy
The unfolding dispute sits within a broader pattern of governance challenges at KPC, including the Triton Oil Scandal, which exposed systemic vulnerabilities in oil stock management and internal controls.
While unrelated in structure, such historical episodes continue to shape scrutiny around large-scale energy infrastructure and procurement processes in Kenya.
What the Evidence Shows—and What It Doesn’t
A review of available court documents and financial structures suggests:
Supported by evidence:
- Existence of the KPC–Zakhem contract
- Ecobank financing and debenture arrangements
- Domiciliation instructions directing payment flows
- Active litigation involving all parties
Not conclusively proven:
- A coordinated fraud scheme across all actors
- Illicit diversion beyond contractual frameworks
- Direct culpability of specific individuals in wrongdoing
This distinction is critical. Much of the narrative circulating publicly blends documented facts with interpretive conclusions that have not yet been tested or affirmed in court.
The Real Risk: Financial Exposure and Institutional Weakness
What remains clear is the financial exposure tied to the project. Aggregated claims, settlements, tax liabilities, and legal costs have pushed the total economic footprint of the dispute toward tens of billions of shillings.
More importantly, the case highlights structural vulnerabilities:
- Complex cross-border financing tied to public projects
- Weak coordination between contracting entities and lenders
- Extended litigation cycles that lock up public funds
As one Nairobi-based financial analyst put it:
“This is less about a single scandal and more about how infrastructure finance, when poorly governed, creates long-tail risks for public institutions.”
The KPC–Zakhem–Ecobank saga is best understood as a high-stakes commercial dispute, not yet a proven grand corruption scheme.
It combines:
- legitimate financing tools
- aggressive legal enforcement
- unresolved contractual tensions
The ultimate outcome will depend on court determinations, forensic audits, and regulatory scrutiny—not narrative framing.
For now, it stands as one of Kenya’s most complex infrastructure disputes, with implications for how future public-private projects are structured, financed, and governed.