Koko carbon-credit offers unlikely to deliver meaningful creditor returns

Offers for the carbon credits owned by Koko Networks (UK) Limited are not expected to generate a meaningful return for the company’s estate, according to its administrators, PwC.

The development leaves FirstRand Bank and other unsecured creditors facing little or no recovery as the UK arm of Koko Networks continues through the insolvency process.

Credit marketing continues

PwC began marketing Koko’s assets on July 17. The firm held discussions with three potential purchasers and five brokers before appointing a broker to market the carbon credits.

Offers were subsequently received, but the administrators said they did not consider them capable of producing a meaningful return to the estate. PwC said it would continue marketing the credits.

Koko Networks (UK) Limited’s carbon credits are its main asset. The administrators have not disclosed the number, type or book value of the credits.

Creditors face limited recovery

FirstRand Bank is owed $60 million. In a progress report, PwC said: “We do not anticipate that the bank (FirstRand) will be repaid in full from the company’s assets.”

Other unsecured creditors, including His Majesty’s Revenue and Customs, are also expected to receive nothing. The report identifies about £126 million owed to other unsecured creditors.

The administrators said FirstRand’s collateral does not include the company’s main assets. Koko Rwanda also owes Koko Networks (UK) Limited about £1.1 million, but that receivable is not expected to be repaid because Koko Rwanda is insolvent.

The UK company has under £280,000 in cash, compared with projected administration costs of about £880,000 before administrators’ fees. It also received about $659,000 from administrators handling the Kenyan business during the period covered by the report.

Possible legal claims under review

The administrators are assessing possible legal claims involving counterparts in Kenya and the group’s Mauritius company. They are seeking outside funding to pursue the claims, although they warned that “significant costs will arise” if the action proceeds.

The potential targets of the claims have not been identified, and it remains uncertain whether the claims will be pursued.

Koko Networks Limited entered administration on February 1, while Koko Networks (UK) Limited entered administration on February 19. More than 700 employees were laid off by the Kenyan company in January.

Founded in 2014, Koko Networks focused on replacing charcoal and other polluting fuels with subsidised bioethanol cooking fuel. The company served about 1.3 million Kenyan households and relied on carbon revenue to help keep fuel affordable.

The Kenyan government’s refusal to issue a Letter of Authorisation needed for sales into international compliance markets cut off a revenue stream that supported the subsidised fuel model.

PwC expects to issue its next report in about six months, or at the end of the administration if that happens sooner. The final recovery for creditors and the administrators’ fees have not yet been determined.