NNPC  Boss Clears Air On Equity Purchase in Dangote Refinery

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CBN

…value of equity about N19 billion

..says FID will be signed on two more refineries

Olusola  Bello

The Nigerian National Petroleum Corporation (NNPC) has cleared the air around the orchestrated controversy that greeted it intent to acquire equity stakes in Dangote Refinery. It also said the worth of the equity would be in the region of about N19 billion, even though discussions are still ongoing to ascertain its really worth.

Mele Kyari, group managing director of the corporation threw more lights on the deal while talking at Channels Television programme,  Sunrise Daily, this morning.

He also gave an insight  into what the corporation is doing regarding the rehabilitation of the  nation’s refineries, some of which  he said their EPC contracts would be consummated by the end of July.

He said: “Our engagement is that we have signed term sheet with the owner of the refinery. We are taking 20 percent equity in the Dangote Refinery. There is a valuation process, this industry is very regulated. It is an international business. No bank would lend you money to buy any equity business of this scale, if you have not followed the basic valuation process. The reality on ground today, is that the valuation is about N19billion, we have not closed on this. There is a governance issue and this that must be concluded, this includes seeking the authority of the federal executive council to close on it.”

He said the conversation started in December 2020 with the Dangote Refinery and NNPC have taken all the international processes for evaluating the refinery. “The worth and value of the refinery has taken place and our banks are comfortable that this is the valuation of the refinery.”

As regards the rehabilitation of the government own refineries, he said what NNPC is dealing with is not turnaround maintenance but rehabilitation.”The Kaduna and Warri Refineries are on  for rehabilitation”

The NNPC boss who owns up that the corporation has not done well in managing these refineries in the last 25 years, said: “Our processes do not help matter even though we don’t want to blame anybody for the past misdeeds”

He said the equipment, procurement and construction (EPC) contract of Port Harcourt Refinery has been awarded.   Substantial progress he said has been made as regards the work there.

As regards the two other refineries, Warri and Kaduna, their award of the EPC contracts, he said would take place within next two to three weeks.  Maximum by the end of July or so. These two process would all run concurrently.At the end of the day he said we would all have the three refineries working.

The NNPC boss insisted that government money would be used to all these rehabilitation exercise, as they are banking on the cash flow of these refineries.

  “This is what is different, what you do at the back of a cash flow means you have a system and process that would enable you deliver commercially. This is why the corporation has changed the whole concept. Part of the requirement of the lenders is that we should not operate these refineries, there must be an operational and maintenance   (O/M) contractors.

Meaning practically these refineries would be run by the lenders and the cash flow would be able to support the payment of the loans used to carry out the job.

“Ultimately, as the initiatives for other refineries come up we are also going to rehabilitate our own, we also have other initiatives which was what the governor of Edo was referring to,” he said

“First we have initiative around condensate refineries. What this means is that, condensates are  large portion of crude oil, it  is much cheaper to convert to petroleum product, they are quicker to construct and it takes out the burden of OPEC quota  you have”

He said that there are about five initiatives that are ongoing, and that final investment decisions(FID) are going to be taking  on two of them within the next two to three months.  The combined effect of these, he said, is about 200,000per day condensate refining capacity.

\Mele Kyari said when all these initiatives are added to the existing refineries, new refineries initiatives that NNPC is involved, then the Dangote Refinery, ultimately Nigeria is going to have  a massive production that it would not be able to consume.

“This would put the country in a position of advantage, first, it would the country the energy security she desired and need and also allow the country to benefit much more from the resources that are in the country. This what is happening, we know it is also a miracle in this country, but we would deliver.

 He said equity acquisition has not been signed with Dangote  Refinery

Our engagement is that we have signed term sheet with the owner of the refinery. We are taking 20 percent equity on the Dangote Refinery. There is valuation process, this industry is very regulated, it is very international business, no bank would lend to you to buy any equity business of this scale If you have not followed the basic valuation process. The reality on ground today is that the valuation is about N19billion, we have not closed on these. There is a governance issue around this that must be concluded, this includes seeking the authority of the federal executive  council to close on these. The conversation started in December 2020. We have taken all the international process for evaluating the refinery. The worth and value of the refinery has taken place and  Our banks are comfortable that this is the valuation of the refinery

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