Page 5 - AfrOil Week 27 2022

AfrOil COMMENTARY AfrOil

These should begin, the company has said, by local media outlet The Whistler quoted an
the end of this year, with the plant operating at NNPC official as saying that payment of the
an initial capacity of 540,000 bpd. balance is subject to the facility’s start-up of the
Ahead of this, NNPC has paid the first plant and is linked to crude supplies to Dangote.
instalment to acquire its 20% stake in the facility “We have made the payments. We paid $1bn,
under an agreement signed in August. This val- the balance is subject to plant start-up and tied
ued the project at around $14bn, below the $15- to crude supply. It was a very ingenious deal. It
16bn valuation previously touted. Term sheets locks market for our crude and puts no stress on
were signed by NNPC and Dangote Group, with payment, as we will pay only $2 on every barrel
talks understood to be ongoing regarding the supplied,” he added. For NNPC, the
financing of the acquisition. Meanwhile, having received NNPC’s invest-
Much of the funding was sourced from a loan ment – and a prior $650mn facility from Afrex- acquisition
signed in November with the Cairo-based Afri- imbank in 2018 – the refinery’s parent company
can Export-Import Bank (Afreximbank), which Dangote Industries Ltd last week offered bonds of a stake in
is also supporting the renovation and upgrade worth $72mn. The seven-year unsecured bond the Dangote
of PHRC. is offered with a pricing range of 12.25-12.75%,
For NNPC, the deal is an important part of its with Dangote rated AA+ by GCR and AA (ncr) Refinery is an
new strategy for the downstream sector, follow- by Fitch. The proceeds will be used in the finali-
ing decades of poor performance. However, the sation of the refinery project. important part of
company admits that Aliko Dangote, the presi- The project will be the culmination not just
dent and CEO of Dangote Group, was not keen of years of development, but for Nigeria, well its downstream
on NNPC’s involvement. over a decade of effort to encourage investors to strategy
Speaking to This Day in mid-July, Kyari said develop refining capacity.
of the investment: “[CEO Aliko Dangote] didn’t Given its size, current market fundamentals
ask for it. It’s our decision to take equity. We and the frailty of Nigeria’s existing downstream
made this decision three years ago much earlier. infrastructure, it is unsurprising that NNPC
It’s not what he wants, but they are also aware wants in – particularly as catering to domestic
that they operate in a resource-dependent coun- fuel demand and allowing for exports of prod-
try. We made a request and it’s the policy of gov- ucts is likely to cover up some of the cracks else-
ernment that we take interest in this refinery.” where and take some pressure off progress at
Now that the first instalment has been paid, state units. ™

Dangote Refinery construction site (Photo: Sulzer Chemtech)

Week 27 06•July•2022 www. NEWSBASE .com P5