Page 11 - DMEA Week 32 2021

DMEA REFINING DMEA
Dangote rubbishes refinery debt claims
AFRICA
NIGERIA’S Dangote Group has moved to dis- miss reports about a potential financial crisis at the company’s nearly complete refinery amid allegations that the developer is struggling to cope with servicing a $7bn credit.
The explosive report, published by local media network MMS Plus, quoted a contractor at the project who alleged that “poor planning, underpayment of contractors, and a lack of proper project management” had led to delays and a lack of clear decision-making resulting in “absolute chaos”. It said that the project’s debt would rise to $8.4bn by 2025.
Two days after publishing the story which suggested that the financial difficulties could see the refinery become the subject of a takeover by the Assets Management Corporation of Nigeria (AMCON), MMS Plus reported that four police officers had entered the news agency’s headquar- ters in Lagos, requesting access to the office of the editor-in-chief.
A day later though, both AMCON and Dan- gote rubbished the claims, pointing out that few projects of this scale can be completed without tapping debt markets. AMCON’s head of cor- porate communications, Jude Nwauzor said the report was inaccurate, adding that neither Dan- gote Refinery nor the Dangote Group is on its list of debtors.
The All Africa media outlet quoted Dangote Group sources as saying that the report was “false and malicious”, noting that the company has no issues in servicing its debt.
The story followed last week’s approval by the Nigerian Cabinet for the country’s national oil company to proceed with the acquisition of a stake in the 650,000-barrel-per-day (bpd) refin- ery which is expected to come on-stream early next year.
On August 4, Minister of State for Petroleum Resources Timipre Sylva said that Nigerian National Petroleum Corp. (NNPC) had received
the green light to acquire a 20% in the Dangote Refinery project for a total of $2.76bn, valuing the total project at around $14bn, below the $15- 16bn valuation previously touted.
Term sheets were signed by NNPC and Dan- gote Group, with talks understood to be ongoing regarding the financing of the acquisition.
For NNPC, the deal is an important part of its new strategy for the downstream sector, fol- lowing decades of poor performance. However, the company admits that Dangote Group’s Pres- ident and CEO Aliko Dangote was not keen on NNPC’s involvement.
Speaking to This Day in mid-July, NNPC Managing Director Mele Kyari said of the invest- ment: “He didn’t ask for it. It’s our decision to take equity. We made this decision three years ago much earlier. It’s not what he wants, but they are also aware that they operate in a resource-de- pendent country. We made a request and it’s the policy of government that we take interest in this refinery.”
The stance of both parties is hardly surpris- ing when we consider that by its own admission, NNPC failed to carry out satisfactory turna- round maintenance (TAM) on its four state- owned refineries at Port Harcourt (two), Kaduna and Warri. However, the state firm has embarked on a multi-billion dollar project to rehabilitate these facilities under a strategy that will see it take a backseat role in the country’s refining sec- tor, outsourcing the maintenance and day-to- day running of operations.
Dangote has said previously that NNPC was one of four companies to make approaches to acquire equity in the refinery in order to secure crude supply deals.
Abuja needed a $1bn loan arranged by Cai- ro-based Afreximbank to kick off its refinery overhaul project and there has been speculation that the lender may be involved in supporting the acquisition of the stake in the Dangote unit.™
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