Oando concludes N70.5bn Downstream recapitalization

Oando PLC, Nigeria’s leading indigenous energy group and the leading integrated energy solutions group in sub-Saharan Africa, has completed the N70.5 billion recapitalization of its Downstream business with HV Investments II B.V., a joint venture owned by a fund advised by Helios Investment Partners, a premier Africa-focused private investment firm, and Vitol Group, the world’s largest independent trader of energy commodities and the ninth largest corporation in the world by revenue.

The deal was first announced on June 30, 2015, and will see an immediate injection of an estimated N70.5 billion into Oando’s downstream operations and the larger Oando group.

Commenting on the successful transaction, Oando PLC Group Chief Executive, Adewale Tinubu, said: “Despite global economic headwinds, we have taken the proactive approach to establish a strategic partnership which will leverage Oando’s sector dominance, considerable local knowledge and expertise, together with HVI’s vast international, financial, and technical capabilities. This partnership will reinvigorate Nigeria’s downstream sector and create one of Africa’s largest downstream operations. We take great pride in our origins as a predominantly downstream company, and we are extremely confident in the success and potential returns this alliance will deliver.”

Under the new business structure, all Oando retail stations will retain the Oando brand. However, Oando Downstream will be renamed OVH Energy (“OVH”) to reflect its new ownership structure and the commitment of its new shareholders. OVH Energy will hold interests in Oando Marketing Limited, Oando Supply & Trading Limited, Apapa SPM Limited, and Oando Trippmart Limited. Oando PLC will retain a 49 percent shareholding in the newly formed corporate vehicle, with the HVI consortium also owning 49 percent. A residual 2 percent will be owned by a local entity.

Oando Downstream is comprised of Oando Marketing PLC, a petroleum product retailing and distribution company with over 350 retail outlets and strategically located terminals in Nigeria, Ghana and Togo; Oando Supply & Trading Limited, a leading indigenous physical trader of petroleum products in the sub-Saharan region, supplying and trading crude oil and refined petroleum products; Oando Trading Limited, an entity involved in the trading of crude oil and refined petroleum products in international markets; Apapa SPM Limited, a marina jetty and subsea pipeline system capable of berthing large vessels that will increase the delivery capacity and offloading efficiency of petroleum products into major petroleum marketers’ storage facilities at Apapa, Lagos; and Ebony Oil & Gas Limited, a Ghanaian supply and trading entity with a provisional bulk distribution company license supplying white products.

OVH will be led by a local management team, tasked with creating new cost efficiencies, building the business safely and efficiently, while leveraging Oando’s existing robust employee base. Oando PLC Group Chief Executive, Mr. Tinubu, will retain his position as Chairman of the Board, while Yomi Awobokun will continue as Chief Executive Officer, cementing the new investors’ belief in the competent management team already in place.

Amid a global downturn and persistent low crude oil prices, the deal is a defining moment for Oando as it optimize its balance sheet, existing assets, operations. By proactively implementing a strategic direction centered on growth and business continuity, the company will address its immediate objective of aggressive debt reduction while remaining a viable player in the sector.

The company recently restructured a N94 billion Medium Term Loan (MTL) facility for an additional five years while reducing its interest rate burden. Other strategic deleveraging initiatives undertaken by the company to enhance its operations and financial positioning include the N2.8 billion farm out of its EEZ 5 and 12 blocks, and the N3.7 billion sale of its Akute Independent Power Plant.

Over the last few years, Vitol has aggressively expanded its business beyond its traditional trading base, making two major investments in the downstream retailing sector with Royal Dutch Shell in Australia and Africa in 2011 and 2014 respectively. Likewise, Helios has made investments in the African oil and gas sector since 2011, and partnered with Vitol to purchase an estimated $1 billion 40% stake in the African downstream fuels business of Royal Dutch Shell.

The consortium’s foray into Nigeria, via Oando’s operations, is the largest capital inflow into the Nigerian downstream sector in 2016. This highlights Oando’s relevance in the downstream sector, its operational strength, and renewed confidence in the Nigeria’s long term economic viability.

The new downstream partnership with HVI is testament to Oando PLC’s legacy of continuous growth through audacious acquisitions and successful partnerships, most notably its landmark $1.5 billion acquisition of ConocoPhillips Nigeria in 2014, which positioned it as Nigeria’s largest indigenous crude oil producer. The transaction remains the first and only acquisition of an IOC operating in Nigeria by an indigenous firm.