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Dangote, Otedola Dump Refineries

By Yakubu Lawal and Mathias Okwe

Public outburst against the controversial sale of the Kaduna and Port Harcourt refineries by the administration of President Olusegun Obasanjo may have yielded results.
The new owners of the two plants, Bluestar Oil Services Consortium, owned by businessmen, Alhaji Aliko Dangote and Mr. Femi Otedola, has reportedly bowed out of the deal.

Dangote Group of Companies and Zenon Petroleum, owned by Otedola formed the consortium to manage the plants. They staked about N92.3 billion ($721 million) to get the nod of the Bureau of Public Enterprises (BPE) to run the refineries.

Soon after the deal was sealed, eminent Nigerians and organised Labour faulted the exercise, alleging that it was not transparent.
In fact, the sale of Kaduna Refinery was greeted with a wild protest in the state while employees of the two plants resorted to prayers for the arrangement to fail.

The Nigeria Labour Congress (NLC) and the Trade Union Congress (TUC) added voice to the opposition when they made the review of the refineries' sale a condition for calling off last month's nation-wide strike to protest the increase of fuel prices.
Only last week, the NLC at the Senate public hearing on the last fuel crisis, demanded that a judicial commission of enquiry be set up by the Federal Government into the sale of the refineries and other national assets such as the National Theatre by the Obasanjo administration.

Apparently disturbed by the controversy, The Guardian learnt that the new core investors, on July 17, wrote a letter to the Federal Government on its withdrawal from the transactions.
An official of the Federal Ministry of Energy confirmed to The Guardian yesterday that Dangote and Otedola had pulled out of the deal.
In the letter, Bluestar reportedly demanded the refund of the money it paid for the Federal Government's equity in the two refineries.
It was also learnt that the consortium was pulling out of the refineries due to the outcome of its due diligence on the plants. The firm reportedly discovered that the amount it offered for the refineries was far above their real value.

But the opponents of the transaction said that besides the fact that the exercise was not transparent, the plants were under-valued.
Bluestar acquired 51 per cent in Port Harcourt Refinery for N71.8 billion ($561 million) and Kaduna Refining and Petrochemicals at N20.5 billion ($160 million).
The official of the Ministry of Energy said that the company's letter had been submitted to the BPE Director-General Mrs. Irene Chigbue.

The official said that the decision of the consortium to withdraw from the running of the plants was informed by the controversy that has trailed the privatisation of the refinery and the alleged campaign by the Nigerian National Petroleum Corporation (NNPC) against the action.
The source said that the consortium is staying for 12 months to allow the NNPC manage them and demanded the refund of the sum of $721 million it paid for the plants.
He said that the consortium had given the NNPC the next 12 months to operate the two plants efficiently without funding from the Federal Government.

Secondly, the consortium challenged the NNPC to end queues from fuel stations within the period.
The Guardian source added that Bluestar also noted in the letter that, in the event of the NNPC being unable to turn the plants around and run them efficiently during the period, it reserved the right to renegotiate its re-entry into the firms.
The official stated that it was the contention of the core investor that it exceeded the reserve price for the plants having adjudged the transaction to be fair and transparent.
But when contacted on the issue yesterday, BPE Head of Communications, Joe Anichebe, who denied knowledge of the development, added that he would need clarification from Chigbue before making any comment.
The government on Monday, May 28, sold 51 per cent of the Kaduna Refining Petrochemical Company Limited and Port-Harcourt Refinery Company Limited to Bluestar Oil Services Consortium on the payment of $721 million.

Dangote received the certificate for 51 per cent equity in the Port Harcourt Refining Company Limited and Kaduna Refinery. The Rivers State government is also a member of the consortium.
China National Petroleum Corporation (CNPC), which was offered the right of first refusal in the KRPC, had offered $102 million for the firm.

This, according to Chigbue, could not match the reserve price.
This paved the way for Dangote to offer $160 million to buy the plant. The process was, however, not thrown open to a competitive process, as Bluestar did not enter any bid for the refinery during the bid period.

Chigbue explained that common ownership of both the Port Harcourt and Kaduna refineries would make integration and synergy between both plants easy.
She said: "Bluestar Oil Services Consortium also took up the challenge of buying into the KPRC with an offer price of $160 million for 51 per cent equity; an amount exceeding the $102 million revised offer by CNPC.
"The consortium has already paid the full financial consideration for KPRC. Let me emphasise that Bluestar Oil Services Consortium is bound by the conditions of sale, especially with respect to the time period mutually agreed for the rehabilitation and activation of KPRC," Chigbue said.
The BPE also disclosed that the SINOPEC of China would operate the refineries on behalf of the consortium.

At the event, Dangote, who was accompanied by Otedola, the Chairman of African Petroleum and President of Zenon Oil, said the investment in the refineries would bring a similar revolution that happened in the telecommunications industry to the downstream sector of the petroleum industry.
He said: "We believe a lot in our economy and will continue to invest as much as possible. We will replicate the revolution that occurred in the telecom industry.
"This is not just about buying into refineries. It is about going into the refineries, turning them around and expanding their capacities."
He pledged that as soon as the turn around of the companies was completed, they would be taken to the stock exchange in order to involve other Nigerians.

Source: guardian