Sahara: Nigerian oil company puts IPO and asset buys on ice
Nigeria’s Sahara has put on hold a planned initial public offering and bond sale that was aimed at financing more oil asset purchases until the investment prospects for oil and gas improve.
A year ago Sahara was pursuing a dual listing on the London and Lagos stock exchanges and roadshowing a bond in an effort to raise more than $1 billion to buy oil and gas assets and develop fields in which it already owns stakes.
Executive director Tonye Cole told Reuters in Lagos that “the bottom had come out” of investor interest in the sector.
“Everything that we needed to raise money for has been on a global hold across the board,” Cole said, adding he did not have a clear idea of when demand would shift back to energy.
Cole said Sahara would still consider buying the right asset, but that the Nigerian government’s slowness in addressing key issues in the energy sector – including a long-delayed petroleum industry bill and arcane and inefficient power tariffs — was delaying much-needed investment.
Nigeria’s senate president has called for asset sales to shore up a creaking national budget due to slumping oil revenues, a tumbling currency and the country’s first recession in more than two decades.
Cole said Sahara was protected from this by diversification that has enabled it to profit from oil product demand in east Africa, including Kenya and Tanzania, as well as crude and oil product trading in Singapore, Geneva and the UAE.
Sahara’s plans to double capacity at Egbin power plant, the 1,320 megawatt facility that is sub-Saharan Africa’s largest, have been hindered by power tarrifs that do not cover the costs.
“Simply put the tariff is not right,” Cole said, adding that Egbin, whose costs for natural gas are in dollars, is forced by government regulations to bill customers at a rate of 197 naira to the dollar. The naira on Wednesday fell to a record low of 460 to the dollar on the black market.
“That’s not sustainable over time,” Cole said, adding that the government, via its bulk electricity purchaser, owed billions of naira in back payments. “We’re not going to pour in huge amounts of money until we can correct all these things.”
Cole said Sahara is examining use of liquefied natural gas for power generation at Egbin in order to cut its reliance on gas pipelines that have been subject to militant strikes. The plant’s capacity was cut to a quarter of its maximum after attacks in February took out Forcados oil, and half of Nigeria’s gas supply.
Sahara is also part of an exchange with state oil company NNPC where it gets crude oil and imports gasoline. Despite lower production due to the attacks, Cole said things had stabilised in the last few months and the arrangement was working well.