The Nation Newspaper

Tag: £1b

  • BP to invest $1b in South Africa, refinery upgrade

    BP Southern Africa (BPSA) will invest $1 billion in South Africa in the next five years with more than a quarter of that set aside to upgrade the SAPREF refinery to produce lower sulfur diesel, its chief executive said.

    The 180,00 barrels per day SAPREF refinery, South Africa’s largest, is a 50:50 venture between Royal Dutch Shell and BPSA, a subsidiary of British oil major BP. The plant is located in the east coast city of Durban.

    BP would invest 3.5 billion-4 billion rand ($252 million-$288 million) in the refinery upgrade, Chief Executive Priscillah Mabelane told Reuters, adding that about 40 percent of the total $1 billion investment would go on retail activities.

    She said the upgrade would make “sure the refinery can meet the new specifications in terms of low sulfur and Marpol regulations.”

    The plant would shut for maintenance from May to June 2019, she added.

    The upgrade has been driven by new rules demanding a lower fuel sulfur content and changing customer preferences for cleaner diesel, such as D50 and D10.

    Refinery operators have been in long-running talks with government on how to recover costs from upgrading work needed to produce cleaner fuel in South Africa, the continent’s most industrialised economy.

    “From an industry perspective we are pushing very hard to ensure that there is policy clarity because we have been on this journey very long, almost a decade,” Mabelane said about the ongoing talks.

    Industry players estimated in 2009 that the cost to upgrade to cleaner fuels would be about $4 billion.

    Other operators in the sector include Total and Sasol.

    Besides upgrading the refinery, Mabelane said BPSA would expand its retail activities in South Africa.

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    “We are aggressively going to grow our footprint in the country,” she said on the sidelines of an event with retailer partner Pick n Pay to launch a new innovation for a loyalty card that will also work at BP fuel stations nationwide.

    BP was looking at opportunities to expand its services in Mozambique, where it is the second largest oil company, Mabelane said. “The market is exciting and dynamic,” she said.

  • Fed Govt backs Kaztec’s $1b fabrication yard in Lagos

    The Federal Government has backed the systems, facilities and technological skill sets used at the fabrication yard of Kaztec Engineering Company Limited, an arm of Chrome Oil Services Limited, located on Snake Island in Lagos.

    Minister of State, Petroleum Resources Dr. Emmanuel Ibe Kachikwu, who led top government officials and international oil companies to the yard, described the billion dollar investment plan by Kaztec as a demonstration of faith in the Nigerian Content development policy.

    Kachikwu urged industry operators to patronise more local goods and services as a credible, patriotic and logical strategy for cost reduction, noting that massive patronage of local content input into projects remains the best way to achieve lower production cost.

    He said while the government was working to attract the right investment capital for field development activities, operators should fully engage existing in-country facilities for in-country value and job creation as well as indigenous capacity and capabilities development.

    The minister acknowledged the technical capacity displayed by Nigerians at the Kaztecplant as impressive during his presentation on the activities of the firm. He noted that very few local oil service companies have been able to effectively position for the shallow water and deep offshore province from where the future development activities will come.

    Kachikwu highlighted that the upcoming major deep-water projects including Eni’s led Zabazaba field, which will be operated by the Nigerian subsidiary, Nigerian Agip Oil Company (NAOC) and Shell operated Bonga South West-Aparo (BSWAP) field will create enormous jobs for Nigerian oil service firms. He noted the imminent final investment decisions on the projects would spark off huge in-country value creation.

    He applauded Kaztec for its commitment, adding that the site of yard, which is in the remote part of the Snake Island, would open commercial and social activities in Ilaje village of the Island with multiple benefits including opportunities for skills acquisition and mass employment of youths, among others.

    He noted that despite considerable milestones achieved in Nigerian oil and gas industry content development policy drive, the industry is still far from the 70 percent Nigerian Content target by 2020.

    The Project Manager at Kaztec, Mr. Mike Simpson, said the fabrication yard was at tertiary level of infrastructural development in a vast island space that holds a free zone status.He said the company has already committed over $300 million in development of facilities for Engineering, Procurement, Installation and Commissioning (EPIC) contracts, and has mapped out another $450 million for second phase of yard development with outlook for incremental investments until the full development plan is realised.

    The Chairman of Chrome Oil Services Limited, Sir EmekaOffor, said the company has the requisite capacity to rehabilitate and upgrade the nation’s ailing refineries if given the opportunity in line with the Nigerian Content policy of the government.

  • U.S. firm to invest $1b in Unity Bank

    An American private equity firm, Milost Global Inc, is seeking to inject $1 billion to recapitalise Unity Bank Plc, one of Nigeria’s 24.

    According to a report, the U.S. firm plans an initial stake of about 30 per cent in Unity Bank in exchange for its first equity investment of $250 million.

    Relying on two sources believed to be aware of talks on the transactions, Bloomberg reports that Milost plans to invest $700 million in equity and $300 million in five-year bonds that can be converted into shares in the Nigerian lender.

    However, the transaction is still subject to a due diligence as well as regulatory approvals, but the first part of the deal may be completed by next quarter.

    The rest of the cash will be drawn down in intervals over a period of four years, provided Unity Bank has sufficient shares to issue to Milost, one of the sources said.

    Some small- and mid-sized Nigerian lenders are battling to rebuild capital levels after a slump in oil prices triggered a foreign-currency shortage and a contraction in the country’s economy in 2016 made it difficult for businesses to repay loans.

    Unity Bank, which was formed out of the merger of nine banks between December 2005 and March 2006, said last April that it was in talks to sell its non-performing loans to avoid penalties after missing a deadline set by regulators on its recapitalisation plans.

    An investment in Unity Bank will be Milost’s third in a publicly traded Nigerian company since it agreed to pump $350 million into oil-services company Japaul Oil & Maritime Services Plc in February and to provide a $250 million financing facility to Resort Savings & Loans Plc.

    Several calls to the numbers listed on Milost’s website have gone unanswered, Bloomberg said.

    The private-equity firm is targeting companies that trade at less than half of their intrinsic value using a facility combining debt and equity that it calls the Milost Equity Subscription Agreement, it said in an emailed statement yesterday.

    Milost buys shares of a company at a minimum 50 per cent premium to its market value, and then pegs this price over the next 90 days. If the stock fails to exceed this threshold, the target company will pay the difference to Milost in the form of extra stock, and a penalty of 10 per cent to 20 per cent of the discount that the share is trading at over a five-day period, it said.

    “The Milost Equity Subscription Agreement is a growth instrument that creates and builds confidence in the stock of the companies in which it invests,” the company said. The targeted company cannot draw down the full committed facility in one tranche and is only allowed to use it from time-to-time over a three- to five-year period, with Milost eyeing a seven- to nine-year horizon for an exit, it said.

    Milost is taking a bet on Unity Bank as the economy of Africa’s largest oil producer shows signs of recovering from a recession after three straight quarters of expansion in gross domestic product, which the International Monetary Fund estimates will grow 2.1 per cent this year.

  • BP expects $1b restructuring charge over coming year

    Oil giant BP has said it expects to incur restructuring charges of about $1billion over the coming year.

    The charges will be taken as part of BP efforts to simplify its business activities and corporate functions.

    BP said it would also review its capital expenditure plans for next year in light of the oil price outlook. Oil prices have slumped since June.

    The firm said it aimed to make its business “stronger and more competitive”.

    BP announced the charges as it laid out its long-term plans for its upstream oil and gas business.

    BP Group chief executive Bob Dudley said: “We have already been working very hard over these past 18 months or so to right-size our organisation as a result of completing more than $43billion of divestments.

    “We are clearly a more focused business now and, without diverting our attention from safety and reliability, our goal is to make BP even stronger and more competitive.

    “The simplification work we have already done is serving us well as we face the tougher external environment.

    “We continue to seek opportunities to eliminate duplication and stop unnecessary activity that is not fully aligned with the group’s strategy.

    Oil prices have slumped since the middle of the year as fears of oversupply have mounted. The price of Brent crude fell to $65.29 a barrel on Tuesday, the lowest level since September 2009.

    Earlier this month, BP announced that it would accelerate plans to cut hundreds of back office jobs.

    BP employs almost 84,000 people worldwide, including 15,000 in the UK.

  • Pension fees cap could add £1b to savers’ pots

    A cap on excessive pension charges could boost savers’ retirement funds by £1 billion, five times more than previously estimated, one of Britain’s largest insurers has indicated.

    Pension fees will be capped at 0.75pc a year next April under a Government initiative to tackle “rip-off” levies that deplete customers’ savings.

    Ministers initially said this new ceiling would transfer £200 million from insurance company profits “into the pockets of savers.”

    But Royal London, which has 11 million customers calculated that the sum passed to savers by the industry would be monumentally higher.

    Phil Loney, chief executive of Royal London, said: “We estimate the total reduction in long-term insurer income may well reach £1 billion.”

    The cap on charges will apply to workplace pensions linked to the stock market.

    Pension companies such as Royal London take annual fees for managing money saved into company schemes. The charges can range from below 0.5pc a year to more than 2pc. Reducing the higher charges to 0.75pc will allow savers’ funds to grow more quickly to the detriment of pension providers. Royal London profits fell by 49pc the first half of this year as the firm acknowledged it will take less from savers each year.

    David Norman, a campaigner on charges and founder of asset manager TCF Investment, said: “The ordinary saver is entirely justified in thinking – hurrah, this serves the pensions industry right.

    “If on average consumers lose less from their pots in charges, we will all be richer. After all, pensions were not designed to make profit for insurance companies but for savers in old age – at least, that’s how it should be.”

    Justin Modray, founder of Candid Financial Advice, said some of the charges on older pensions were little short of criminal and were only there to pay excessive sales commissions.

    He said things have gradually improved over the years but there is no doubt some pensions remain too expensive. “Insurers are paying the price for treating customers poorly over several decades.”

    However, some commentators warned that reducing charges so quickly could have unintended consequences.

    Loney said the charges cap could do more harm than good, indicating that Royal London and similar providers might hit employers with supplementary fees. These would fall outside the 0.75pc government cap, which relates specifically to the management charges paid by staff.

    Tom McPhail, head of pensions at financial services firm Hargreaves Lansdown, said extra fees outside the cap would be passed on to customers and shareholders.

    “There could be a sort ‘money-go-round’ where insurers put extra charges on employers, who pass these on to staff in the form of lower pay rises and to shareholders in the form of smaller dividends.

    “If that happens there will be little overall benefit to the people the Government is trying to help.”

    Culled from The Telegraph