Sahara Group, a Nigerian energy company, plans to raise as much as $1.4 billion through a dual listing of its oil and gas unit in London and Lagos along with a debut dollar bond sale.
Lagos-based Sahara, which trades crude oil and owns Nigeria’s biggest power plant, wants the money to buy oil blocs in Africa’s largest producer as it seeks to ramp up production five-fold to 60,000 barrels a day, said Executive Director Tonye Cole.
Sahara is seeking as much as $600 million in the initial public offering, which may take place within a year, and $800 million through a seven-year bond that should be issued by the end of October, he said.
“Over the next five years, our target is to be one of the largest indigenous producers in Nigeria,” Cole, 48, who owns a third of Sahara, said in an interview at the company’s headquarters in Lagos. “A lot is dependent on the IPO. We started down that road before oil prices collapsed, but we’re still focused on it.”
Sahara and others including Seplat Petroleum Development Co. and Shoreline Group, are taking advantage of so-called indigenisation laws in Nigeria’s oil industry that are meant to boost production by local companies. Those groups account for about 20 per cent of Nigeria’s production of nearly two million barrels a day.
Seplat, which pumps about 70,000 barrels daily, became the first Nigerian company to sell its shares in London and Lagos when it completed listings in April, 2014. The stock has fallen 69 percent in London in the past year as crude prices more than halved, giving the company a market capitalisation of 409 million pounds ($624 million).
“We’re looking to raise somewhere between $500 million to $600 million for about 20 to 25 per cent of the shares,” Cole said, which would value the unit at between $2 billion and $3 billion.
Sahara will meet investors in Europe and the U.S. in the next few weeks to discuss the deals, Cole said. He declined to identify the banks working on the IPO or Eurobond sale.
Companies from Africa’s biggest economy are increasingly looking to sell stock in the U.K. Aliko Dangote, Africa’s richest man, wants to list his main company, Dangote Cement Plc, which already trades in Lagos and London.
Interswitch Limited., which processes bank transactions and owns a brand of debit cards, is also considering a dual listing.
Beyond oil and gas production, Sahara, which makes revenue of about $10 billion annually, is expanding its trading and power divisions. It plans to double generation at the Egbin power plant in Lagos to 2,600 megawatts within five years, Cole said. Sahara needs to recoup its debts from the government-owned bulk buyer of electricity before that happens, he said.
Sahara may re-bid for new government oil-swap contracts, also known as offshore processing agreements. The company’s OPA, which saw it provide refined petroleum in return for crude, was canceled last month after the state-owned Nigerian National Petroleum Corporation. said the terms were “skewed.”
“There’s no one that would ever deny that when the swap, or the OPA, was instituted six years ago that it was a necessity at that point,” Cole said. “But we had discussions with the NNPC. We all agreed that it was time to have a review and move forward. I have no problem with it.”
Sahara will also consider entering into joint ventures with Nigeria’s four state-owned refineries, he said. The NNPC is under pressure from President Muhammadu Buhari, who came to power in May promising to revamp the graft-ridden oil industry, to revive the dilapidated refineries and end Nigeria’s reliance on imported fuel.
