DOES Oando PLC have access to US $1 billion to restart the Petrotrin refinery?
Energy experts are posing this question after research found that Oando’s liabilities exceed its assets and the company is in a generally shaky financial state.
At the end of last year, the energy company’s liabilities amounted to US $3.44 billion, while assets were worth US $3.29 billion.
This resulted in a negative shareholder value of US $152.64 million.
Energy Minister Stuart Young did not make this revelation when he announced the Government’s decision to award the Pointe-a-Pierre facility to the Nigerian firm.
Oando has a debt-to-equity ratio of -10, meaning it has 10 times more debt than equity.
The company has posted recurring operating losses, which have accumulated to US $400 million.
In recent years, the energy firm has been unable to pay dividends to shareholders, and investors have publicly expressed anxieties.
The firm is “running on borrowed money,” one financial expert stated.
He added: “Statistics show that this is a company facing bankruptcy.
“If Oando is liquidated, no shareholders will receive any returns.”
Observers are asking whether the Government complied with the regulations of the Office of Procurement Regulator.
The Procurement and Disposal of Public Property Act spells out measures that must be undertaken in the lease or sale of a national asset.
Oando has reportedly not made any commitments about the use of local labour.
The energy firm was previously suspended from the Nigerian and Johannesburg stock exchanges for major governance breaches.
In addition to its financial troubles, Oando has ongoing operational headaches.
There have been frequent shutdowns following sabotage and theft in the Niger Delta.
Young said Oando’s expertise will help to revitalise Petrotrin, but the company has never operated a refinery.
“How can they be expected to upgrade our refinery asset and make it profitable?” an industry expert queried.
He stated: “The Government is asking a company with financial difficulties, multiple allegations of corruption, and lack of refinery experience to operate our prized enterprise.”
Oando’s Chief Executive Wale Tinubu has been quoted in the Nigerian media as saying: “This strategic investment aligns with our long-term vision of expanding into high-potential regions and growing our operational footprint…”
Tinubu said the acquisition aligns with the strategic vision of expanding operations across the Caribbean area.
Detailed discussions are expected to take place soon with Trinidad Petroleum Holdings Ltd. on lease and operational arrangements.
The awarding of Petrotrin to Oando has surprised many energy executives who are aware of the company’s chequered history and absence of refinery experience.
The firm was selected from 10 bidders, including a three-company consortium that includes a longstanding Trinidad and Tobago-owned industrial firm.
A Cabinet Sub-Committee, headed by Housing Minister Camille Robinson-Regis, recommended a lease to Oando.
No member of the committee has industry experience.
Petrotrin, with a capacity of 175,000 barrels a day, was mothballed on November 30, 2018, and some of its assets have since gone to waste.
Some 6,000 workers lost their jobs.
The Government plans to promote the lease during campaigning for the forthcoming general election.
