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Why Oando divested from Axxela

-By Gideon Osaka

The recent divestment of Oando Plc from its affiliate company, Axxela Limited, to Helios Investment Partners may have been effected to enable it concentrate on its upstream dollar-based business, Valuechain has learnt.

The sale of Oando’s 25 percent residual interest in Axxela signals the completion of a divestment initiative that began in 2016. Valuechain gathered that by December 2016, Oando completed the $115.8 million or 75 per cent partial divestment of the then Oando Gas and Power to Helios, which is a leading private equity firm with a focus on investments in Africa.

At that time, Oando had explained that net proceeds from the divestment would be used to partially prepay its Medium Term Loan (MTL), which it took in June 2016 following the downturn in global oil prices.

The decrease in oil price had engendered a debt crisis with companies barely breaking even and struggling to survive. Some of the surviving companies had to evolve their business models, diversify their portfolios, as well as imbibe more financial prudence and discipline to ensure survival in a high or low price era.

Oando’s divestment of its 25 per cent residual interest in Axxela to Helios was seen as a strategic initiative aimed at maintaining the trajectory of aggressive debt reduction, portfolio optimization and ensuring that the company’s business remained viable.

In 2016, the company started the implementation of its three-dimensional restructuring plan of growth through its upstream business; deleveraging through disposal of $350 million in assets value and a return to profitability.

Valuechain learnt that through open dialogue with ten leading financial institutions in Nigeria, the company agreed to a medium term restructuring loan facility of N94.6 billion, about $311 million, as part of its strategic initiatives. Also, in 2018, Oando successfully completed a $210 million recapitalization of its downstream business, with a consortium of Helios and Vitol Group, the world’s largest independent trader of energy commodities.

Speaking on the divestment, Oando PLC’s Group Chief Executive, Wale Tinubu said “the completion of this divestment signifies another win for the company. We pioneered the development of Nigeria’s foremost natural gas distribution network, which has subsequently grown to making us become the largest private sector gas distributor in Nigeria, creating a lasting impact on both the sector and the Nigerian economy.

“The divestment further reinforces Oando’s ability to create value that can be monetized and the company’s status as the indigenous partner of choice for international companies looking to invest in Nigeria. This transaction favourably positions us to significantly reduce our debt profile and remain focused on growth through our dollar denominated businesses.

“We will continue to maintain significant presence in the midstream, as well as grow our gas aspirations via our upstream gas assets in our NAOC Joint Venture, wherein we have four gas projects within the NNPC’s Seven Critical Gas Development Projects (CGDPs) that are responsible for almost 50 percent of the 42 TCF of gas that will be delivered by the seven CGDPs by 2020.”

Also speaking, the Chief Executive Officer of Axxela Limited, Bolaji Osunsanya, said “as we position to become the preferred and fast-growing gas and power portfolio across sub-Saharan Africa, we pay homage to our origins, legacy, and storied history as an Oando portfolio company.

Bolaji Osunsanya, Chief Executive Officer of Axxela Ltd

“We are immensely proud of our impressive track record of building substantial gas and power infrastructure across Nigeria, and implementing essential Corporate Social Responsibility (CSR) initiatives in our host communities. As we commence a new journey, our audacious growth initiatives across Nigeria and the sub-region will leverage our industry expertise, experience, and longevity; while our affiliation as a full-fledged Helios company will improve our access to capital.

“The continued growth, robustness, and stability of our business enterprise, enables Axxela provide required efficient and environmentally-friendly energy solutions for industrial and commercial clients, leading to positive socio-economic impact in our markets of operation.”

Axxela is a designated natural gas shipper on the West African Gas Pipeline (WAGP). It is also the pioneering private sector-led developer of natural gas distribution in Nigeria, delivering at peak 80 million standard cubic feet per day to over 160 industrial and commercial customers via a vast network of gas infrastructure.

With over 280 kilometers in gas pipeline infrastructure built, Axxela provides unique energy solutions primarily through its subsidiaries, which are Gaslink Nigeria Limited, Gas Network Services Limited, and Central Horizon Gas Company Limited.