Maravi

Govt to single-source indeni strategic partner

Govt to single-source indeni strategic partner
Written by Kabanda Chulu
Tuesday, August 18, 2009 2:44:49 PM

GOVERNMENT intends to single-source a foreign strategic partner to take up the proposed 30 per cent shareholding in Indeni Oil Refinery that will be offered later this year, sources in the Ministry of Energy have revealed.

The sources said the process the government intended to pursue on the partial privatisation of Indeni would be irregular and against the recommendations contained in the 2005 technical and financial audit, which stated that Indeni must be refurbished and recapitalised at US $65 million over a five-year period to enhance efficiency and operational reliability of the refinery.

The audit report further stated that the current shareholders – Zambian government and French major oil company, Total International - which own the refinery on a 50-50 per cent basis, should offload 15 per cent shareholding each that would be offered either through public placement at the Lusaka Stock Exchange (LuSE) or through invitation of bids by open tenders.

When asked to clarify the manner in which government intended to invite an equity partner for the refinery, energy permanent secretary Peter Mumba requested for a press query, which was sent but he did not respond by press time.

But the sources said the government and Total International as shareholders have together provided US $45 million as recapitalisation funds out of the required US $ 65 million with the balance of US $20 million to be offset by the third equity partner.

“It is the intention of the shareholders to raise the balance of US $20 million through disposing of part of the shareholding of the refinery to a third equity partner, which has not yet been found and instead of looking for this partner through open tenders or the stock markets for recapitalisation funds, the government want to hand pick (single-source) a foreign partner preferably from China,” the sources said. “Actually there is a kind of division within this government because those in the minority want the 30 per cent shares to be offered to Zambians or the funds be raised at the Lusaka stock exchange (LuSE) since US $20 million is too little to be raised through giving away 30 per cent shares to a foreign owned equity when this amount can be found locally, but the way things are handled in this country, obviously the majority will win and a partner will just be hand picked or single sourced to be given part of the refinery.”

Since 2006, the two shareholders in Indeni – governmental and Total International – have each made available US $22.5 million as part of the recapitalisation funds.

And some of the rehabilitation works that have been carried out to improve efficiency and operational reliability of the refinery included the replacement of pipes and equipment, rehabilitation of the flare and regeneration of the catalyst.

To avoid shut downs at the country’s only refinery in the event of Zesco Limited’s power interruptions, diesel powered generators were installed and commissioned in 2007.

Since the commencement of rehabilitation works, there have been reduced consumption losses from 15 per cent of feedstock processed to 10 per cent, meaning that the refinery was now able to operate profitably after the recapitalisation.

Unplanned refinery shutdowns have reduced due to replacement of obsolete equipment and improved piping that has also resulted in improved safety of the plant operations.

However, there are still some outstanding rehabilitation works to be done and the two shareholders say they would like the works to be covered by the US $20 million that would be brought in by the third equity partner.

Some of the outstanding works include the upgrading of the control system, addressing of the safety issues in the furnaces, works on the distillation column and energy management in order to further improve refinery reliability and throughput.

Labels: CORRUPTION, INDENI, PRIVATISATION, PROCUREMENT SYSTEMS

posted by MrK @ 1:46 PM