Forte Oil To Sell Power, Upstream Arms, Exit Ghana Over Loss, Debts

Femi Otedola’s Forte Oil says it plans to sell its upstream services and power businesses in Nigeria and divest from Ghana to focus on its core fuel distribution operation at home.
The unit in Ghana has declared losses over the last three years and has uncollectible trade debts due to tough economic conditions and a currency devaluation in the cocoa-rich country.
Forte Oil said proceeds from the divestment would be used to expand its downstream fuel distribution business and to invest in storage infrastructure.
It said interest costs attributable to the businesses for sale stood at N2.2bn as of December and now plans to seek shareholder approval for the sale on May 23 and appoint advisers, it said in a notice to investors.
The move comes as a surprise about-turn for a company whose Chief Executive Akin Akinfemiwa told investors in Lagos in August that he wanted to aggressively pursue mergers and acquisition opportunities along the energy value chain and acquire marginal oilfields to boost its upstream business, according to Reuters.
The company had also been in talks with a major refinery to form a strategic partnership for local refining of petroleum products.
It did not give a reason for the change in direction but said the downstream sector in Nigeria had gone through changes in recent years and was expected to evolve further.
It added that the industry has operated under a tightly regulated fixed margin but could be deregulated especially given its impact on the Nigerian currency and import bill.
The government increased petrol prices by 67 percent to N145 in 2016 to cut subsidies paid for fuel imports after a plunge in oil prices hit state revenues, caused dollar shortages and halted infrastructure projects with firms laying off tens of thousands of workers.
Its 57% owned power unit, Amperion Power Distribution Company, has a lot of receivables due from the state-backed offtaker and its upstream unit has contributed less than 7% to group earnings over the past three years.
“The changing landscape also suggests backward integration would be essential to remain competitive within the sector, particularly in the face of impending deregulation,” it said in the notice.
Forte’s pretax profit nearly doubled in 2017 to 10.63 billion naira, though sales fell by 15% to N129.4bn, the company said in March.