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What NNPC’s Acquisition Of OVH Energy Means For Nigeria

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By Ifeanyi Onuba

The Nigerian National Petroleum Company Ltd last weekend acquired the entire assets of OVH Energy Marketing Company.

OVH’s expertise spans the provision of jetty services and the marketing and distribution of refined petroleum products for retail, commercial and industrial purposes.

Its subsidiaries include OVH Energy Marketing (OVHEM) Limited, licensee of the Oando retail brand and ASPM Limited, custodians of the Lagos Midstream Jetty, also known as West Africa’s first privately owned midstream jetty.

The Company boasts of distributing over one billion litres of refined petroleum products annually while ASPM Limited is focused on strengthening Nigeria’s downstream value chain through the Lagos jetty.

One of the implications of the deal is that the 100 per cent acquisition of OVH Energy by NNPC Limited has made the National Oil Company to become the company with the biggest downstream company in Africa.

This is because with the full acquisition, OVH retail stations trading under the Oando brand will now join the NNPC Retail Ltd.

The second implication is that while merger and acquisition create opportunities for growth and sustainability, employees on both sides have the opportunity to maintain their employment with NRL which is now the new owner of OVH.

Under the current acquisition, OVH employees have the opportunity to work with NRL as NRL members of staff. This is because transiting OVH employees will be accommodated under NRL terms and conditions of service since the NRL is a wholly owned subsidiary of NNPC Limited. Also, the corporate name of OVH Energy will now be NRL a subsidiary of NNPC Limited, bearing the NNPC brand.

The third implication of the deal is that it will increase the assets of the NNPC Ltd, thereby making it to have to have reception jetty (ASPM) with 240,000MT monthly capacity, eight LPG Plants, 3 Lubes Blending Plants , three Aviation Depots, and 12 warehouses.

Similarly, as a result of the acquisition, additional 380 filling stations would be added to what the NNPC had, thereby boosting the aspiration of the National Oil Company to have 1,500 retail fuel station.

Oando was a shareholder of OVH and ceased to be a part of the OVH business in December, 2019. OVH has a franchise agreement with Oando to use the Oando brand name, which is now being phased out and rebranding with NNPC.

As the acquisition creates the largest downstream entity in Nigeria with enormous opportunities, it therefore implies that competent employees will surely have more opportunities for exciting career and growth

NRL business operations spans across the nation, and under the current acquisition, NRL will have more wider presence while maintaining its Corporate Headquarters in Abuja.

As typical of such acquisition deal, employees will be emplaced where they can deliver the best value to the company and transiting OVH employees will be accommodated under NRL terms and conditions of service.

As a member of the Major Oil Marketers Association MOMAN, the deal will not in affect the membership of NRL. Rather, the acquisition will bring more fuel stations under the umbrella of NRL. This will help improve fuel availability and accessibility to Nigerians, thus supporting NNPC’s commitment to guarantee National Energy Security for Nigeria.

Another implication of the acquisition is that it will leverage the strength and capacity of NRL and OVH to create the fastest-growing commercial energy company that can guarantee energy security for Nigeria’s growing population

With mergers come business integration which is a gradual process. Based on the NNPC’s plan, the integration process between NRL and OVH Energy is expected to be fully achieved by the end of 2023.

Both NRL and the acquired OVH have their respective strengths, and it is expected that the resulting operating model will leverage those assets to create a more efficient organization

As a growth-focused business, the NNPC has pledged that it will always be on the lookout for opportunities that align with its business aspirations.

The existence of any two or more stations within an area is an indication of the market size of the particular location, and NRL will maintain its presence to retain and grow market share in that location

For those questioning the validity of all subsisting agreements with third parties, the NNPC has assured that they remain valid for the contract period and transferable to NNPC Limited

Also, the NRL will explore industry best practice that guarantees mutual value in dealing with transporters and other third parties.

The Group Chief Executive Officer of NNPC, Mele Kyari gave credence to this when he said that the strategic move would create the leading downstream energy company in Nigeria and West Africa, driven by operational efficiency, best-in-class management, and physical infrastructure.

He said this would offer premium petroleum products and related services to customers, in line with global standards.

Through this acquisition, he said the NNPC Retail Limited will build on the existing success of OVH Energy and operate model service outlets leveraging OVH’s extensive asset base and commercial capabilities.

He stated that the NNPCL was bringing to the table, its 45 years of experience and strong capability to bear on the management of the facilities.

The NNPC Boss maintained that securing the country against energy poverty would mean access to petroleum products in addition to managing the energy transition, which he said has become a reality.

He said, “Our President who is also the Minister of Petroleum Resources has consistently insisted that this company must ensure energy security for our country.

“Providing energy security means access to product. There is no way we can do this except you have a robust system and processes, you have a network that will work, you have an institution that will deliver value to shareholders.”

He described OVH as a company that has systems, processes and the competence that align with the energy transitioning aspiration of the NNPC.

Kyari added, “We have struggled with this for many years and we saw the opportunities to latch on the competences of OVH. We have worked with them; they are our partners and we have also worked with them and we know their capability and ultimately, we knew that this company will work for us.

“It has systems, it has processes, it has the network and it has potentials to make us achieve our aspiration to be the global company of choice.

“This is not about assets; it is about us building a relationship that is based on value. As at this moment, we are the largest downstream company in the country. By this acquisition, we are also likely to be the largest downstream company in Africa.

“This is a vehicle that will enable us to deliver on the energy transition for our country. We will use this vehicle to deliver LPG, CNG to the market.

“Our poor communities who are relying on biomass to cook, 70 per cent of our people don’t have cooking fuel, this is an opportunity for us to latch on this.”

He explained further that the partnership would also enable the NNPC to not only deliver value to its stakeholders but also generate revenue.

“This is a very competitive business. We are not here to cause disruptions; we will integrate it into our existing businesses. We have experiences that you don’t have, we have capacity that you don’t have and we will bring all this for the success of the partnership,” he concluded.

The Chief Executive Officer, OVH Energy, Mr. Huub Stokman, said the acquisition by NNPCL came at a critical time in Nigeria’s energy sector given the overhaul of the petroleum laws with the recent enactment of the Petroleum Industry Act (PIA).

Stokman added that the deal took place at a time there was increased demand for petroleum products and particularly, the deliberate efforts to increase and improve the supply and consumption of natural gas in support of the company and Nigeria’s energy transition goals.

“We have always focused on a value-driven approach, prioritising the quality of products and services offered to our customers, at both retail and commercial levels. This acquisition enables the combined strengths of both entities, to innovate our offerings and infrastructure, necessary to transform the downstream energy sector in Nigeria and West Africa.

“It is an exciting time for us all, as we continue to focus on technological enhancement, our customers, staff, and other stakeholders,” he added.

In her remarks, the Chairman of the Board of Directors of the NNPCL, Mrs. Margery Okadigbo, noted that it was the right time to adopt the OVH as a ‘baby’ of the NNPCL, promising to ensure that the investment becomes the envy of the industry.

“In the end, everyone will be happier for it. We will continue to work with you,” she assured.

On his part, the Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Mr. Farouk Ahmed, described the deal as a major achievement.

While congratulating the NNPCL, he pledged that the NMDPRA would support the growth of the business and advised that sound corporate governance, as well as discipline, should remain the watchword in managing the assets.

The post What NNPC’s Acquisition Of OVH Energy Means For Nigeria is first published on The Whistler Newspaper

Source: The Whistler.