Subject to regulatory approvals, South African oil and chemicals group Sasol and Malaysian state oil company Petroliam Nasional Berhad (Petronas) are set to form South Africa’s largest liquid fuels business, following the signing of a joint venture
agreement between the two parties.
The joint venture will see Sasol combine its liquid fuels business in South Africa, as well as its 150 service stations, with Engen’s 1 250 service stations. Petronas has an 80% stake in Engen.
The merger brings together Sasol’s substantial liquid fuels production in South Africa, with Engen’s large number of South African retail petrol service stations.
Sasol produces about 40% of South Africa’s annual consumption of liquid fuels, while Engen has just over 25% of the country’s 4 750 or so petrol stations.
The combination will have about 1 600 petrol stations in South Africa, with Engen contributing 1 250 stations and a further 150 service stations coming from Sasol and another 250 stations coming from Exel and Zenex.
After the conclusion of the transaction, a further 100 Sasol service stations will be erected for a total of 1 700 service stations.
On the empowerment front, Worldwide African Investments as well as a new, but yet to be formed, entity called Tshwarisano, will each hold 12,5% in the joint venture.
The total empowerment stake in the venture will total 25%, which would meet the obligations of the liquid fuels charter. The liquid fuels charter requires compliance by the companies in the sector by 2010.
Once the deal is concluded, Sasol and Petronas will each hold 37,5% in the venture.
The South African Petroleum Industry Association (Sapia) 2003 annual report shows that the combination of Engen, Sasol and the interests of empowerment groupings would give the joint venture a total South African retail market share of over 34,6% in petrol and 33,6% in diesel.
This compares with its nearest competitors — Shell with 17,78% in petrol and 17,89% in diesel and Caltex with 17,09% in petrol and 16,89% in diesel.
The joint venture is subject to regulatory approval from both South African and European Union competition authorities, which are expected to rule on the merger during the first half of 2005.
For the 2004 financial year, the joint venture would have pro forma sales of R33-billion and pro forma earnings of R1,2-billion, based on the unpublished results for Engen for the year ended on March 31, 2004 and Sasol’s liquid fuels business for the year ended June 30, 2004.
Sasol said it anticipated that the transaction would be marginally earnings enhancing for Sasol in the 2005 financial year to June 30, 2005, with improvements anticipated thereafter as synergies are realised and integration costs are expensed.
The liquid fuels joint venture will have the capacity to produce more than 13-million cubic metres of petrol, diesel and kerosene a year.
The joint venture will comprise the Enref oil refinery in Durban, as well as Sasol’s 63,64% stake in the Natref crude oil refinery in Sasolburg in the northern Free State.
The attributable production of the two refineries would be the largest refining capacity in South Africa, with the country having a refining capacity of about 700 000 barrels of crude a day.
Either Enref or Sasol’s stake in Natref could be sold to alleviate any competition concerns, analysts suggested.
Outside South Africa, the joint venture will have liquid fuels operations in 13 other sub-Saharan African countries.
The joint venture will also include liquid fuels components produced at Sasol’s synthetic fuel blending facility in Secunda.
Former government minister Penuell Maduna is to facilitate the structuring of the Tshwarisano empowerment vehicle.
The Tshwarisano vehicle is still in the process of being structured and the financing for the 12,5% stake it will acquire in the joint venture has yet to be concluded, a Sasol spokesperson said.
“We are looking to conclude the Tshwarisano deal as soon as possible,” he added.
South African Minerals and Energy Minister Phumzile Mlambo-Ngcuka said in a statement that she was pleased with the joint venture, as well as the inclusion of empowerment groupings. – I-Net Bridge