NIGERIA'S OANDO GROUP LISTS ON SA STOCK EXCHANGE

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E.O. 12958: N/A
TAGS: EPET EINV NI ENERG
SUBJECT: NIGERIA'S OANDO GROUP LISTS ON SA STOCK EXCHANGE


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Summary
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1. (U) Oando Group, an integrated energy firm and
Nigeria's leading downstream petroleum marketer, was listed
on the Johannesburg Stock Exchange (JSE) on November 25, the
first Nigerian firm approved to do so. Oando announced 4
percent of its shares would be listed on the JSE; Oando
forecasts 25-50 percent of its shares will be on the JSE
within 10 years. Oando claims to be the largest oil
marketing company in Africa. With this listing, Oando hopes
to eventually raise USD 1 billion to diversify into
exploration, production, refining, power generation, and for
additional expansion in other African markets. With access
to financing in South Africa, Oando has distinguished itself
from other indigenous rivals.

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Oando First Nigerian Firm on the Johannesburg Stock Exchange
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2. (U) On November 25, Oando Group listed on the "Resources
- Oil and Gas" section of the Johannesburg Stock Exchange
(JSE),Africa's largest exchange, becoming the first
Nigerian firm on the JSE. Oando will initially list 4
percent of its shares on the JSE, increasing this to 10
percent within months. Executives forecast 25-50 percent of
Oando's shares will be traded on the JSE within 10 years.
Oando will maintain its primary listing on the Nigerian
Stock Exchange, where its market capitalization is Naira
60.7 billion, about USD 464.7 million. Oando management
hopes this new listing will help towards the goal of raising
USD 1 billion, allowing the firm to diversify into
exploration, production, refining, power generation, and to
further expand regional operations.

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Vertical Integration and Regional Expansion:
Oando Strategy, Corporate Structure, and Operations
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3. (U) Now an indigenous Nigerian firm, Oando Group began
operations in 1956 as Esso West Africa, a subsidiary of
Exxon Mobil. The GON nationalized the company in 1976, re-
branding it Unipetrol. In an initial move towards
privatization, in 1991 the GON sold 60 percent of its shares
to the public. In 2000, Ocean and Oil, a petroleum trading
company, acquired 30 percent stake, while a further 10% was
sold to the public. In 2003, Unipetrol and Agip Nigeria
merged to form Oando Plc, becoming the largest Nigerian
petroleum products retailer. Originally focused on
downstream petroleum marketing, Oando is now pursuing a
strategy of vertical integration and regional expansion.
Oando subsidiaries currently include:

--Oando Marketing, the country's largest downstream
marketer, with 500-plus retail outlets in Nigeria, and
operations in Ghana, TOGO, Liberia and Benin;
--Oando Trading, Africa's largest independent oil trading
company;
--Gaslink Limited, a natural gas distribution company,
delivers compressed natural gas to industrial users in Lagos
via a 100-kilometer pipeline;
--Oando Power, an independent power plant development firm;
--Oando Energy Services, provides oil services to major
upstream companies;
--Oando Production and Development Company, an oil
exploration and production company;
--Oando Refinery is investigating both purchasing a
government refinery and greenfield projects.

Retired Major General Magoro, a former Transportation
Minister, chairs the Oando Board of Directors. Wale Tinubu,
a lawyer and nephew of Lagos State Governor Tinubu, is the
Group Chief Executive Officer.

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Oando and Shell Bid to Enter Refining Sector
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4. (U) The GON is aggressively pursuing increased domestic
refining capacity, through privatization of poorly
functioning parastatal refineries, and construction of new
plants. In a drive to enter the refining sector, Oando is
bidding on a 51 percent stake in the Port Harcourt Refining
Company (PHRC),with Shell Petroleum Development Company
(SPDC) as technical partner. The project is worth about USD
3 billion. Oando is also exploring construction of a
360,000 bpd greenfield refinery in Lagos. If both projects
move forward, Oando would become a significant player in
Nigerian refining, with a refining capacity of about 570,000
barrels per day (bpd): 210,000 bpd from the Port Harcourt
refinery and 360,000 bpd from its proposed Lekki refinery in
Lagos.

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Oando Also Expands into Upstream and Power Sector
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5. (U) Oando recently moved into the exploration and
production arena, winning three marginal oil blocks offered
in the August 2005 oil block bid round. The firm is also
expanding into the power sector. Its new power subsidiary,
Oando Power, is expected to commence business in Q4 2006,
using gas-powered turbines (with gas supplied by Oando
subsidiary Gaslink) to generate electricity within the Lagos
area. Industrial customers are its initial target clients.

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Comment
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6. (U) Oando's listing on the JSE demonstrates the growing
business and investment links between Nigeria and South
Africa, Africa's two largest economies. In the last several
years, well-financed and aggressive South African firms have
moved into Nigeria, most prominently in the banking and
telecommunications markets. Now, Nigerian firms such as
Oando are looking to advantages they can tap in the South
African market. Oando's expansion onto the JSE reflects an
increasingly sophisticated understanding of international
financial markets, and a quest for more competitively-priced
financing. This move creatively sidesteps the Nigerian
financial market's inability to support expensive oil
exploration and production operations. On the South African
side, JSE's listing of Oando signals confidence in the
firm's corporate governance and balance sheet. It also
demonstrates that Nigeria is a credible destination for
South African investment, not only sales. However, it
remains uncertain whether Oando will attain the high level
of investment from South Africa that is currently
contemplated.

Browne