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Oando’s investment in IPP to boost profitability

By Peter Egwuatu
Shareholders of    Oando Plc have cause to expect a better dividend for the current financial year as the company’s recent investment in Independent Power Plant (IPP) is expected to boost its profitability.

Capital market operators disclosed to Vanguard that Oando’s investment in IPP should boost the Group’s profitability which will consequently lead to higher dividend payout to shareholders.

The operators emphasized that shareholders who invested in Oando’s Rights Issue expect a higher dividend given the myriad of investments the company has embarked upon.

According to a stockbroker, “Now that the IPP has come on stream, it is expected that the Group’s revenue generation will increase for the benefit of shareholders and other stakeholders. The revenue mix is now upstream  (crude oil sale), midstream (natural gas and power) and down stream (petroleum products marketing where Oando marketing holds 18 per cent.”

It would be noted that last week the Nigerian Stock Exchange (NSE) lifted the technical suspension placed on Oando shares when the company notified it of its plan to issue a Rights Issue .

Consequently, normal trading activity has commenced on the shares at the secondary market and the price of the shares is now determined by forces of demand and supply. This was not the case when the shares was placed on technical suspension. During the period of the technical suspension, Oando share price was pegged and traded at N93.99 per share at the secondary market.

It would be recalled that the Rights Issue which ended recently was issued at N70 per share, representing a discount of 25.5 per cent of the market price. The technical suspension was placed on the price of Oando shares further to its application to raise N21 billion through Rights Issue offering, in compliance with Rule 82(C) Securities and Exchange (SEC) Rules and Regulations. The Rights Issue, which acceptance list closed on the 19th February, 2010, is currently being processed for allotment prior to the announcement of the outcome of the offer.

Commenting Mrs. Oredeji Delano, Chief Compliance Officer & Company Secretary said “The lifting of the technical suspension means that Oando shares will now experience price movements in response to competitive forces of demand and supply in line with the NSE’’s trading rules.”

Oando indigenous energy group, announced that it has commissioned its first Independent Power Plant (IPP), Akute Power to supply stable electricity to the Lagos Water Corporation (LWC). The 12.15 megawatt plant will power LWC’s main water intake facility, including two other facilities with a combined installed capacity of 125 million gallons of water per day. The $25.5 million project was finance by Fidelity Bank, one of Nigeria’s leading financial institutions.
The power project included the construction of a 13km gas pipeline from Oando’s existing natural gas grid in Lagos to supply fuel to the power plant.  The gas fuelled IPP is eco-friendly and enabled an immediate increase in capacity utilisation of Lagos Water Corporation whilst creating substantial savings for the Lagos Water Corporation in annual energy cost. In ensuring smooth project delivery, Oando mobilised local and international resources with Clark Energy – a leading UK energy company- providing the reliable General Electric Jenbacher natural gas engine generator packages.

Speaking at the commissioning, Mr. Wale Tinubu, Group Chief Executive, Oando PLC said; “This IPP is a significant milestone for Oando, marking our entry into the Nigerian power sector and another major step in the development of our mid- and down-stream business. Our power generation strategy has always been clear – to contribute several captive power plants to Nigerian markets to boost electricity supply and help meet the huge and rapidly growing demand for power for local industry. Our objective is to redefine how energy is accessed in Nigeria and Africa. We will continue to build world class energy platforms that support industrialisation and economic development.”

Also commenting during the inauguration of the facility, Mr. Babatunde Fashola, the Executive Governor of Lagos State, said, “This project is a classic example of how public private partnerships can benefit the people: It means that by shifting from diesel to gas, we are saving 27 per cent of our energy cost to provide water, which translates to about N1,602,236 of taxpayer’s money daily and N591 million annually.”

Bolaji Osunsanya, Chief Executive Officer, Oando Gas and Power said, “This project is a testament of Oando’s continuous improvement in execution capability as we had to develop the 13km gas pipeline for this project through built-up areas and a major river crossing, while maintaining international safety standards and environmental friendliness. It is also a significant way of demonstrating how we are well positioned to leverage our gas pipeline network to provide captive power solutions to meet Nigeria’s energy needs”.

Commenting further, Mr. Osunsanya said, “The major social significance of this facility is that it powers Lagos Water Corporation’s major water works, which is responsible for 80% of water supply to the over 18 million residents of Lagos State. This significant improvement in potable water provision will reduce the incidence of pipe-borne water diseases and promote economic activities in the state”.


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