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Interesting biog...
"Savannah Energy
Sponsor
Savannah Energy PLC is a British independent energy company focused around the delivery of Projects that Matter in Africa. We want to meaningfully contribute to the economic development of the countries in which we operate through the development of businesses and projects that make a material difference to those countries. We are pursuing growth opportunities in both hydrocarbon and renewable energy.
Savannah aims to deliver utility scale renewable energy projects across Africa and generate clean, competitively priced electricity for millions of households. We are involved across the entire project life cycle, taking projects from greenfield development through to long term ownership and operation. We currently have up to 696 MW of hydroelectric, solar, and wind projects in Niger, Cameroon, and across the Sahel, and are targeting to have up to 1 GW of projects in motion by the end of 2024 across Africa.
Savannah’s existing presence in sub-Saharan Africa through our hydrocarbon operations means we are able to leverage local teams to accelerate our renewable energy business. We are focused on ensuring the highest environmental, social and governance standards to ensure a positive legacy from our projects."
Thanks, trust
Good to see Savannah sponsoring again.
I'd expect the AGM the same week. If Andrew Knott is in BCN for some of 25-28 June (28 June being a Friday), then the AGM can easily be arranged around this to get the accounts approved by month-end. He has zero excuse not to rock up at Bank Street for the AGM (except for a deal execution, of course).
Agree CYB on the accounting around 4. Cameroon.
Of course, there’ll also need to be reference within the acs under the same topic to the corresponding CC acquisition debt servicing from SAVE to XOM that was subsequently refi’d against Cameroon alone.
CYB, rather concerningly, Global Arbitration Review today has an article stating:-
Qatari bank wins billion-dollar award against South Sudan
An ICSID tribunal has ordered South Sudan and its central bank to pay over US$1 billion to repay civil war-era loans made by an affiliate of Qatar’s sovereign wealth fund.
I assume this is added to the list of sovereign debt and won’t impact SS SAVE acquisition…but shows the country needs to generate more revenue and so new investors into O&G sector required urgently…
Brilliant innovative idea, Streets. Everyone would win with this approach.
At this stage, I have no clue what it takes to unlock South Sudan, Niger or the Accugas restructuring. Still, at least everything else is crystal clear...
Amazing. SS unknown. Chad unknown. Niger unknown. The only thing we know is Friday the weekend and the sun is shining. I thought to myself SS would have been done and dusted before my two month US stay end of last year. Since then I went back twice, three trips altogether, yet no changes here, as if we were frozen in time.
Hopefully this will be resolved soon.
https://www.bbc.com/news/articles/cmm3dr2e5lqo.amp
Looks like the funding is still proving difficult to close article from africa intelligence below:
I believe the vitol exclusivity period is until the end of May, so clearly there seems to be sticking points if they are still unable to agree with vitol, vitol as ever can provide funding but i am sure they have their limit as to concessions they are willing to offer no oil trader would sign a bad deal for them so not sure whether Gunvor or Trafigura would offer anything different to what vitol is offering
GOC changes advisers in quest to buy out Carlyle assets
The state-owned Gabon Oil Co recently reviewed its strategy to give itself a better chance of financing the pre-emption of the US investment firm's assets.
Gabon Oil Co (GOC) has changed its advisers as it searches for funds to acquire Carlyle's oil assets in the country, which are operated by Assala Energy, The Paris branch of US law firm Norton Rose Fulbright is now handling the legal side of the highly sensitive matter.
Norton Rose in the past regularly represented the son of former president Ali Bongo, Noureddin Bongo, who has been in prison since a coup last August led by General Brice Clotaire Oligui Nguema (AI, 19/01/23). Until April, GOC worked mainly with the Paris offshoot of the US law firm Baker McKenzie.
But on the banking aspects of the Carlyle-Assala takeover, GOC continues to use the advisory bank Africa Bright, one of whose new executives is Emmanuel Leroueil, who worked as an economic and financial adviser to the Gabonese president's office from 2019 till last October.
Leroueil was a director of GOC until last October. The Franco-Rwandan, a graduate of Sciences-Po in Paris, managed negotiations with oil operators in Gabon from 2022 until last year's coup. Prior to the coup, he had taken on increasing responsibility at the presidential palace in Libreville (AI, 07/12/22).
Exclusivity agreement
Gabon's junta leader said in November that he wanted to nationalise the assets of Carlyle, which produce 45,000 barrels a day, rendering null and void a sales agreement signed six months earlier with Maurel & Prom of the Pertamina group.
GOC signed an exclusivity agreement earlier this year with Vitol to negotiate the terms of raising funds in exchange for marketing the crude generated by these licences, which will remain in Shell's hands until 2017 (AI, 09/04/24). But the exclusivity period will come to an end in a few weeks' time and other commodity traders, such as Gunvor and Trafigura, are keeping a close eye on the deal.
GOC managing director Marcellin Simba Ngabi is under pressure to find the billion dollars needed for the state's pre-emption. If the compromise with Vitol fails and Gunvor or Trafigura cannot raise the money, there will be few other options.
Looks Like Deby has been officially announced as winner in Chad, not that it will have an effect on Savannah's case but will be interesting to see what direction he takes the energy sector now that he has secured and consolidated his position.
https://www.bbc.co.uk/news/articles/cz96ezdljl9o
Thanks for this TIL.
It seems to me that this could be an excellent opportunity for SAVE to propose to the Ministry / Nilepet a prepayment, upon completion of the SS acquisition, of (contractual) oil royalty payments for 2024, which would immediately be released upon completion of the acquisition. A prepayment shouldn’t trigger sovereign debt covenants.
I know that this would have to be carefully considered & structured by lawyers to ensure above-board; and prepayment for a discrete period only, not creating a precedent. This is precisely the sort of agile structured solution SAVE brings to the party.
Just a thought, intrigued whether others think may be possible.
Haha, I share your frustration, Tier. I'll be going for a swim, having a run and getting frustrated at what a completely rubbish guitarist I am. I'll also be planning what to do with my Savannah millions, a second passport being the first purchase.
It may be that they have to stick out an RNS as 17 May approaches simply to say what new extension date has been granted to the Company by the nomad and exchange.
All the best,
I re-read the last two rnses; the last one completely overrides its previous one and May17th is of no significance at all. We don’t know when the next news be, at least until the very end of H1. So boring. 🥱 what is everyone doing this weekend?
Interesting stance by the Nigerian regulator, they are willing to expediate oil major divestment plans if they commit to paying clean up costs
https://www.reuters.com/world/africa/oil-majors-offered-faster-nigerian-exit-if-they-pay-cleanup-2024-05-03/
The South Sudan National oil company is in serious need of cash by the looks of it as it has currently implemented 50% salary cuts leading to some protests
https://x.com/PatrickHeinisc1/status/1787148306507862178
https://x.com/ssemtv/status/1787134822747361341
https://t.co/SHLFwcI7QN
Clearly the South Sudan National oil company as an entity struggles with operational stability, and a very good example of why they are not ready to takeover the Petronas assests.
A strong market signal needs to be given by the government to increase investments and materially increase production from fields
A couple of follow ups:
Re point number 4 on Cameroon, I think I was incorrect: on reflection, I expect the cash won't be booked, but rather a receivable (booked against the liability of deferred revenue that I mentioned before). At least, that's my hope.
The other thing well worth looking out for is a mention of the metrics associated with gross and net debt and any related comments on bank covenants.
South Sudan dismisses allegation of shady oil deal with UAE
The alleged agreement, negotiated on the sidelines of the COP28 climate change summit in December, would see the Hamad Bin Khalifa Department of Projects (HBK DOP) lend South Sudan the money in exchange for discounted oil supplies over two decades.
May 3, 2024
UBA – South Sudan has dismissed accusations of an opaque oil-for-cash deal with the UAE, calling them “unfounded” and “an attempt to damage relations between the two countries.”
The alleged agreement, negotiated on the sidelines of the COP28 climate change summit in December, would see the Hamad Bin Khalifa Department of Projects (HBK DOP) lend South Sudan the money in exchange for discounted oil supplies over two decades.
This is according to a copy of the term sheet seen by Sudans Post and an unpublished U.N. report.
Speaking to reporters following a weekly cabinet meeting in Juba on Friday, deputy information and communication minister Jacob Mijok Korok dismissed the reports as “social media allegations” that don’t require comment.
“There is nothing credible about $13 billion or whatever this figure is. It’s circulating on social media,” Korok told reporters after the meeting shared by President Salva Kiir Mayardit.
The term sheet, however, states that the agreement was signed on Dec. 28 by former finance minister Bak Barnaba and HBK DOP chairman Hamad Bin Khalifa Al Nahyan.
It remains unclear if the initial $5.24 billion tranche of the loan has been received.
Bloomberg reported that under the deal, South Sudan would receive $10 less per barrel of oil compared to the international benchmark.
The U.N. document cited by Bloomberg states that 70% of the loan would be directed towards infrastructure projects in South Sudan.
HBK DOP has previously been involved in a halted bid to buy a stake in Beitar Jerusalem Football Club due to concerns over Sheikh Khalifa’s finances.
https://www.sudanspost.com/south-sudan-dismisses-allegation-of-shady-oil-deal-with-uae/
Should be noted that Pres Kiir fired the above finance minister in March.
"President Salva Kiir fired Barnaba Bak Chol in March after a surge in consumer prices, a decline in the local currency’s value, and a shortage of supplies."
https://sudantribune.com/article285051/
Title should, of course, read FY23 financials.
Muppet.
4. Cameroonian income
I seem to recall (from all that Lower Manhattan Court filing stuff) that cash from Cameroonian midstream revenue is accumulating in a branch account of Citibank NA in Libreville, pending distribution after the arbitral proceedings are concluded (expected mid-2025). It will be very interesting indeed to see how the Company accounts for this. I assume they cannot recognise the revenue but (hopefully clearly!) this is a Savannah Asset. So I suspect we have another category of Contract Liabilities in lieu of revenue and that we recognise the cash in the balance sheet (our proportion of what is held in the Libreville bank accounts). The CL then gets released to P&L on successful completion of the arbitration. Clearly, if the arbitration goes against us (unlikely, I think) then we just unwind the balance sheet gross-up: no P&L impact, again it’s conservative. Of course, the Company may be directed by the auditors to recognise nothing at all and flag that this is without prejudice to the arbitral proceedings.
This begs another question concerning the Exxon debt facility which was originally attributed to the expropriated Chadian assets but was amended in early 2023 (“Following the Nationalisation [Chad], the terms of this facility were amended in 2023.” Note 30, page 169) and included in the FY22 segmental reporting under the Cameroonian business at USD162m. How is that now being serviced or is interest simply rolling up on it?
5. Revenue growth
The encouraging addition of customers in 2022 in Nigeria should begin to have a positive impact on revenue in the 2023 accounts. Too many moving parts to assess the impact but I am cautiously optimistic about this.
6. Transaction fees
These might be rather large given all that is going on. I wonder if they will be separately disclosed.
7. Audit opinion
This is in the FY22 report (page 87): “With respect to the opinion of the Group’s external auditors we do not anticipate that there will be any disclaimer opinion required for 2023 - this has only arisen for 2022 due to the specific and exceptional set of circumstances discussed above.” Let’s hope this holds true.
I’d expect a reported FY23 loss of around USD150m (admittedly, a guess). This belies the great asset base and contingent asset base of the company. I remain as positive on future prospects and I am highly critical of Company engagement with its equity providers.
Here's to some good news and a recommencement of trading soon.
Given the lack of investor engagement, the last meaningful update having been the 29 September interims, I thought I’d flag some key issues to look out for in the FY23 numbers. I am deliberately not commenting here on SS, CC, Niger, renewables: we’ve collectively discussed all those at length. Rather, I wanted to refocus on the financial aspects of the business. I am really hoping some of you will add to this and give your perspective on it.
A detailed update on the entire liability side of the balance sheet is clearly needed and I hope Nick Beattie will discuss matters up to the reporting date, rather than just to the balance sheet date.
Foreign exchange losses
USDNGN started the year at about 450 and ended it at 900-ish.
The reported net exposure in NGN at 31 December 2022 was USD177m (note 35(d) to the financial statements). Obviously payments in NGN in lieu of USD for FY23 will have been made across the board: these should amount to an invoiced dollar equivalent of USD300m or so for the year, perhaps a little more.
I’m envisaging unrealised FX losses for the year in the region of USD80-100m for the year (USD54m was reported for the first half when NGN finished at about 760). If unrealised losses were reported to current date now that USDNGN is around 1,380, I’d expect cumulative unrealised losses of up to USD150m-ish. These are guesses.
This is clearly a significant issue.
2. Debt service burden.
From page 90 of the FY22 financials: “The average interest rate on debt for the Group was 12.0% (2021: 10.2%), due to higher US LIBOR rates in 2022.”
Financing costs were USD79m in FY22 (page 88).
I’d guess the blended rate was perhaps 2.5% higher on average for 2023: so 14.5%. Given we still don’t seem to be able to swing our NGN into USD (see my note on FX losses above) the interest burden is likely to be a bit higher, I guess in the region of USD100m. Until we can switch our USD revenue, paid in NGN, for USD and apply it to the debt, the interest burden will remain a significant drag.
3. TOP contract impact on financials
Contract Liabilities for FY21 were USD213m, for FY22 USD314m (see note 32, page 170). It’s hard to know whether our customers will have begun to take the as-yet-untaken-but-paid-for gas or whether they will have continued to pay for contractual obligations in FY23 and continued to leave the gas in the ground. I’d hazard a guess that Contractual Liabilities will go up again for FY23, given Nigeria’s volatile year. It will be interesting to see what comment the Company offers on the commercial impact here if this is the case. The accounting treatment adopted is conservative anyway (we aren’t recognising profit on gas left in the ground but already paid for).
markel ceo tom ***nor at the annual 2024 meeting in omaha today, 5 may’24, following the berkshire hathaway 2024 meeting 4 may’24:-
“we couldn’t do what we do without you, our investors, putting in your capital and leaving it with us. we want to treat you as important partners and treat you in the way we would like to be treated if the roles were reversed”
An article in the Guardian about US and Russian troops together in Niger airport. Speaking purely about the current affairs, it feels to me like Niger is now a dead duck, with western influence on the wane I hope I’m wrong, and that we can work together with CNPC but I have a sick feeling we will be leaving Niger with little or nothing.
So essentially there won’t be any news until at least end of June? Back to 😴
Even if we do have approval, we wouldn’t be coming back from suspension on the 17th May (unless the deal is scrapped).
Fair to say there’s been no progress since their first deadline 30/6/23.