News / National
NOIC to assume full ownership of Feruka-Harare fuel pipeline
08 Apr 2019 at 01:42hrs | Views
THE Competition and Tariffs Commission (CTC) has approved a deal in which State-owned National Oil Infrastructure Company of Zimbabwe (NOIC) assumes full ownership of the Feruka-Harare fuel pipeline after snapping up Lonmin's 50% shareholding in Petrozim Line (Private) Limited (Petrozim/PZL), NewsDay has established.
Petrozim owns and operates the Feruka-Harare fuel pipeline and currently holds the sole and exclusive rights to transport all petroleum products imported into Zimbabwe through the pipeline.
The pipeline, built in 1966, is somewhat considered a strategic asset. It has a carrying capacity of 6,5 million litres per day and currently accounts for more than 90% of the fuel that comes into country.
Last July, Lonmin "entered into a conditional Sale of Shares Agreement to sell its 50% interest in Petrozim for $14,75 million to NOIC.
Since then CTC has been probing the transaction in line with local regulatory requirements.
"NOIC entered into a joint venture (JV) agreement with Lomnin on 30 September 1988, which detailed the formation, control, operation and objectives of a JV company — Petrozim Line. NOIC had the option to purchase all shares in Petrozim Line owned by Lonmin and is now exercising the option," CTC director Ellen Ruparanganda told NewsDay.
"As a result of this transaction, NOIC will have 100% ownership of PZL, and thereby having sole control of the pipeline and storage facilities managed by PZL. The transaction was classified as a vertical merger and was approved subject to the condition that NOIC maintains the pumping schedules of fuel in a manner that promotes competition among fuel
retailers."
The cash-rich miner last year indicated the transaction was done to enhance its liquidity and was in sync with the company's thrust to dispose non-core assets.
It said its interest in Petrozim has been impaired to nil and no attributable profits were recorded in the company's report and accounts for the year ended September 30, 2017.
Over and above the $14,75 million, Lonmin will receive $8 million in the form of special dividends from Petrozim.
Ruparanganda said by owning 100%, government had made sure that the strategic asset is not abused by private players.
"The fuel pipeline is a strategic asset which can only be best managed by government. If left in the hands of private players the fuel allocations might not be done equitably.
The expected results are that the Government of Zimbabwe, through NOIC, will have 100% ownership of a national strategic asset ie the oil pipeline. This is likely to increase
revenues as well as attracting investors into the country," she said.
There, however, has been an outcry by industry players that Sakunda Holdings, which is owned by businessman Kudakwashe Tagwirei, enjoys a monopoly over the use of the pipeline after it entered into a hazy deal with government to finance the refurbishment of the facility.
Recently government blocked a plan by South African-owned mining, oil and gas services company to construct another 550km fuel pipeline from Beira to Harare, arguing that the sector was oversubscribed, but industry sources said the move was deliberate to shut out new players and maintain Sakunda's monopoly.
Petrozim owns and operates the Feruka-Harare fuel pipeline and currently holds the sole and exclusive rights to transport all petroleum products imported into Zimbabwe through the pipeline.
The pipeline, built in 1966, is somewhat considered a strategic asset. It has a carrying capacity of 6,5 million litres per day and currently accounts for more than 90% of the fuel that comes into country.
Last July, Lonmin "entered into a conditional Sale of Shares Agreement to sell its 50% interest in Petrozim for $14,75 million to NOIC.
Since then CTC has been probing the transaction in line with local regulatory requirements.
"NOIC entered into a joint venture (JV) agreement with Lomnin on 30 September 1988, which detailed the formation, control, operation and objectives of a JV company — Petrozim Line. NOIC had the option to purchase all shares in Petrozim Line owned by Lonmin and is now exercising the option," CTC director Ellen Ruparanganda told NewsDay.
"As a result of this transaction, NOIC will have 100% ownership of PZL, and thereby having sole control of the pipeline and storage facilities managed by PZL. The transaction was classified as a vertical merger and was approved subject to the condition that NOIC maintains the pumping schedules of fuel in a manner that promotes competition among fuel
retailers."
It said its interest in Petrozim has been impaired to nil and no attributable profits were recorded in the company's report and accounts for the year ended September 30, 2017.
Over and above the $14,75 million, Lonmin will receive $8 million in the form of special dividends from Petrozim.
Ruparanganda said by owning 100%, government had made sure that the strategic asset is not abused by private players.
"The fuel pipeline is a strategic asset which can only be best managed by government. If left in the hands of private players the fuel allocations might not be done equitably.
The expected results are that the Government of Zimbabwe, through NOIC, will have 100% ownership of a national strategic asset ie the oil pipeline. This is likely to increase
revenues as well as attracting investors into the country," she said.
There, however, has been an outcry by industry players that Sakunda Holdings, which is owned by businessman Kudakwashe Tagwirei, enjoys a monopoly over the use of the pipeline after it entered into a hazy deal with government to finance the refurbishment of the facility.
Recently government blocked a plan by South African-owned mining, oil and gas services company to construct another 550km fuel pipeline from Beira to Harare, arguing that the sector was oversubscribed, but industry sources said the move was deliberate to shut out new players and maintain Sakunda's monopoly.
Source - newsday
