- Says We Demonstrated Proven Profitability Before Refinery IPO
Dangote Refinery has set a three-year completion target for its planned expansion to 1.4 million barrels per day , with the company disclosing that virtually all major equipment for the project has already been ordered and most contracts signed.
The Vice President of Dangote Refinery, Edwin Devakumar, disclosed this during a media interaction on Friday at the refinery in Lagos saying the expansion could even be delivered ahead of the three-year target because significant preparatory work had already been completed.
Devakumar said the refinery which is currently running at about 710, 000 bpd from its projected 650,000 bpd would enjoy major cost advantages in the expansion plans because the land and critical infrastructure were already available, while much of the engineering and design would replicate existing facilities.
“We are targeting three years and probably we may be even doing faster than that,” he declared.
According to him, the company has completed the entire basic engineering for the expansion and almost all the detailed engineering, while virtually all major equipment has been ordered.
“Contracts have been signed. Most of them, we have already given them advance. So we are at that stage where we have practically gone very far,” Devakumar said.
He explained that only smaller items such as bolts, nuts, flanges and fittings were yet to be ordered, noting that such materials had relatively short delivery periods of about three to four months.
He also projected that the cost might be slightly lower than the initial cost.
“Overall, there will be a slight reduction in cost compared to the first stage. But time-wise, we have already signed all the licences. We have got the licence,” he said.
Petrochemical Plants To Raise Expansion Cost
Devakumar, however, disclosed that the expansion would include additional petrochemical facilities that were not part of the original configuration, including linear alkyl benzene and a propylene hydrogenation plant.
He said these additions would create extra costs even as savings would be achieved through the use of existing infrastructure and the replication of engineering designs already developed for the refinery.
“We are also adding petrochemical side,” he said, adding that the company had instructed its design engineers to reduce engineering and design costs because much of the work would be replicated.
‘We Took The Risk Before Inviting Shareholders’
On the ongoing public offering of shares in the refinery, Devakumar said the company deliberately waited until the facility had commenced operations and demonstrated profitability before approaching the capital market.
He said the refinery had operated for about six months before the IPO, stressing that the strategy was consistent with the investment philosophy of the Dangote Group.
“Our philosophy is: go and invest, complete the project, bring it to operations, start declaring your profit, and then go public,” he said.
Devakumar said the approach was designed to ensure that prospective shareholders were not being asked to take the construction and commissioning risks associated with a major industrial project.
“What we are achieving is none of the shareholders is taking any risk because we are selling a company which is already running profitably,” he said.
He added that the decision also enabled the company to command a better valuation because it was offering investors an operating and profitable business rather than a project still under construction.
According to him, the Dangote Group has historically financed major projects through its own resources before taking them to the public market, unlike the common model where companies raise a combination of debt and equity during the construction phase.
Devakumar said the decision to move relatively quickly with the refinery IPO was also driven by the desire to broaden ownership and allow more Nigerians to benefit from the company’s growth.
He disclosed that the group was targeting 10 million shareholders, describing the ambition as unprecedented in the global stock market.
“We kept a small threshold, ₦5,250, anybody can afford. So anybody at any level can become a shareholder,” he said.
Devakumar also revealed that employees of the refinery, including himself, participated in an earlier private placement, saying those who understood the project had an opportunity to become shareholders.
He nevertheless advised prospective investors to conduct their own assessment before committing funds to the IPO.
“But you as an individual, before putting your money, you can always do your own evaluation,” he said.
