READY TO POWER

Nigeria 2016 | ENERGY | INTERVIEW

TBY talks to Femi Otedola, Chairman of Forte Oil, on the current economic situation, the company's role in the sector, and downstream development.

Femi Otedola
BIOGRAPHY
Mr. Olufemi Otedola was appointed Chairman of the Board of Directors of Forte Oil Plc in 2007. He cut his entrepreneurial teeth in printing, and became Managing Director of Impact Press Limited in 1988. In 1999, he founded Zenon Petroleum & Gas Limited. In 2001, he incorporated Seaforce Shipping Company Limited. Mr. Otedola went on to found other companies including Atlas Shipping Agency Company, F.O. Transport Limited, F.O. Properties Limited, Swift Insurance Brokers Limited and Garment Care Limited. In 2010, he was awarded the National Honors of ‘Commander, Order of the Niger – CON’ by the President of Nigeria, and a member of the National Economic Management Team (EMT).

Forte has just received an investment of $200 million by Mercuria Group in exchange for a 17% stake. How has this deal changed Forte's strategy going forward?

Our five-year strategic business outlook, which commenced in 2015, makes mention of a number of key focus areas. We said we would strengthen our balance sheet and optimize our working capital mix amongst other things. We also stated that we would aggressively pursue M&A opportunities along the energy value chain. This deal with Mercuria fulfills some of these aspirations. This is not so much of a change in strategic direction, but rather a fulfillment of a major anchor point of our strategic plan. We have had a long-term trading relationship with Mercuria, and this investment now deepens opportunities for us to derive full benefits of backward integration along the value chain.

How has the current economic situation affected your business?

Our business model is built on the foundations of resilience and our ability to adapt to changes in our operating environment. The significant dip in oil prices and its spiral effects on the Nigerian economy and our business were taken into account for our forecast for the year. Current oil prices have adversely affected the national income and consequently fuels consumption on the retail segment of our business. Our upstream services business has also been negatively impacted as the E&P companies have had to re-negotiated contracts in view of the falling oil prices. However, diversification into the power generation business and our focus on high-margin products, such as lubricants and LPG, have allowed us to absorb these shocks, which I believe are temporary. The new government is doing all it can to create a stable business environment that will improve the overall macro-economic conditions in Nigeria.

Forte acquired the Geregu Power Plant during the power sector privatization and has recently signed an agreement with Siemens to overhaul it. What role do you envision power sector projects playing in Forte Oil's mix of assets in the future?

We have always stressed that our goal was to diversify our revenue base, and we achieved this via the strategic acquisition of the Geregu Power Plant. Power sector projects will continue be center stage of our growth aspirations. Going forward, we expect to see the power business contribute significantly to our corporate basket. Our expectation is that as the government continues to provide the right enabling environment, particularly in terms of necessary improvements to the existing regulatory and operational frameworks, our strategic assets will deliver even more value to the shareholders. In addition, as more Nigerians set up SMEs and our local industries step up their production as a result of improved power supply, we foresee a growth in the demand for power required to meet their operational needs. The major overhaul places us in a good stead to meet the ramped up demand.

As Nigeria's economy grows and per-capita GDP rises with it, what are the growth prospects in your downstream distribution business?

Ours is a youthful population with rising demand for consumable products. Our passion is to keep improving lives by providing uncommon service solutions to all Nigerians. As we expand our retail footprints and continue to provide convenient and affordable services, the response from Nigerians has been positive. Growth opportunities for fuels and lubricants lie in our growing population, and in rising demand for distribution from the manufacturing sector in the near future stemming from increased power supply. We also expect increased demand for cooking gas as Nigerians are now making the switch to the LPG. We are also developing and providing convenient payment solutions such as the FO Advantage card to our growing middle class. We are building partnerships with reputable brands to increase traffic to our stations.