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Understanding the Dangote Refinery IPO · The Mwango Capital Podcast

0:00
SPEAKER_01: It's 8 p.m. is African time and you want to get started on these two spaces.
0:04
SPEAKER_01: Our aim today is to check you from zero to around 7 over 10 in terms
0:09
SPEAKER_01: of understanding Dangote Refinery and the IPO itself.
0:12
SPEAKER_01: We just understand the ecosystem around the refinery,
0:15
SPEAKER_01: supply chain,
0:16
SPEAKER_01: the business itself,
0:17
SPEAKER_01: the valuation, the risks, and just about everything that pertains to it.
0:22
SPEAKER_01: If you've been online, there's been a lot of memes being shared about the IPO.
0:25
SPEAKER_01: It's made me laugh a lot.
0:27
SPEAKER_01: It's made me think a lot about how sometimes we take for granted the fact
0:31
SPEAKER_01: that people can participate in buying shares of companies and what it means to be
0:35
SPEAKER_01: a shareholder.
0:36
SPEAKER_01: I think it's made me reflect a lot on that.
0:38
SPEAKER_01: Today's discussion around the Dangoto Refinery and
0:41
SPEAKER_01: the IPO process itself will be enlightening in that sense,
0:45
SPEAKER_01: also in terms of shedding light on some of the things that you've seen online.
0:48
SPEAKER_01: So with me tonight are two speakers, Samuel and Devine.
0:52
SPEAKER_01: So I will allow them to introduce themselves first.
0:54
SPEAKER_01: I'll start with Samuel.
0:55
SPEAKER_01: Just briefly tell us a bit about yourself and what you do, and then we'll get to Divine.
1:00
SPEAKER_00: Thank you very much for this and pleasure being here to everyone.
1:03
SPEAKER_00: I think it's relatively exciting times across Africa with what is perhaps one of
1:08
SPEAKER_00: the most dynamic stories.
1:10
SPEAKER_00: And it's not just around the IPO.
1:13
SPEAKER_00: It's a story in full.
1:15
SPEAKER_00: My name is Samuel Sule.
1:16
SPEAKER_00: I look after Renaissance Capital Africa.
1:19
SPEAKER_00: We are affiliated with Renaissance Capital in Kenya,
1:22
SPEAKER_00: and we'll perhaps at the end of this call share some of the things we're trying
1:25
SPEAKER_00: to do to bring opportunities such as this,
1:28
SPEAKER_00: including this specifically, into, call it the East African market via Kenya.
1:33
SPEAKER_00: Renaissance Capital Africa is active across the investment
1:40
SPEAKER_00: We do equity capital markets deals,
1:43
SPEAKER_00: debt capital markets deals, a ton of M&A advisory restructuring work.
1:48
SPEAKER_00: And we've been very active across 12 African countries over the last three years,
1:54
SPEAKER_00: essentially just trying to bring water with a strong premise that Again,
1:59
SPEAKER_00: African institutions,
2:00
SPEAKER_00: where their advisory,
2:01
SPEAKER_00: where their issuers can do everything and we can be much more inward looking.
2:07
SPEAKER_00: Of course,
2:08
SPEAKER_00: he still needs partners,
2:09
SPEAKER_00: but much more inward looking in the solutions as well as the funding required for
2:14
SPEAKER_00: the African continent.
2:15
SPEAKER_00: So that's me in a nutshell.
2:16
SPEAKER_00: And I'll allow my co-speaker, Devine, to introduce herself.
2:20
SPEAKER_00: Thank you.
2:20
SPEAKER_02: Good evening.
2:21
SPEAKER_02: My name is Devine Ulmerse.
2:24
SPEAKER_02: I work with Reasons Capital Africa,
2:28
SPEAKER_02: an oil and gas analyst,
2:30
SPEAKER_02: and within my coverage, I cover Settler, Taradale, and now the Dangote Refinery.
2:36
SPEAKER_01: Well,
2:36
SPEAKER_01: I want to start with you in terms of just placing the idea in context and you as
2:40
SPEAKER_01: the individuals behind helping people unpack the refinery itself.
2:44
SPEAKER_01: So what do you set context in terms of Nigeria itself as a whole of the country?
2:48
SPEAKER_01: Tell us, what is Nigeria to someone who's never been there?
2:52
SPEAKER_01: I'll do that very quickly.
2:53
SPEAKER_01: Nigeria in the context of Africa is relatively...
3:07
SPEAKER_00: Interesting story.
3:09
SPEAKER_00: It's been known best for exporting culture as well as crude oil and
3:15
SPEAKER_00: for importing everything under the sun, including petroleum.
3:19
SPEAKER_00: Situated in West Africa with a population of above 200 million,
3:23
SPEAKER_00: even though the last census has been some time, but we will say around 200 million.
3:28
SPEAKER_00: Some people say 220 million people.
3:31
SPEAKER_00: It is perhaps one of the greater African consumer markets.
3:36
SPEAKER_00: Over the years, Nigeria moved partly away from, call it, free market mechanisms.
3:43
SPEAKER_00: And a very big part of that was around subsidies for electricity, subsidies for petrol.
3:49
SPEAKER_00: And it did mean all the way to 2023.
3:52
SPEAKER_00: The state of the economy was semi-perilious.
3:56
SPEAKER_00: The government was borrowing, printing money.
3:59
SPEAKER_00: In order to essentially feed or pay for these subsidies.
4:04
SPEAKER_00: And that had a very material part on infrastructure, the CapEx.
4:09
SPEAKER_00: And it even started to eat into salaries and cause what was a big bout of inflation.
4:15
SPEAKER_00: I think since 2023, what had happened is there was an election and a new party was appointed.
4:23
SPEAKER_00: And that was led by the current president.
4:26
SPEAKER_00: And with that precedent came a more free market focus on things.
4:32
SPEAKER_00: Now, the beauty as well as the ugliness of free markets is the price is set
4:37
SPEAKER_00: and salaries don't necessarily match that price as is.
4:41
SPEAKER_00: So Nigeria has become much more free market,
4:43
SPEAKER_00: albeit some parts of the population are still within the lag period for prosperity
4:49
SPEAKER_00: to be seen by most.
4:51
SPEAKER_00: Again, I say most because I'm trying to be relatively direct.
4:55
SPEAKER_00: What has happened is subsidies have reduced drastically on electricity.
5:00
SPEAKER_00: Subsidies on petroleum products were removed immediately because that was costing
5:05
SPEAKER_00: the nation close to $10 billion.
5:08
SPEAKER_00: On the back of that,
5:09
SPEAKER_00: Dangote Refinery has been 10 years in the making,
5:12
SPEAKER_00: but it just happened to be a confluence where,
5:15
SPEAKER_00: As subsidies were being removed,
5:18
SPEAKER_00: the Dangote refinery came on stream shortly thereafter.
5:22
SPEAKER_00: What did that mean?
5:23
SPEAKER_00: It meant that a 650,000 barrel at the time refinery,
5:27
SPEAKER_00: that is now a 700k barrel refinery,
5:31
SPEAKER_00: which could service majority of quality in Nigeria's requirements.
5:36
SPEAKER_00: A lot of West Africa's requirements was in place.
5:40
SPEAKER_00: And that essentially is a big part of the story that we'll be talking about today.
5:46
SPEAKER_00: Nigeria still remains quite integral from a GDP standpoint across the continent.
5:54
SPEAKER_00: There has been a relatively material over the last three,
5:58
SPEAKER_00: four years,
5:59
SPEAKER_00: devaluation of the currency from an official rate that was in the context of 360
6:04
SPEAKER_00: to now 1,300.
6:08
SPEAKER_00: Nigerians of half a year.
6:15
SPEAKER_00: Was the only stock exchange that was close in terms of performance on
6:19
SPEAKER_00: a dollarized basis,
6:20
SPEAKER_00: which is the impact of the appreciation of the currency,
6:23
SPEAKER_00: as well as the performance of the stock exchange on the line,
6:27
SPEAKER_00: or South Korea, which is known for chips, which power AI, which is very topical.
6:32
SPEAKER_00: So again, very dynamic story.
6:34
SPEAKER_00: And in terms of myself, I look after Renaissance Capital Africa, as mentioned earlier.
6:39
SPEAKER_00: And my journey has been one of 18, 19 years.
6:42
SPEAKER_00: Starting off interning because I always knew I needed to do finance, not wanted.
6:46
SPEAKER_00: Needed is the only place I can fully express some of the talents that I have.
6:51
SPEAKER_00: I started off with interning in the UK.
6:54
SPEAKER_00: I joined Renaissance Capital at the time, a much larger emerging and frontier markets group.
7:19
SPEAKER_00: In 2018, and then in 2023, led a buyout of that entity.
7:25
SPEAKER_00: And that is what I've been doing since.
7:26
SPEAKER_00: Work with a very strong team,
7:28
SPEAKER_00: because again, it's really around partnerships, especially from an African context.
7:35
SPEAKER_00: So whether it's my internal colleagues that sit in Nigeria
7:39
SPEAKER_00: or our affiliate colleagues that sit in Kenya and everyone in between,
7:44
SPEAKER_00: we also work in Ethiopia and own a small part of an investment bank there.
7:49
SPEAKER_00: It's really around providing value and the best level services
7:54
SPEAKER_00: beyond international standard because we infuse passion in it while solving some of
7:58
SPEAKER_00: the continent's problems from a financial standpoint.
8:02
SPEAKER_00: I'll pause there and perhaps hand over to you, sir.
8:04
SPEAKER_01: Thank you for setting context.
8:06
SPEAKER_01: Divine,
8:06
SPEAKER_01: could you share a little bit about your journey towards becoming a financial analyst
8:09
SPEAKER_01: and what made you specifically be interested in the laboratory finally?
8:14
SPEAKER_02: I started my journey in 2023,
8:17
SPEAKER_02: started off interning in a company called Pan-African Capital Buildings.
8:23
SPEAKER_02: And I moved to Vertigo Capital, where I was an oil and gas analyst, as well as a telcos analyst.
8:33
SPEAKER_02: Then in 2025,
8:34
SPEAKER_02: I moved to Renaissance Capital, Africa,
8:38
SPEAKER_02: where I'm currently covering,
8:40
SPEAKER_02: like I mentioned,
8:41
SPEAKER_02: the companies under my coverage, Septa,
8:44
SPEAKER_02: Saradel,
8:45
SPEAKER_02: Wando as well, and then the Dangote Refinery, all under the oil and gas sector.
8:50
SPEAKER_02: I think that's pretty legit about me.
8:52
SPEAKER_01: So in that context, then,
8:53
SPEAKER_01: a refinery in the supply chain,
8:55
SPEAKER_01: in the business,
8:56
SPEAKER_01: where does it fit generally so that you give context to the people who are new to
9:00
SPEAKER_01: the oil and gas industry?
9:01
SPEAKER_02: The downstream sector.
9:04
SPEAKER_01: It gives a bit more context to that.
9:06
SPEAKER_02: With the refinery,
9:07
SPEAKER_02: we have the upstream activities with the guys that are drilling and getting oil from
9:12
SPEAKER_02: the ground.
9:13
SPEAKER_02: And then everything after that,
9:16
SPEAKER_02: in terms of refining,
9:17
SPEAKER_02: distribution,
9:18
SPEAKER_02: and meeting the final user,
9:20
SPEAKER_02: everything is classified as downstream, which the refinery sits in.
9:25
SPEAKER_02: That's downstream.
9:27
SPEAKER_01: Samuel then to you, how did Ngochit set up the refinery in Nigeria?
9:31
SPEAKER_01: How was it the setting up process?
9:33
SPEAKER_01: In the context of Nigeria, recently they've become a net export in terms of petroleum products.
9:37
SPEAKER_01: What's their history around the country and oil?
9:41
SPEAKER_00: Nigeria's history is one of oil.
9:42
SPEAKER_00: Oil was discovered shortly before independence.
9:45
SPEAKER_00: And it meant,
9:46
SPEAKER_00: I guess,
9:46
SPEAKER_00: we're already on the route to independence, which meant we still got independence.
9:50
SPEAKER_00: A very strong control from the international oil companies all the way to probably
9:57
SPEAKER_00: about 20 years ago.
9:58
SPEAKER_00: Where we had a series of divestments from them.
10:01
SPEAKER_00: And those divestments,
10:03
SPEAKER_00: typically upstream divestments,
10:05
SPEAKER_00: meant that a lot of indigenous oil companies did come to the fore.
10:10
SPEAKER_00: Now all of this is upstream.
10:11
SPEAKER_00: You pump the oil out of the ground,
10:13
SPEAKER_00: you put it on a ship, and you sell it to a refinery elsewhere.
10:18
SPEAKER_00: This is whilst you have a very strong population with extremely strong demand
10:23
SPEAKER_00: for petroleum products.
10:24
SPEAKER_00: And that's really the context.
10:26
SPEAKER_00: So now you have...
10:27
SPEAKER_00: Much more indigenous ownership of oil and gas fields,
10:31
SPEAKER_00: especially those that are onshore or shallow waters,
10:35
SPEAKER_00: with the internationals, again,
10:36
SPEAKER_00: given the capital expenditure requirements for deep offshore,
10:40
SPEAKER_00: which runs into billions and sometimes tens of billions.
10:43
SPEAKER_00: That's still done a lot by international entities like Shell and Chevron and Total and Exxon.
10:50
SPEAKER_00: But you do have increasing amounts of that commodity cycle being controlled
10:57
SPEAKER_00: by indigenous persons.
10:59
SPEAKER_00: I think what you then notice is in 2013,
11:04
SPEAKER_00: Dangote took a loan,
11:05
SPEAKER_00: having seen that Nigeria was entirely dependent on imports of refined product.
11:12
SPEAKER_00: Here you have a country who at that time was doing anything
11:14
SPEAKER_00: between Nigeria picked around 2.2, 2.3 million barrels per day.
11:20
SPEAKER_00: Most cases over the last decade, anything is in around 1.5 plus or minus.
11:24
SPEAKER_00: And we were still dependent on importing refined products,
11:29
SPEAKER_00: including petrol and diesel and aviation fuel or gas oil.
11:35
SPEAKER_00: It didn't make any sense, but it was a problem that not every individual could solve.
11:41
SPEAKER_00: You needed skill from a From an economy standpoint, you needed capital.
11:49
SPEAKER_00: And so there are really only a few people that can embark on that journey.
11:52
SPEAKER_00: And I think the gentleman has said himself that if at all he knew,
11:56
SPEAKER_00: he would perhaps not have done that journey because it did take 10 years
12:00
SPEAKER_00: and it had its own kerns in between it.
12:04
SPEAKER_00: But I think the explanation that was put in front was one that was pretty exciting
12:08
SPEAKER_00: where he says, if you swim to the middle of an ocean, what do you do?
12:12
SPEAKER_00: Do you swim back or do you continue swimming forward, knowing that there's land in front of you?
12:16
SPEAKER_00: And I think that's essentially how this came about.
12:19
SPEAKER_00: Now, it's coming about with the official launch in 2024.
12:23
SPEAKER_00: Again, took some time to optimize,
12:26
SPEAKER_00: as you will find with everything, because this was done wholly.
12:29
SPEAKER_00: I think it was also stated that every bolt was bought by the Dangote Group
12:33
SPEAKER_00: because it acted as engineering, EPC, engineering procurement contractor.
12:39
SPEAKER_00: And so it built all of this and then takes some time to optimize.
12:43
SPEAKER_00: I think what you then find is that story changes in 2026.
12:48
SPEAKER_00: So you would see that...
13:02
SPEAKER_00: The biggest supplier of jet fuel to Europe for many months this year has been
13:08
SPEAKER_00: the Dangote Refinery, which is, again, very important in context.
13:12
SPEAKER_00: Because without any disruption, it takes a while to set up relationships.
13:17
SPEAKER_00: But because relationships are set up, It's essentially like a road.
13:20
SPEAKER_00: Once it's built, it can be utilized very quickly.
13:23
SPEAKER_00: That confluence is very important in the story and how we treat it on our research.
13:28
SPEAKER_00: A divine will talk through all three.
13:31
SPEAKER_00: I think the other thing that we've seen is that refinery capacity across
13:35
SPEAKER_00: the world has continued to shrink.
13:38
SPEAKER_00: Some of it because those refineries are extremely old.
13:42
SPEAKER_00: The average refineries in some parts of the world,
13:45
SPEAKER_00: as much as 50 years plus, which is very old from our perspective.
13:52
SPEAKER_00: You've also found geopolitics,
13:54
SPEAKER_00: where there's some refineries in Russia,
13:57
SPEAKER_00: in the Middle East,
14:01
SPEAKER_00: And that has meant that demand for final product is very clear.
14:06
SPEAKER_00: And demand is very clear and there's a super premium to it.
14:09
SPEAKER_00: That has an impact on gross refining margins, which plays into the Dangote story.
14:15
SPEAKER_00: But again, we think that...
14:17
SPEAKER_00: But there is a plan for phase two that's already on the way.
14:41
SPEAKER_00: That plan is being financed by the equity that is raised from this, as well as debt.
14:46
SPEAKER_00: The Dangote Refinery Complex raised,
14:49
SPEAKER_00: interestingly last week, a 10-year bond at 8.375% for $750 million.
14:53
SPEAKER_00: It varies close to the Nigerian sovereign.
14:58
SPEAKER_00: So this is an entity that ends dollars,
15:01
SPEAKER_00: has embedded in a captive market, and is essentially changing the model on its head.
15:08
SPEAKER_00: It means that African demand for petrol,
15:12
SPEAKER_00: for diesel,
15:13
SPEAKER_00: for jet fuel,
15:14
SPEAKER_00: as well as NAFTA,
15:16
SPEAKER_00: other derivatives,
15:17
SPEAKER_00: or crude oil, I'll pause there just to see and then take things forward.
15:22
SPEAKER_00: Thank you.
15:33
SPEAKER_01: Very nicely put in terms of setting context.
15:35
SPEAKER_01: And now over to Divine.
15:36
SPEAKER_01: I've looked through your presentation.
15:38
SPEAKER_01: I've shared a bit of the slides there.
15:40
SPEAKER_01: So you have an investment thesis for Dangote refinery.
15:44
SPEAKER_01: Could you share with us maybe the four key points that I see that you raised about the refinery?
15:48
SPEAKER_01: And then before that,
15:49
SPEAKER_01: you can share a little bit about the context in terms of the business and
15:52
SPEAKER_01: the business model itself.
15:53
SPEAKER_02: The investment thesis,
15:55
SPEAKER_02: just like I think Sam has pretty much spoken about the Nigerian story
15:59
SPEAKER_02: and how we've been dependent on importation of refined products here in Nigeria.
16:05
SPEAKER_02: So for us, the investment case really rests on three things.
16:09
SPEAKER_02: Scale.
16:10
SPEAKER_02: It's one of the largest single site refineries in the world.
16:14
SPEAKER_02: It's a 650K capacity that was recently upgraded to 700K.
16:19
SPEAKER_02: And then with the expansion,
16:21
SPEAKER_02: the plant expansion for phase two would lift the 700K
16:25
SPEAKER_02: to 1.4 million barrels per day.
16:28
SPEAKER_02: And also the structural costs, the structural cost advantages that the refinery has.
16:34
SPEAKER_02: Just looking at the European pairs,
16:37
SPEAKER_02: we know that there's an average of what the refining margins are like
16:41
SPEAKER_02: for these refineries and We are saying, okay,
16:45
SPEAKER_02: there's some advantages that the refinery has over those other refineries in terms
16:50
SPEAKER_02: of access to crude.
16:53
SPEAKER_02: So what that means is that we have the crude here in Nigeria,
16:57
SPEAKER_02: unlike other European refineries that will have to wait till the products,
17:04
SPEAKER_02: the crude gets to them.
17:05
SPEAKER_02: It just really takes off the wait time for the crude.
17:09
SPEAKER_02: And also logistics is also linked to the availability of crude too.
17:13
SPEAKER_02: So we have the costs that is associated with bringing crude down to refineries.
17:19
SPEAKER_02: It's significantly lower than other refineries around the world.
17:23
SPEAKER_02: And then in terms of energy, lower costs, we have gas, we buy gas here.
17:29
SPEAKER_02: Cheaper rates,
17:30
SPEAKER_02: that also adds to the structural advantages that accrue to the refinery
17:35
SPEAKER_02: and also lower operating costs.
17:38
SPEAKER_02: It's one of the lowest, since it's a newer refinery, it's more efficient, it has lower costs.
17:43
SPEAKER_02: So just an addition of all these cost savings,
17:46
SPEAKER_02: it will give you an idea of what the gross refining margins should be like
17:50
SPEAKER_02: in November cycle,
17:51
SPEAKER_02: which is like Almost at mid to low 20s,
17:54
SPEAKER_02: just in a normal cycle, excluding non-normal years like 2026.
17:59
SPEAKER_02: And then the other parts of our investment thesis is really the demand part.
18:05
SPEAKER_02: On the demand side,
18:06
SPEAKER_02: what it shows is they're producing and then there's strong demand to take off
18:10
SPEAKER_02: the production, what it's producing.
18:13
SPEAKER_02: And then we see that in some quarters,
18:15
SPEAKER_02: they're actually selling more than they're producing,
18:18
SPEAKER_02: meaning that the demand is always going to be there.
18:21
SPEAKER_02: From Nigeria and also from other African countries.
18:24
SPEAKER_02: And then the final point in our investment thesis is just that earnings infection
18:29
SPEAKER_02: that we've seen.
18:31
SPEAKER_02: From 2024,
18:32
SPEAKER_02: when the refinery,
18:34
SPEAKER_02: when it properly started, around 1.5 billion in losses, the loss in losses.
18:40
SPEAKER_02: And then from 2025, we started to reduce, we saw 476 million in losses.
18:48
SPEAKER_02: And then about any inflection,
18:50
SPEAKER_02: like we've already seen in 2026,
18:52
SPEAKER_02: if you look through it on prospectus,
18:54
SPEAKER_02: you'd see that H1 numbers, H1 is actually, actually in a profit now.
18:59
SPEAKER_02: And we have our expectations for what is going to look like in 2026
19:02
SPEAKER_02: and Really it's just capturing that we've seen that ending inflection happening
19:09
SPEAKER_02: in 2026,
19:10
SPEAKER_02: also due to a stronger crack spreads,
19:13
SPEAKER_02: refining margins currently,
19:14
SPEAKER_02: and also like the structural advantages that I've mentioned earlier.
19:19
SPEAKER_02: And for the business model.
19:21
SPEAKER_02: The simple way to explain it is the refinery buys crude,
19:25
SPEAKER_02: it processes it and it sells the finished products, petrol, diesel,
19:31
SPEAKER_02: aviation fuel,
19:32
SPEAKER_02: and also petrochemicals like polypropylene,
19:36
SPEAKER_02: which is used to make plastics and packaging.
19:39
SPEAKER_02: The difference between what it pays for crude and what it earns
19:43
SPEAKER_02: from those products is what we call that refining margin.
19:47
SPEAKER_02: And that's really the heartbeat of this business.
19:50
SPEAKER_02: And I think I've already mentioned some things that make the refinery different
19:55
SPEAKER_02: from other refineries around the world.
19:57
SPEAKER_02: I think Sam has also touched on the complexity of the refinery.
20:01
SPEAKER_02: That is what we call an NCI and the Dangoteen refinery has a score of around 11.5
20:09
SPEAKER_02: in terms of the complexity and is much larger or it's much higher than the average
20:14
SPEAKER_02: of refineries in Europe, in America or in Asia.
20:18
SPEAKER_02: In practical terms, About 92% of every barley processes comes out as clean and high value fuel.
20:27
SPEAKER_02: So I think that's it for the business model.
20:30
SPEAKER_01: Samuel, from looking at the business itself so far,
20:32
SPEAKER_01: are there things that you'd want to point out to the listeners who are new
20:35
SPEAKER_01: to this industry and the business itself in terms of what makes this asset
20:39
SPEAKER_01: a really prime asset in terms of coming to market at this particular point in time?
20:44
SPEAKER_01: And also to emphasize some of the key points that Diviner's mentioned in terms of
20:47
SPEAKER_01: the investment thesis.
20:49
SPEAKER_00: Well, I think the first thing is,
20:51
SPEAKER_00: again, when you're looking through an investment, what are you investing in?
20:54
SPEAKER_00: You're investing in a very large refinery that is in the right place at
20:58
SPEAKER_00: the right time from a global standpoint.
21:02
SPEAKER_00: Margins, extremely high.
21:04
SPEAKER_00: And that today is a point of view that potentially...
21:07
SPEAKER_00: We have been conservative in our modeling, potentially.
21:11
SPEAKER_00: And margins continues to grow,
21:13
SPEAKER_00: and the numbers that are out till H1 do not show the performance over July
21:18
SPEAKER_00: and August from our perspective.
21:21
SPEAKER_00: It's then shown that this refined The refinery is large and has proven scale.
21:25
SPEAKER_00: And what is happening is that refinery is going to double in capacity,
21:29
SPEAKER_00: partly with the proceeds that are there and become perhaps
21:31
SPEAKER_00: the largest refining group globally.
21:34
SPEAKER_00: When you combine the 1.4 billion,
21:36
SPEAKER_00: but also there's also the Mwango refinery, which will come on stream.
21:40
SPEAKER_00: And I guess they should break ground in the next few months.
21:44
SPEAKER_00: We think some of the advantages, as Devan had mentioned earlier, are structural.
21:48
SPEAKER_00: The refineries are practically quite all.
21:52
SPEAKER_00: And this is a new refinery.
21:54
SPEAKER_00: So it is essentially a 20-something-year-old person competing with
21:59
SPEAKER_00: a 60-something-year-old person.
22:01
SPEAKER_00: From a brain standpoint, there is the ability to compete.
22:04
SPEAKER_00: But if you're wrestling, that's not necessary.
22:07
SPEAKER_00: And I think that's part of what we're seeing now.
22:22
SPEAKER_00: And all the memes and whatnot have come through because there is
22:25
SPEAKER_00: a genuine enthusiasm around this transaction.
22:29
SPEAKER_00: The second to final part is the fact that this is a refinery that's embedded in
22:33
SPEAKER_00: the market that requires refined products.
22:37
SPEAKER_00: So what has this done?
22:38
SPEAKER_00: Again, as I mentioned, the models have been changed.
22:41
SPEAKER_00: Africa is being powered by African energy sources.
22:46
SPEAKER_00: I think that's the right way to put it.
22:48
SPEAKER_00: And so whether it's supply to Ghana,
22:52
SPEAKER_00: to Angola,
22:54
SPEAKER_00: to South Africa,
22:54
SPEAKER_00: to Namibia, to Kenya, even as far flung as Saudi for jet fuel, that is happening.
23:00
SPEAKER_00: And it's not an assumption.
23:02
SPEAKER_00: It's something that's already started happening and happening with very strong scale.
23:07
SPEAKER_00: All of this being done in dollars.
23:10
SPEAKER_00: The refinery is placed in a free trade zone in the Leki corridor of Lagos,
23:15
SPEAKER_00: which is the new industrial city with the relevant tax breaks in there.
23:20
SPEAKER_00: And exports get exported from there, very close to the ports.
23:24
SPEAKER_00: We have had the privilege of being there, watching ports load, seeing the refinery in action.
23:30
SPEAKER_00: And it is a sight to behold.
23:33
SPEAKER_00: So all of this happening on the continent with an efficient refinery
23:36
SPEAKER_00: that can produce at lower cost than most refineries globally is
23:42
SPEAKER_00: the reason why this story is so compelling.
23:44
SPEAKER_00: I think the final part I will now talk to is around, okay, it's a compelling story.
23:50
SPEAKER_00: Why should we buy at the current price?
23:53
SPEAKER_00: And it's really just we're looking through and I'll allow Divine Walk
23:57
SPEAKER_00: to our base case,
23:59
SPEAKER_00: Our bull case as well as our bear case and what those key drivers are.
24:03
SPEAKER_00: Some things is already touched face on a little bit, but perhaps in more detail.
24:08
SPEAKER_00: There are upside prospects.
24:10
SPEAKER_00: If the new refinery comes on stream in line with management at 2028,
24:15
SPEAKER_00: our research essentially stretches it a little bit because we have
24:18
SPEAKER_00: to be conservative to 2030.
24:21
SPEAKER_00: So if that happens earlier, that's certainly going to be positive.
24:24
SPEAKER_00: There are other derivatives from crude oil that are extremely valuable,
24:30
SPEAKER_00: polypropylene being a very key part.
24:32
SPEAKER_00: And that expansion is already on the way.
24:35
SPEAKER_00: So again, that is more cash flow.
24:37
SPEAKER_00: But there are some downside risks.
24:38
SPEAKER_00: Execution risk, as mentioned, when does it happen?
24:41
SPEAKER_00: Is it end of 28?
24:43
SPEAKER_00: Is it 29?
24:43
SPEAKER_00: Is it 30?
24:44
SPEAKER_00: We use the position of 30 because we think that is a conservative but balanced perspective.
24:50
SPEAKER_00: Again, what happens if crack spreads reduce?
24:54
SPEAKER_00: There is a partial mitigant because it's a more efficient refinery than others.
24:57
SPEAKER_00: So you'd always earn higher margins than other refineries.
25:00
SPEAKER_00: But again, reduction is reduction, and we have to basically put that into context.
25:05
SPEAKER_00: And the financing is already being done by the market,
25:07
SPEAKER_00: whether it's the bond markets, whether it's the equity markets.
25:10
SPEAKER_00: So again, reducing some of that risk there.
25:13
SPEAKER_00: But I'll hand over to Divine now to perhaps give a bit more holistic perspective
25:18
SPEAKER_00: of what I've said.
25:19
SPEAKER_01: So Divine,
25:20
SPEAKER_01: over to you,
25:20
SPEAKER_01: give us the base case,
25:21
SPEAKER_01: the bull case and the bear case,
25:23
SPEAKER_01: so to speak, or your base case and the other cases that you have in mind.
25:27
SPEAKER_02: So like Sam has mentioned,
25:29
SPEAKER_02: we're a bit conservative in our valuation and rightly,
25:34
SPEAKER_02: there's that execution risk that we have to account for.
25:37
SPEAKER_02: What if it doesn't happen at the time that they've said that it's going to happen?
25:42
SPEAKER_02: So we had to use a more conservative approach that was 2030.
25:46
SPEAKER_02: So we're assuming,
25:47
SPEAKER_02: our base case is assuming that the second phase of the refinery,
25:51
SPEAKER_02: it happened in 2030.
25:53
SPEAKER_02: And then bull cases, okay, if it happens at the time that's They say it's going to happen.
25:59
SPEAKER_02: So that's an upside to our valuations.
26:01
SPEAKER_02: It presents itself as an upside, basically.
26:03
SPEAKER_02: So if it happens, this is what the valuation would look like.
26:06
SPEAKER_02: And then our bear cases, look, it happens.
26:09
SPEAKER_02: It doesn't happen in 2030.
26:10
SPEAKER_02: It happens in 2031.
26:13
SPEAKER_02: And then we have what the valuation is going to look like if that happens in 2031.
26:18
SPEAKER_02: So all this is really just frustrating.
26:20
SPEAKER_02: Address the fact that we know that there's an execution risk and that has
26:25
SPEAKER_02: to be accounted for in evaluation.
26:27
SPEAKER_02: And that's how we arrived at those cases.
26:29
SPEAKER_01: Could you give us a bit more detail on that?
26:31
SPEAKER_01: You have phase one, phase two, what's in there?
26:34
SPEAKER_01: What do you expect happening in phase two?
26:35
SPEAKER_01: Where are they now in terms of,
26:38
SPEAKER_01: if someone looked at the revenue,
26:39
SPEAKER_01: seeing quite a ramp up in terms of volume this year, margins also going up.
26:44
SPEAKER_01: Could you take us through that a little bit?
26:46
SPEAKER_02: For the first possible question,
26:47
SPEAKER_02: phase one is the refinery,
26:49
SPEAKER_02: the current 700k capacity,
26:52
SPEAKER_02: and then phase two is when it expands from 700k to 1.4 million.
26:57
SPEAKER_02: And it's going to be funded by the proceeds of the IPO,
27:01
SPEAKER_02: cash from the business, and also through debt, like Sam has mentioned.
27:06
SPEAKER_02: And I think for what we've done,
27:08
SPEAKER_02: just looking at our revenue projection,
27:10
SPEAKER_02: that there's a jump in revenue by 2030,
27:13
SPEAKER_02: and that is accounting for the fact that The second phase has already started
27:18
SPEAKER_02: in 2030.
27:19
SPEAKER_02: So you see that jump from 2029 to 2030.
27:23
SPEAKER_02: And then for our refining margins, we've seen that 2026 is a non-normal year.
27:28
SPEAKER_02: We have the tension between US and Iran,
27:31
SPEAKER_02: crack spreads, way over what historical averages were like.
27:36
SPEAKER_02: And then we've accounted for that and okay.
27:38
SPEAKER_02: So for 2027, cracks are not going to be the way they were in 2026.
27:43
SPEAKER_02: So we've accounted for that in our models and bailing out the revenue.
27:47
SPEAKER_02: So if you see the refining margins for 2026, it's different from 2027.
27:53
SPEAKER_02: So you see that we've applied a discount to account for the fact that 2026 is
28:00
SPEAKER_02: a non-normal year, basically.
28:01
SPEAKER_02: So that's how we've done it in our models, basically.
28:05
SPEAKER_01: In terms of risks, one, you highlighted one or two there.
28:07
SPEAKER_01: I wanted you to maybe robustly expound on some of the risks that are inherent in the Dangoturi.
28:12
SPEAKER_01: Finally,
28:13
SPEAKER_01: I think there is specifically the country risk,
28:15
SPEAKER_01: but it's significantly tied to Nigeria as a story.
28:19
SPEAKER_01: But then there's also the expansion to Lambo.
28:21
SPEAKER_01: You can talk a bit about it and what you know so far in terms of the details,
28:24
SPEAKER_01: because I think we heard that the groundbreaking may be at the end of this month.
28:28
SPEAKER_00: I think the risks are understood, and I'll go through very quickly.
28:31
SPEAKER_00: You have a single train, which is a single train.
28:34
SPEAKER_00: And second train is really to de-risk that.
28:36
SPEAKER_00: Because what happens is every few years you have to do turnaround maintenance.
28:42
SPEAKER_00: So it means for that period in time, you are not processing in full.
28:47
SPEAKER_00: And so having a second train de-risk that.
28:50
SPEAKER_00: So the risk is there, but the mitigant is already essentially embedded within the structure.
28:54
SPEAKER_00: Now, with constructing a new refinery, it was effective.
28:58
SPEAKER_00: There are some risks that come with it, the potential for delays.
29:02
SPEAKER_00: And we think that they've done it once before.
29:05
SPEAKER_00: They can do it a second time.
29:07
SPEAKER_00: Well, we stretch the time we think they can do it for.
29:09
SPEAKER_00: But I believe almost all of the The equipment that needs to be put together has been ordered.
29:14
SPEAKER_00: And if you go on site, you see the Koreans doing the work.
29:17
SPEAKER_00: The beauty of that is the infrastructure is the same.
29:20
SPEAKER_00: All you're doing is adding a second refinery and plugging it into existing infrastructure.
29:26
SPEAKER_00: So there's a balance to that risk.
29:29
SPEAKER_00: There's always a point about crude availability.
29:31
SPEAKER_00: In some cases, crude oil is encumbered.
29:34
SPEAKER_00: But again, this is an entity that has imported crude from across the world.
29:38
SPEAKER_00: Whether it's Nigerian crude bought from the Nigerian government via its oil company,
29:43
SPEAKER_00: whether it's Nigerian crude bought from international oil traders, it's easy.
29:48
SPEAKER_00: Whether it is U.S.
29:50
SPEAKER_00: crude or what is called WTI,
29:53
SPEAKER_00: which has been relied upon also,
29:56
SPEAKER_00: And whether it's the fact that,
29:57
SPEAKER_00: of course,
29:57
SPEAKER_00: over time,
29:58
SPEAKER_00: you then find your own sources of crude so you can be much more captive
30:02
SPEAKER_00: and control your environment.
30:04
SPEAKER_00: We think, again,
30:05
SPEAKER_00: that's a risk,
30:05
SPEAKER_00: but within it has shown some level of mitigants,
30:08
SPEAKER_00: but one has to always be watchful for that.
30:10
SPEAKER_00: I think most importantly is cyclical risk.
30:13
SPEAKER_00: In times of recession...
30:15
SPEAKER_00: Of course, people demand or utilize less fuel.
30:18
SPEAKER_00: And so there is that part.
30:21
SPEAKER_00: In this case,
30:22
SPEAKER_00: our balancing is that the crack spreads,
30:25
SPEAKER_00: will repeat, but it will still be better than your next refiner.
30:29
SPEAKER_00: So that's there.
30:30
SPEAKER_00: And there's Nigeria risk.
30:32
SPEAKER_00: That Nigeria risk seems to be mitigated at this point in time with
30:37
SPEAKER_00: a free market focused government.
30:39
SPEAKER_00: But again, elections are elections and elections happen.
30:42
SPEAKER_00: Populist policies come in some places,
30:44
SPEAKER_00: more balanced policies that take social consciousness into play,
30:47
SPEAKER_00: but they allow the free market to reign also come into place.
30:51
SPEAKER_00: And that's a risk that exists in every country.
30:53
SPEAKER_00: And we can mention a few developed markets where they're facing that risk in real time today.
30:58
SPEAKER_00: So that's it on downside risks.
31:00
SPEAKER_00: And I think the offside risks I'd already explained in full detail.
31:03
SPEAKER_00: Thank you.
31:04
SPEAKER_01: Devine, you did compare the refinery to a couple of other refineries around the globe.
31:09
SPEAKER_01: Could you take us through that peer comparison,
31:11
SPEAKER_01: your valuation versus the peer group,
31:13
SPEAKER_01: and what made you value it as the premium material value?
31:17
SPEAKER_01: In fact, if you look at that, the evolutions metrics that you've shared.
31:20
SPEAKER_02: So it's the reason for the premium is it's a newer refinery.
31:25
SPEAKER_02: It's a 700K capacity with a Nelson complexity index of 11.5, which is above
31:33
SPEAKER_02: Our pair comparables were actually American refineries.
31:37
SPEAKER_02: Most of them are American refineries, right?
31:40
SPEAKER_02: And so you see that it's above the average of what the NCI is in America, which is 10.8.
31:46
SPEAKER_02: And it's also above the NCI of Asia Pacific and also Europe.
31:52
SPEAKER_02: All these, and then the costs, operating costs, I think I touched briefly on that.
31:57
SPEAKER_02: So operating costs are significantly lower.
32:00
SPEAKER_02: And it's definitely lower than the U.S. pairs.
32:04
SPEAKER_02: And then the management also has a guidance or a target to further reduce the cost.
32:10
SPEAKER_02: So when the second train comes,
32:12
SPEAKER_02: and the second train comes on stream,
32:13
SPEAKER_02: we'll see a reduction in cash operating costs,
32:16
SPEAKER_02: and that'll be around $2.4 per barrel.
32:20
SPEAKER_02: Also, the fact that Like I mentioned,
32:23
SPEAKER_02: it's strategically located in a location that has access
32:27
SPEAKER_02: to different markets like West African markets,
32:31
SPEAKER_02: European markets and American markets.
32:34
SPEAKER_02: So all these are basically reasons why we think that it's trading at a premium to pair.
32:40
SPEAKER_02: Thank you.
32:40
SPEAKER_01: And Devine,
32:41
SPEAKER_01: I want you to maybe tell us a few details about the IPO itself,
32:44
SPEAKER_01: how many shares are on offer.
32:46
SPEAKER_01: And I've seen quite a bit of,
32:47
SPEAKER_01: I think the headline on futures today is
32:49
SPEAKER_01: that several Nigerian digital investment platforms suffer the outages
32:53
SPEAKER_01: as retail investors rush to buy shares.
32:54
SPEAKER_01: There seem to be pretty high interest on the IPO itself.
32:58
SPEAKER_01: So you can chase a bit of details on specifics on the IPO.
33:02
SPEAKER_01: What's the start date?
33:03
SPEAKER_01: What's the end date?
33:04
SPEAKER_01: What are many shares that are on offer and all that?
33:06
SPEAKER_01: And then several, you can chip in after that.
33:08
SPEAKER_02: So the offer price is offer price 5.25 naira per share,
33:12
SPEAKER_02: which is around 8.5 cents,
33:15
SPEAKER_02: which brings the valuation of the whole entire business to around 49 billion and
33:20
SPEAKER_02: the minimum number of shares in 10 shares.
33:23
SPEAKER_02: It's majorly targeted for retail investors who's trying to make it more accessible
33:28
SPEAKER_02: and that the IPO really is for the people.
33:30
SPEAKER_02: So it's a minimum of 10 shares and that's 5.25 naira per share.
33:35
SPEAKER_01: Correct, Samah.
33:36
SPEAKER_00: I think the euphoria,
33:38
SPEAKER_00: and I want to call it that,
33:39
SPEAKER_00: the support,
33:40
SPEAKER_00: is a myth of saying what typically isn't done on a private sector African basis
33:47
SPEAKER_00: that solves an African problem has been a very endearing story.
33:51
SPEAKER_00: Yes, Tangote has always had cement.
33:54
SPEAKER_00: Sugar, flour.
33:56
SPEAKER_00: But this is actually a need at a time where it is very evident.
34:01
SPEAKER_00: In other parts of the world,
34:03
SPEAKER_00: over the last few months, you've had rationing of petrol, rationing of diesel.
34:07
SPEAKER_00: You almost had aircraft shot down because they couldn't source.
34:10
SPEAKER_00: They are fuel.
34:12
SPEAKER_00: And across many parts of Africa, there is zero scarcity.
34:16
SPEAKER_00: So solving that innate need for human beings and Africans to rule is something
34:23
SPEAKER_00: that everyone sees.
34:25
SPEAKER_00: So yes,
34:25
SPEAKER_00: the share price has mentioned 525 and a very strong demand where for as little
34:31
SPEAKER_00: as 5,250 or 10 shares minimum, you're having participation from the entire market.
34:37
SPEAKER_00: Yes, there's still a big set of investors,
34:40
SPEAKER_00: but you are getting really to the very crux of the market.
34:43
SPEAKER_00: People who jump on buses that are fueled by diesel or petrol,
34:48
SPEAKER_00: people who jump on planes,
34:49
SPEAKER_00: even for short haul journeys,
34:52
SPEAKER_00: all know that Most likely,
34:54
SPEAKER_00: if you are in West Africa and in many parts of the African continent,
34:58
SPEAKER_00: you are being transported, fueled by fuel from the Dangotei refinery.
35:04
SPEAKER_00: It's almost promoting itself because it is just a very clear proposition.
35:09
SPEAKER_00: I think when we think through it, yes,
35:11
SPEAKER_00: Nigerians have access to it,
35:13
SPEAKER_00: but there are structures coming into play For the rest of Africa,
35:18
SPEAKER_00: not just institutional investors,
35:20
SPEAKER_00: because institutional investors that have custodian relationships or
35:24
SPEAKER_00: that set up asset management relationships with ourselves at Rencap Africa,
35:29
SPEAKER_00: for example, can get access.
35:31
SPEAKER_00: But we are working on structures,
35:33
SPEAKER_00: particularly across the piece because we are Pan-Africa and Renaissance Capital,
35:37
SPEAKER_00: Renaissance Africa,
35:38
SPEAKER_00: Renaissance Capital tenure to provide access
35:43
SPEAKER_00: And I think East Africa is number one priority on that access list.
35:49
SPEAKER_00: It's number one priority because it's a deep market.
35:52
SPEAKER_00: Kenya is deep.
35:54
SPEAKER_00: It's a market that is also going to have its own refinery by the same promoter.
35:58
SPEAKER_00: It's a market that seems to understand the story and has
36:03
SPEAKER_00: the right regulatory frameworks to enable participation on a cross-border basis.
36:10
SPEAKER_00: And what I would say is very much watch that space.
36:13
SPEAKER_01: So the people's IPO is generating a lot of interest from the people.
36:16
SPEAKER_01: Yes.
36:17
SPEAKER_01: Maybe I can switch to divine a little bit.
36:19
SPEAKER_01: When I look at your modeling,
36:20
SPEAKER_01: you're showing a bit of the leveraging,
36:22
SPEAKER_01: a reduction in the debt,
36:23
SPEAKER_01: especially net debt to EBITDA,
36:25
SPEAKER_01: cash flows being positive for the period of your modeling.
36:29
SPEAKER_01: And I want you to take us through your thinking around leverage with data.
36:32
SPEAKER_01: Take up a bit more debt coming,
36:33
SPEAKER_01: even after they've taken up a little bit of money over the IPO period.
36:37
SPEAKER_01: Capital expenditures, should you expect them to ramp up a bit in terms of phase two?
36:43
SPEAKER_01: And then talk to us a little bit about the tax holiday.
36:45
SPEAKER_01: So three things, the leveraging story about net debt to EBITDA and cash flow business there.
36:51
SPEAKER_01: And secondly, the capital expenditure story, how do you expect them to?
36:55
SPEAKER_01: And then thirdly, the loss of the expected tax holiday.
36:59
SPEAKER_01: Then take us through your thinking around it and what investors should keep in mind.
37:04
SPEAKER_01: And somewhere you can add to that after.
37:06
SPEAKER_02: So on the net debt to EBITDA, the refinery was built largely with debt.
37:11
SPEAKER_02: The ban sheet has been heavily loaded.
37:15
SPEAKER_02: So what we did, like a useful measure here is just the net debt to EBITDA.
37:20
SPEAKER_02: It basically tells you how many years of operating profit it would take to pay off that debt.
37:26
SPEAKER_02: So in 2025, I think that figure was around almost 10x, which is considered higher.
37:33
SPEAKER_02: So this year,
37:34
SPEAKER_02: because we are seeing that earnings are rising sharply,
37:37
SPEAKER_02: we expect that to fall significantly and also next year.
37:41
SPEAKER_02: So the improvement doesn't just come up from paying those debt overnight.
37:46
SPEAKER_02: It also comes because the business is earning more this year and then in subsequent years.
37:51
SPEAKER_02: And my thing for the CAPEX part,
37:53
SPEAKER_02: there's the CAPEX plan from now to 2020,
37:56
SPEAKER_02: when they plan to commission the refinery around $12.4 billion in CAPEX spend.
38:02
SPEAKER_02: So you see that NAFI's Q spending is actually heavy.
38:06
SPEAKER_02: And like we've mentioned,
38:08
SPEAKER_02: there's going to be a mix of the IPO proceeds,
38:11
SPEAKER_02: debt as well, the new debt, and also the cash from the business.
38:16
SPEAKER_02: Just looking at that, we see that cash is going to be used to fund the expansion.
38:22
SPEAKER_02: And just on the tax holiday,
38:24
SPEAKER_02: speaking on taxes, previously there was a five-year pioneer period for the refinery.
38:30
SPEAKER_02: It's an economically important company in Nigeria,
38:34
SPEAKER_02: so it qualified for that five-year pioneer period, tax-free period.
38:38
SPEAKER_02: But the new act in 2025 that was reversed and there's
38:43
SPEAKER_02: a 15% minimum effective tax rate on the business now on profits.
38:48
SPEAKER_02: And what management has said is they're trying to talk to the government to see
38:53
SPEAKER_02: if they can reverse that because the whole point is over.
38:56
SPEAKER_02: It was built in a location where it wasn't meant to pay taxes, especially for exports.
39:00
SPEAKER_02: From now you have profits are being taxed,
39:03
SPEAKER_02: even though very low at 15%,
39:05
SPEAKER_02: but still according to what we've gotten from the company,
39:08
SPEAKER_02: they're still trying to talk to the government to see how they can reverse
39:13
SPEAKER_02: the taxes, the new tax act.
39:15
SPEAKER_02: Thank you.
39:16
SPEAKER_01: Additional question leading to you then,
39:18
SPEAKER_01: in terms of the capex and leveraging plan,
39:20
SPEAKER_01: what's your sense of management in terms of dividend policy going forward?
39:25
SPEAKER_01: Have they mentioned anything or should investors look at this more as
39:29
SPEAKER_01: a share price appreciation play?
39:31
SPEAKER_00: I think it's a combination of both, but you have to put three things into context.
39:36
SPEAKER_00: If they weren't expanding the refinery this year,
39:38
SPEAKER_00: this IPO might not even have happened because it's extremely cash liquid based on
39:43
SPEAKER_00: where we are today.
39:45
SPEAKER_00: But there is an expansion.
39:46
SPEAKER_00: We provide a very material de-risking to the business.
39:50
SPEAKER_00: And that expansion is essentially the funding for it is already in play.
39:55
SPEAKER_00: So it's a fast-growing business with high growth,
39:58
SPEAKER_00: but that growth is being reinvested in making the business even more solid.
40:02
SPEAKER_00: So when dividends start to come, they come and they come very furiously.
40:07
SPEAKER_00: I think they've also stated that dividends can be elected for local currency
40:11
SPEAKER_00: or foreign currency because majority of the revenues of the entity are
40:17
SPEAKER_00: in US dollars.
40:19
SPEAKER_00: Oil is a dollar commodity.
40:21
SPEAKER_00: So whilst dividend policy has not been Fully defined at this point in time,
40:28
SPEAKER_00: we do expect that those dividends will be material post
40:32
SPEAKER_00: the college funding financing of the second train, which is already in play.
40:38
SPEAKER_01: So we are almost drawing to the end.
40:40
SPEAKER_01: So I want to kind of a quickfire session.
40:42
SPEAKER_01: There was talk of cross-listing.
40:44
SPEAKER_01: I think the listing was in London.
40:46
SPEAKER_01: Did that fall through or what happened there?
40:48
SPEAKER_00: I think I'll respond to that.
40:51
SPEAKER_00: What's the way this is being looked at?
40:53
SPEAKER_00: I think London, there was some miscommunication.
40:57
SPEAKER_00: The Dangote cement business is listed in Nigeria, but does operate across many African markets.
41:04
SPEAKER_00: That is going to be dual listed in London.
41:08
SPEAKER_00: I think Aladi Dangote has mentioned that in the future,
41:12
SPEAKER_00: following his African expansion, there will be a listing in New York.
41:19
SPEAKER_00: He said categorically.
41:20
SPEAKER_00: So again,
41:21
SPEAKER_00: that will then provide an extra avenue of liquidity for investors that participated
41:26
SPEAKER_00: at this time.
41:27
SPEAKER_01: And then in terms of the impact on the broad African energy landscape,
41:32
SPEAKER_01: what do you think is the impact of the Dangote refinery?
41:34
SPEAKER_01: Now, is it showing that anything is possible?
41:37
SPEAKER_01: You can move up the value chain?
41:40
SPEAKER_00: Chose with the right mind,
41:41
SPEAKER_00: the right focus,
41:43
SPEAKER_00: the right capital,
41:44
SPEAKER_00: the right backers,
41:45
SPEAKER_00: the right advisors, that it is possible to redefine any landscape.
41:50
SPEAKER_00: In this case, it's energy, or we've seen it in finance, we've seen it across the board.
41:55
SPEAKER_00: And it's really a part of a Pan-Africanism around finding solutions.
42:04
SPEAKER_00: How do we finance ourselves?
42:08
SPEAKER_00: How do we feed ourselves?
42:09
SPEAKER_00: How do we power our own industries?
42:12
SPEAKER_00: How do we transport ourselves?
42:14
SPEAKER_00: And this is just a very material part of that exercise we expect to continue over
42:19
SPEAKER_00: the coming decades.
42:20
SPEAKER_01: Divine, in terms of competition,
42:22
SPEAKER_01: is there potential that other African countries would copy this
42:25
SPEAKER_01: and say they would want to set up their own refineries and then
42:27
SPEAKER_01: that would tie up competition across the continent for the supply of crude oil
42:31
SPEAKER_01: across the continent?
42:33
SPEAKER_01: And then that would perhaps pressure margins.
42:36
SPEAKER_01: What's your sense of the competition landscape for the Dango Tree Finder in Africa?
42:40
SPEAKER_02: I think just looking at it,
42:41
SPEAKER_02: I don't think in terms of competition that there'll be anything now
42:45
SPEAKER_02: because seeing how long it took,
42:48
SPEAKER_02: For this refinery to actually happen, it took around maybe over 10 years.
42:53
SPEAKER_02: And just the way you look at the time and then the cost of everything that it takes
42:58
SPEAKER_02: to build refineries, I don't see any competition for the refinery.
43:02
SPEAKER_00: See, private sector-driven enterprise or exercise...
43:07
SPEAKER_00: There are very few people that have that same balance sheet and the audacity
43:13
SPEAKER_00: and vision to execute it.
43:15
SPEAKER_00: So would we see refineries that are 10,000, 50,000, perhaps 100,000 barrels?
43:19
SPEAKER_00: The answer is yes, but this scale is just very material.
43:24
SPEAKER_00: Governments have to fund social programs, general infrastructure, social services.
43:30
SPEAKER_00: It's very difficult for a government to even say,
43:32
SPEAKER_00: do you know what,
43:33
SPEAKER_00: let's build this in four or five years with the right incentive scheme
43:36
SPEAKER_00: and actually execute and get it done.
43:38
SPEAKER_00: And of course, the first time it's taken 10 years, but all the lessons are being learned.
43:43
SPEAKER_00: So for someone else to try and do the same scale, They would also need to learn their lessons.
43:49
SPEAKER_00: And I mentioned earlier, the engineering procurement contracting team was internal.
43:54
SPEAKER_00: It's a very different exercise.
43:56
SPEAKER_00: Because of how it almost creates a motive in itself,
44:00
SPEAKER_00: that who else can do this of this size, of this scale?
44:03
SPEAKER_00: Yes, there are some refiners that were trying to build further refining capacity in India.
44:09
SPEAKER_00: It's taking some time.
44:10
SPEAKER_00: I think there's some land disputes there.
44:13
SPEAKER_00: There are significant constraints across all of the board to achieve this feat,
44:18
SPEAKER_00: which is why it's so celebrated, might I say.
44:21
SPEAKER_01: And you talked about the capacity being internal in terms of the management team
44:25
SPEAKER_01: that they helped build.
44:26
SPEAKER_01: Could you turn us through a little bit and maybe the management team and how it looks like?
44:30
SPEAKER_01: Is there a key boundaries?
44:31
SPEAKER_01: Because all we hear about, at least for the rest of Africa, is demand and go to himself.
44:36
SPEAKER_01: Are there people beyond him that are responsible for the rest of the business?
44:39
SPEAKER_00: Maybe I'll start.
44:40
SPEAKER_00: I'll just lay the land for divine.
44:42
SPEAKER_00: And I think in our research report, you would see the full management team.
44:46
SPEAKER_00: It is global experts across the board,
44:48
SPEAKER_00: starting with David Baird,
44:50
SPEAKER_00: who worked in Qatar and has worked in quite a few refinery complexes over his,
44:54
SPEAKER_00: call it 30, 40-year career.
44:56
SPEAKER_00: And whether it's the procurement team, supply chain, it is of world-class standard.
45:03
SPEAKER_00: Because when you have something of this scale that services the world,
45:07
SPEAKER_00: you need world-class talent to deal.
45:09
SPEAKER_00: Now, vision,
45:10
SPEAKER_00: yes, Alaji Aliko Dangote is the visionary, but no visionary executes without a team.
45:15
SPEAKER_00: And I think that's what you find here.
45:17
SPEAKER_02: Divine?
45:18
SPEAKER_02: Nothing much to add.
45:19
SPEAKER_02: Just he has mentioned the experience, the team.
45:22
SPEAKER_02: They have MD slash CEO, Mr. David Bird, who has over 25 years of experience in oil and gas.
45:29
SPEAKER_02: They also have the CFO as well as other very experienced and seasoned people on the team.
45:36
SPEAKER_02: I think that's all I have to add.
45:38
SPEAKER_01: In terms of the currency itself, could you also remind us, are there sales in Nigerian Naira?
45:44
SPEAKER_01: Are there costs in US dollars perhaps?
45:47
SPEAKER_01: Is there a mismatch there?
45:48
SPEAKER_01: Should investors be worried there a little bit about it?
45:50
SPEAKER_01: We've also had a couple of times in the past where the Nigerian currency has been devalued.
45:55
SPEAKER_01: Is that something that especially investors from the rest of Africa should be aware of?
45:59
SPEAKER_01: Are there still challenges, by the way, with access to US dollars?
46:03
SPEAKER_00: I'll take the challenges question and the rest for divine.
46:06
SPEAKER_00: There are no challenges at this point in time.
46:08
SPEAKER_00: We have a central bank that's extremely conventional.
46:11
SPEAKER_00: That central bank allows the free flowing of funds.
46:15
SPEAKER_00: Again, I think Nigeria uses the Bloomberg matching system.
46:19
SPEAKER_00: You can see the list of buyers, the list of sellers, and you can see where it crosses.
46:22
SPEAKER_00: I think, again,
46:23
SPEAKER_00: if we look at currency, the currency has appreciated over the last 12 to 18 months.
46:28
SPEAKER_00: So extremely strong.
46:30
SPEAKER_00: But embedded within this is a strong dollar component for sales.
46:34
SPEAKER_00: As I mentioned earlier, the refined products from crude oil are all traded in dollars.
46:41
SPEAKER_00: And this is the private enterprise that would demand what the market price is.
46:45
SPEAKER_00: Devine?
46:47
SPEAKER_02: Yes, just like Sam mentioned,
46:49
SPEAKER_02: the cost,
46:50
SPEAKER_02: the crude component is in dollars and the cost,
46:53
SPEAKER_02: everything,
46:53
SPEAKER_02: basically the cost of the business is in dollars and then the pricing as well.
46:58
SPEAKER_02: So the pricing of refined products is also linked to the dollar as well.
47:02
SPEAKER_02: So we have almost everything is
47:05
SPEAKER_01: basically done in dollars.
47:06
SPEAKER_01: In terms of participation in the IPO process itself,
47:10
SPEAKER_01: I know Sam,
47:11
SPEAKER_01: when you said you're working on means in which people
47:13
SPEAKER_01: in specific countries can participate.
47:15
SPEAKER_01: In terms of Renaissance Capital Africa yourself, how are you helping?
47:18
SPEAKER_01: Are you working around with investors and how can they reach you so
47:22
SPEAKER_01: that they're able to ask some of these questions that they have in the process?
47:25
SPEAKER_01: So someone, perhaps you can respond to that.
47:27
SPEAKER_00: Thank you very much.
47:28
SPEAKER_00: I think you circulated the research report as well as the presentation.
47:32
SPEAKER_00: Our emails are there.
47:33
SPEAKER_00: We do have a website where you can see the IPO research again,
47:37
SPEAKER_00: and you can apply to set up an account.
47:39
SPEAKER_00: The one thing we note is most accounts require a biometric verification number.
47:44
SPEAKER_00: So again, that precludes a lot of call it non-Nigerian based persons.
47:50
SPEAKER_00: But again, watch this space.
47:51
SPEAKER_00: There is a structure coming in place that would open up Participation
47:55
SPEAKER_00: for East African slash Penian investors.
48:00
SPEAKER_00: And that's going to come on board very shortly.
48:03
SPEAKER_00: At the very end of the research report, you'll find our email addresses.
48:06
SPEAKER_00: Research at rankupafrica.com gets you to the research team of which Divine is a key member.
48:12
SPEAKER_01: We're winding up, so I want to start with Divine and then Samuel.
48:14
SPEAKER_01: You can tell us what are your key takeaways that you want investors to remember
48:18
SPEAKER_01: from these spaces?
48:19
SPEAKER_01: Divine first, and then Samuel, you can wrap up for us.
48:23
SPEAKER_02: So I'd say the Dangoto Refinery, it came at a time where Africa needed it.
48:28
SPEAKER_02: There was a lot of dependence on the importation of refined products.
48:32
SPEAKER_02: And we think that the refinery,
48:34
SPEAKER_02: like I said, it came at a very important time where Africa needed it.
48:38
SPEAKER_02: And it's in a very good location that allows it to access markets in terms of, okay,
48:45
SPEAKER_02: even if it's importing crude or if it's exporting the refined product outside
48:52
SPEAKER_02: of Nigeria.
48:52
SPEAKER_02: So it sits up.
48:53
SPEAKER_02: That's such a strategic location that is very key to reaching other markets.
48:59
SPEAKER_02: And also looking at costs,
49:01
SPEAKER_02: a very cost location refinery, newer refinery with a much higher complexity.
49:06
SPEAKER_02: So all these things,
49:08
SPEAKER_02: just looking at everything together just makes it one of a very compelling story for
49:12
SPEAKER_02: a refinery.
49:13
SPEAKER_01: Thank you, Divine.
49:14
SPEAKER_01: Before I switch to Samuel, did you have any comment on the Lama refinery?
49:17
SPEAKER_01: I think Kenyans are hearing that there would be a groundbreaking at the end of this month.
49:21
SPEAKER_01: In your research, did you come across any details that you'd want to share?
49:25
SPEAKER_02: No, nothing yet.
49:27
SPEAKER_01: No details in the prospectus, in management or anything, any comments, right?
49:32
SPEAKER_02: I don't have any comments yet.
49:34
SPEAKER_01: All right.
49:35
SPEAKER_01: Samuel, did you find anything?
49:37
SPEAKER_01: I think that remains a very key focus.
49:39
SPEAKER_00: And I thought there'll be announcements calling very good time on that.
49:44
SPEAKER_01: So you do think that it's something viable?
49:46
SPEAKER_00: Yes.
49:47
SPEAKER_00: The train has already left the station, might I say.
49:49
SPEAKER_01: Samuel, I want you,
49:50
SPEAKER_01: in terms of wrapping up,
49:51
SPEAKER_01: telling us a bit about the key number or metrics that investors should pay attention
49:55
SPEAKER_01: to and some of the key days that they should pay attention to.
49:58
SPEAKER_01: And you can pitch to us why they should come and be with you through the IPO process.
50:03
SPEAKER_00: I think it's very important to understand this is an African story
50:07
SPEAKER_00: about African sustainable energy that has been built.
50:11
SPEAKER_00: And again, its expansion now requires some African support.
50:15
SPEAKER_00: In terms of matrices, I think now it's going to be a listed company.
50:18
SPEAKER_00: It's going to adhere to those roles.
50:20
SPEAKER_00: So you expect quarterly results, which means you can track.
50:23
SPEAKER_00: I think there's a strong governance framework that's also been put in place.
50:28
SPEAKER_00: And you can see the board of directors, as well as the management team, has shared.
50:32
SPEAKER_00: And in terms of key matrices,
50:35
SPEAKER_00: we'll always look at that a bit,
50:36
SPEAKER_00: that number, because we want to understand how it looks.
50:40
SPEAKER_00: And we always look at the multiples.
50:41
SPEAKER_00: But even on a daily basis, you can see what crack spreads are doing.
50:44
SPEAKER_00: So again,
50:45
SPEAKER_00: for the next,
50:46
SPEAKER_00: call it 12,
50:47
SPEAKER_00: 18, 24 months, we understand some of the capacity constraints that exist globally.
50:52
SPEAKER_00: And we think this is perhaps one of the most succinct ways to To play the fact
50:56
SPEAKER_00: that there is a global demand for refined products and there is not enough supply.
51:02
SPEAKER_00: And in some cases,
51:04
SPEAKER_00: refineries exist that cannot get crude just because of some of
51:07
SPEAKER_00: the geopolitics around the street as well as other areas.
51:11
SPEAKER_00: So again, a very timely story and one that, again, we think...
51:16
SPEAKER_00: From our perspective,
51:18
SPEAKER_00: that everyone should do the homework,
51:20
SPEAKER_00: read your research,
51:21
SPEAKER_00: read the perspectives,
51:22
SPEAKER_00: but one that we think,
51:23
SPEAKER_00: from our opinion, is a credible investment at this point in time.
51:29
SPEAKER_01: Thank you, Samuel.
51:30
SPEAKER_01: Thank you, Divine, for joining us.
51:32
SPEAKER_01: We appreciate that you took the time and the hour to take us to the Dangotri Finery.
51:36
SPEAKER_01: For the rest of the audience,
51:37
SPEAKER_01: we appreciate also your time for the hour also that you shared with us.
51:40
SPEAKER_01: Thank you for me, Mokaya,
51:41
SPEAKER_01: and Samuel,
51:42
SPEAKER_01: and Divine here,
51:43
SPEAKER_01: and for the rest of the team at Mwango Capital who are working behind the scenes
51:46
SPEAKER_01: to make sure that these spaces become a success.
51:48
SPEAKER_01: Thank you.