Zimbabwe has picked Kuwaiti commodities trader Independent Petroleum Group (IPG) to run state-owned oil assets Petrotrade and Genesis Energy, after government cleared out a board that opposed the deal.
IPG will partner the two parastatals, which supply fuel to the government and other agencies, Information Minister Monica Mutsvangwa said Tuesday.
The government had three options for dealing with the two companies; selling their assets outright, merging them and partnering them with a new investor, or forming new companies.
“Cabinet approved the business purchase (option) since it fulfills government’s objective of merging Petrotrade and Genesis Energy at the least restructuring cost. The option will preserve the value created by both entities over the years and ensure minimum disruption to the current operation,” Mutsvangwa said after Tuesday’s Cabinet meeting.
IPG is a 40% shareholder in Inpetro, which operates a 95,000 m³ fuel storage terminal at Beira, Mozambique. The other shareholders are the National Oil Infrastructure Company of Zimbabwe (NOIC) and Petromoc, Mozambique’s national fuels utility.
The Kuwait company has been a major supplier of fuel to Zimbabwe for over two decades, but this will be the first time that it will be involved on the retail end of the fuel chain in Zimbabwe.
Petrotrade operates 30 service stations of its own, and dozens more through dealers. The company sells over 100 million litres of fuel per year, mostly to government agencies, and makes extra money from distribution via its tanker fleet. It claims to hold 10% of the fuel market.
The deal is not without controversy. In March this year, Energy Minister Zhemu Soda fired the board of Petrotrade, saying this was to make way for investigations into “matters of corporate governance”. But this drew a legal challenge from Tinomudaishe Chinyoka, who was Petrotrade chairman.
His court papers laid bare a fight between his board and government over the future of Petrotrade and Genesis. The board, Chinyoka said, had opposed plans to merge the two companies and sell them off at under US$40 million, a price the board saw as an undervaluation.
“That an asset as valuable as Petrotrade is being valued less than US$20 million, a fraction of its value, is in all probability because the intended buyer has already indicated the price he wants to pay,” Chinyoka said in an affidavit.
He claimed that there had been deliberate efforts to undermine the company’s performance to sell it off cheaply.
“The balance sheet has to be terrible,” to justify the discount, Chinyoka alleged, and the sale “reeks of corruption and backhanders”.