A new report claims that Africa’s richest man, Aliko Dangote, does not have the kind of money needed to complete his refinery by 2023.
The report published by Fitch, the world’s biggest global rating agency, said that the Nigerian billionaire required an additional $1.1 billion (900 billion) to complete the refinery but had invested all his cash and even borrowed to finance the refinery project.
According to the report, the Dangote refinery project was still on track to be completed by 2023 and required an additional USD1.1 billion capex in 2022 to be partly funded by the new bond.
The report added that Dangote Industries Limited (DIL) was planning to establish a local bond programme amounting to USD750 million to partially finance the completion of its refinery and petrochemical plant.
By Anthony Osae-Brown+Follow
DIL’s subsidiaries – Dangote Oil Refining Company Limited (DORC) and Dangote Fertiliser Limited (DFL) – will be co-obligors under the proposed programme.
“Funding for the completion of the refinery project is expected to be partly covered by proceeds of the new bond. If the transaction is not successful, or should completion costs overrun or market conditions in the cement or urea sector deteriorate materially, we do not believe that DIL’s existing creditors would have further lending capacity.
“We believe that further asset sales, either in cement or stakes in the projects, would be the more likely options to address funding of the refinery.”
Fitch also noted that Dangote Industries suffered from weak corporate governance, adding that “it’s a risk for Dangote, who already has a lot of power over operations, to remain the largest shareholder and CEO of the project.”
In the report, Fitch said, “DIL has a complex group structure with a large amount of related-party transactions, with a negative effect on operational and financial transparency. We also view the dominance of Aliko Dangote, as CEO and the main shareholder, in operations as an additional risk.”
Fitch concluded its report that the refinery project was expected to sustain strong margins and yield solid cash generation, adding diversification to DIL’s profile and allowing rapid deleveraging.
“Once operational, we expect this project to contribute around USD1 billion to EBITDA annually when ramped up from 2024,” it added.
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