All Along the Value Chain

You acquired a majority stake in Forte Oil in 2007. How has your vision for growth evolved since then?

The vision was to turn the then African Petroleum around and build a world-class business. We saw a huge opportunity to build an efficient chain of retail outlets that would surpass the expectations of shareholders. We achieved that and went on to expand the vision to become the foremost integrated energy solutions provider. Today we own assets across various aspects of the energy chain and are poised to invest in further expansion and asset acquisition to solidify our position. We no longer see ourselves as just a local business; we now operate from a global perspective.

Forte has just received an investment of $200 million from 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, but 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.

How did you achieve the rebound in performance after the 2009 economic crisis?

I was running a very robust business and controlled a very large share of the diesel market in Nigeria. The business had grown beyond my imagination but I failed to recognize the importance of putting a robust risk management structure in its day-to-day operations, so when the 2008 meltdown occurred, the business suffered heavily from the devaluation of the naira and the capital market collapse. Having learned from this experience, I rebuilt my business with world-class professionals and I only play an advisory and mentoring role, and this is evident in the performance and strong results being posted today.

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 asset 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 driving 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.

What are your expectations for the year ahead?

I believe despite the economic that upheavals we are experiencing at the moment, the Nigerian economy is still resilient and will stand the test of time. For the oil and gas sector, I see increased participation of indigenous firms as a result of their continuous efforts in building capacity and solid business structures. Our downstream business will continue to seek more opportunities in view of the growth in the Nigerian population. We shall also continue to seek additional opportunities to diversify our revenue streams along the energy value chain.