The Dangote Petroleum Refinery will focus first on its planned October listing in Nigeria before seeking a foreign stock market listing. The Chief Executive Officer David Bird said on Friday that the $20 billion facility will spend at least three years building a proven production and financial record before approaching overseas investors.
The decision is aimed at giving Nigerians access to the refinery through its domestic initial public offering (IPO), which could raise as much as $5 billion, even as preparations for the Nigerian listing continue.
The plan gives the Nigerian capital market the first opportunity to receive shares in one of Africa’s biggest industrial projects. It also places the planned domestic IPO ahead of any international listing, which Bird said would only be considered after the refinery has established a longer record of production and earnings.
Nigerian IPO gets first place
Bird said the October IPO preparations were on schedule, but declined to disclose the proposed size of the offer or the refinery’s valuation. A source familiar with the matter revealed to Reuters that the Securities and Exchange Commission has received the company’s IPO application and that the offer could raise up to $5 billion.
Bird said the domestic offer was created to increase Nigerian participation in the refinery’s ownership.
“The mandate of the IPO was to be the people’s IPO,” he said, adding that the company wanted broad participation.
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The planned listing comes after a $2.5 billion private placement completed in July. That transaction valued the refinery at about $40 billion. Africa Finance Corporation, which led the transaction with strategic investors, said the placement was 3.7 times oversubscribed and attracted institutional investors from Africa and other parts of the world.
Bird said investor interest during pre-marketing and the private placement had been strong. The October IPO is therefore being prepared after the refinery has already secured substantial interest from institutional investors.
The three-year waiting period for an overseas listing would give the refinery more time to record production and financial results before seeking an international valuation.
Bird said such a record could help the company secure a better valuation when it eventually approaches foreign investors.
Refinery expands before overseas listing
The planned foreign listing comes against the backdrop of rapid expansion in the refinery’s fuel business. Bird said the facility became Europe’s largest supplier of jet fuel in June and July, as buyers looked for alternative supplies following disruptions connected to the Iran war.
The refinery currently supplies most of Nigeria’s petrol and diesel demand and all of the country’s jet fuel needs. Its international sales have therefore grown alongside its importance to the Nigerian fuel market.
The facility also plans to increase refining capacity from 650,000 barrels per day to 1.4 million barrels per day within three years. Funding for the expansion will come partly from the IPO and partly from debt.
Bird said the expansion would cost substantially less than the roughly $20 billion spent on the original refinery.
He said the refinery has advantages over comparable US refining assets because it has access to local crude, strong domestic demand and integrated operations.
Bird also said Africa has a structural shortage of refined fuels and petrochemicals, creating room for additional production.
The proposed international listing would therefore wait until the refinery has a longer operating record.
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