According to a new report, Africa’s richest man, Aliko Dangote, lacks the financial means to construct his refinery by 2023.
According to a study issued by Fitch, the world’s largest global rating agency, the Nigerian tycoon needs an additional $1.1 billion (900 billion) to finish the refinery, but has already invested all of his money and even borrowed to fund the project.
The Dangote refinery project is still on target to be finished by 2023, according to the report, and will require an extra USD1.1 billion in capex in 2022, which will be partially funded by the new bond.
According to the article, Dangote Industries Limited (DIL) plans to establish a USD750 million local bond program to partially fund the completion of its refinery and petrochemical complex. Under the planned program, DIL’s subsidiaries Dangote Oil Refining Company Limited (DORC) and Dangote Fertiliser Limited (DFL) will be co-obligors.
“The profits of the new bond are projected to finance part of the cost of completing the refinery project.” We do not expect DIL’s existing creditors would have additional loan capacity if the transaction fails, or if completion costs overrun or market conditions in the cement or urea sectors deteriorate considerably. We anticipate that more asset sales, such as cement or shares in projects, are the most likely choices for refining finance.”
Dangote Industries, according to Fitch, has poor corporate governance, and it’s a risk for Dangote, who currently wields a lot of authority over operations, to remain the project’s largest shareholder and CEO.
“DIL has a complex group structure with a substantial number of related-party transactions, which has a negative impact on operational and financial transparency,” Fitch said in the assessment. We also see Aliko Dangote’s control of the company’s operations as an extra risk.”
The refinery project, according to Fitch, is projected to maintain excellent margins and generate solid cash generation, diversifying DIL’s profile and permitting rapid deleveraging.
“When ramped up from 2024, we expect this project to contribute roughly USD1 billion to EBITDA annually,” it added.