The Central Energy Fund (CEF) Group of Companies presented on March 14 an update on the merger of its subsidiaries Petro SA, iGas and Strategic Fuel Fund, to create a single entity called the South African National Petroleum Company ( SANPC).
Addressing the Mineral Resources and Energy Portfolio Committee, CEF president They are increasing Noah said that the merger of the three entities entered Phase 2, which focuses on the stabilization of the entity, after the completion of design and operational activities in Phase 1.
Noah admits that the merger has been a colossal task, involving the review of thousands of documents, the consideration of various archetypes of merger models and legal aspects, as well as various compromises between unions, government and other interest groups, since that the Council of Ministers took the step. forward for the merged entity in June 2020.
In November 2022, the Council of Ministers approved the implementation of Phase 2 of the merger.
The project management team that carried out the merger activities carried out a full baseline assessment, as part of Phase 1, which identified that SANPC can reach €1 billion in earnings before of interest, taxes, depreciation and amortization (Ebitda) within three years from the operation and generate R20. – billions of Ebitda in 2030, with profits growing at an average rate of 11% per year.
The team also identified market opportunities valued at R95 billion that SANPC could tap into.
Noah stated that the first phase of the merger activities had established the building blocks of the new entity, including the governance and communication systems as well as the legal parameters of operation.
“This merger will be a catalyst to unleash the country’s economic growth. We are now focused on accelerating our efforts to complete the implementation of Phase 2, to reach these massive market opportunities,” he added.
CEO of CEF Dr Ishmael Polo stated that the SANPC would be supported by the CEF until capacity through the transfer of relevant business aspects of the legacy entities. From there, the new entity would optimize itself and begin expanding its footprint.
It explained that Phase 2 of the merger activities would result in the finalization of key working capital commitments and other funding requirements, as well as the finalization of leadership structures and transitional service agreements (ATS).
Poolo expects the transition council and SANPC chief executive to be approved by April 1, with further permits and approvals from government and other stakeholders between 10 and 40 weeks from April 1 ‘April. This would include approval of the final SANPC structure.
Poolo therefore said the SANPC would be “stabilised” by this time next year, with the permanent SANPC staff having been transferred or appointed, and the TSAs concluded.
He added that the appointment of a transitional SANPC board and a transitional legacy board would begin after key consultation and alignment with the Minister of Mineral Resources and Energy. Gwede Mantashe.
Transitional boards would not only meet legal requirements but also enable efficient execution of transition activities to stabilize the SANPC.
SANPC’s interim board would serve until a permanent board could be appointed, which was expected to be within 10 to 11 months, and the legacy interim board would serve until the respective entities were dissolved.
Transition boards would be responsible for signing a master lease and assignment and all supporting agreements, finalizing the organizational design to understand employee implications and facilitate the transfer of employees. The boards will also be responsible for obtaining the necessary consent for the transfer of assets and operating licenses from the respective entities.
Poolo said the master lease and assignment agreement would allow for the start of all transition activities.
He also highlighted some of the risks to the transition project such as hostility from unions in relation to the Section 179 carryover process and other labor-related issues, for which the transition team would execute a plan detailed participation of interest groups and would guarantee regular sessions with the unions. .
Another risk includes significant project delays due to time, quality, and cost-related elements affecting the achievement of key milestones, to which the project management office would track overall initiatives and mark change management requirements.
Poolo assured the committee that the project management office would do everything possible to support the infrastructure and data migration process and limit operational disruptions.
Noah concluded by admitting that the merger had been a difficult process so far, but said the team was making every effort to ensure a sustainable and reliable entity that would benefit the country in a positive way.
