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Dangote Petroleum Refinery, which is set for a blockbuster listing on the Nigerian Stock Exchange, is looking to leverage Africa’s most populous nation to build a domestic market for the raw material used for various household detergents, including laundry and dishwashing liquids.The industrial giant’s CEO, David Bird, told Business Times this week that the mooted initial public offering (IPO), said to value the company north of $40bn (about R645bn), is not an end in itself but the start of a wealth creation journey for African investors.The group plans to double its capacity from the current 700,000 barrels per day to 1.4-million barrels per day by 2030 — which would make the Nigeria-based refinery the world’s largest.To achieve this, the group plans to spend about $12bn — on top of the $20bn it cost to build its mega refinery. The IPO will pay for part of the capital expenditure, while the rest is expected to come from the company’s own cash flow and other financing.Bird said gaining a foothold in the production of linear alkyl benzene — a clear, colourless oil that serves as the primary ingredient used to make biodegradable household detergents and cleaning products — is part of its expansion plans.“We want to expand our petrochemicals offering to incorporate linear alkyl benzene. This is a great project because a huge country like Nigeria, with 240-million people, has 100% of its cleaning products imported,” Bird said.“So manufacturing linear alkyl benzene at the refinery is a great opportunity in a large market where demand is driven by population and not wealth. We are aiming for import substitution. What is good about this project as well is that 70% of the feedstock to the linear alkyl benzene plant is kerosene, which presents us with good diversification.”King Dangote (Nolo Moima) The plan to increase linear alkyl benzene to 400,000t a year will position the group, chaired by Africa’s wealthiest man, Aliko Dangote, as the largest producer of detergent and cleaning agents in Africa.Dangote has built his enterprises, which stretch from cement and agriculture to food processing on a large scale, by adopting the same strategy as his audacious refinery project.Bird said another growth project the group wants to accelerate is the rollout of a 2,000km pipeline from the Walvis Bay port in Namibia to supply fuel to Botswana, Zimbabwe and Zambia. “We want this up and running within the next 18 months because we are utilising an already existing harbour.”Dangote last year hired Bird, a former executive of Shell, to head his refinery and petrochemical firm and lead its IPO.“We have a very credible growth journey ahead of us and a great opportunity for investors to grow their wealth,” Bird said on the timing of the IPO, which is set to make history as Africa’s largest public share offering.The company is seeking to raise $1.6bn in the IPO by selling 4.1-billion shares at 525 naira (about R6.30) apiece.Retail investors in the IPO can earn up to two free bonus shares by holding their initial purchase continuously. Under the scheme, retail investors who hold at least 10 shares continuously for 12 months after allotment will receive one free bonus share, and if they hold these shares for two years, they will receive a second bonus share. The incentive is capped at a maximum of two bonus shares per person, regardless of how many shares a person has.Bruce Tanner, Dangote Petroleum Refinery’s CFO, said the main reason for the IPO was to “democratise wealth”, while not ruling out a future secondary listing on the Johannesburg Stock Exchange, Africa’s largest bourse.“The IPO signals that we have a mature business that is proven and has scale, delivering robust results. It’s a success story for the industrialisation of Africa,” Tanner said. “The strategic intent behind this IPO is to democratise wealth creation that comes from Africa’s industrialisation. The mandate is very much to drive broad participation.”Standard Bank, through its Nigerian subsidiary Stanbic IBTC Capital, is acting as lead adviser to the proposed IPO by Dangote Petroleum Refinery and Petrochemicals FZE, advising on the structuring, execution and marketing of the IPO. Stanbic’s engagement extends beyond the IPO itself. The lender continues to provide strategic advisory support to the refinery as it scales operations and optimises its capital structure.Standard Bank Group CEO Sim Tshabalala earlier this year visited the refinery, which he later described as a “transformational industrial project”.Business Times
