The National Petroleum Authority (NPA) has given Vivo Energy Ghana Limited, local distributors of Shell Ghana products, up to January 1, 2015 to transfer eight per cent of its stake to interested indigenous investors or have its licence withdrawn.
“The transfer of the eight per cent is a requirement for the renewal of the licence and they (Vivo Energy) are aware of that. So I think that it is just in their interest to meet the deadline for the NPA to renew the licence. If they do not, then it means they are prepared to go out of business,” a highly placed source at the NPA told the GRAPHIC BUSINESS on December 19.
The order from the industry regulator is likely to start a legal tussle between the authority and Vivo, which took over 82 per cent stake in Shell Ghana mid last year.
Already, Vivo Energy has issued a statement in which it is intimating that the transfer of the eight percent stake is not a legal requirement to the granting or renewal of a license.
Vivo Energy was required to transfer eight per cent of its total holding in Shell Ghana to indigenous investors as part of requirements and conditions leading to the approval of the takeover in August 2013.
Although that transfer was supposed to be done before the takeover could be approved, the NPA, which regulates the oil marketing business in the country, allowed a grace period of 60 days after the company had assured the authority of its resolve to meet the transfer requirement.
One such assurance was contained in a letter written in July 2013 and signed by one of Vivo Energy’s directors, Mr Augustine Osei-Bonsu.
It was addressed to the Minister of Energy and Petroleum.
In the said letter, Vivo Energy acknowledged that the NPA’s approval of the transfer of the shares of Shell Ghana to Vivo Energy was subject to certain conditions, one of which was the disinvestment of eight per cent of the latter’s stake to indigenous entities.
“Shell Ghana and the Vivo Energy Group have commenced the process of making the shares available for bids and can confirm that local legal counsel and a financial advisor have been engaged to assist through the necessary steps,” it stated.
That process is, however, yet to be completed, almost a year after it was commenced. The delayed transfer of the shares has consequently forced the NPA to refuse to renew Vivo Energy’s licence, despite a request for renewal dated October 27, 2014.
The source at the NPA said, “I think it is an issue of principle and conditions.”
“Anybody who is supposed to meet a certain condition before a licence can be renewed will have to first meet it or have the licence revoked. Vivo agreed to this principle (to transform 8% of its stake to local entities) and they are bound by it,” it said.
“If Vivo thinks the licence is important, then they will do all they can to meet the requirement, but if it is not important to them, then that is their own business,” it added.
A withdrawal of Vivo Energy’s licence, which will expire on December 31, will mean that the company will not have the legal right to operate and that will have dire consequences for its operations and numerous customers nationwide, including the mining giant, Newmont Gold Ghana Limited (NGGL).
Vivo Energy, which took over Shell Ghana’s entire business in August 2013, currently operates about 128 fuel service stations, employs 143 permanent staff and has the capacity to store over 10,767 cubic meters of fuel, according to information on its corporate profile.
It also serves over 10,000 customers daily and has a range of clients in the mining, aviation, marine and construction industries.
Vivo Energy was formed in 2011 by Vitol, a global oil trading company, Helios Investment Partners Limited and Shell International with the mandate to market and distribute the products of Shell across Africa.
At the time of its takeover of Shell Ghana’s business, Shell International owned about 82 per cent of the former. That, therefore, meant that the 82 per cent stake in Shell Ghana was directly transferred to Vivo Energy, leaving the remaining 18 per cent in the hands of indigenous entities.
Prior to approving the takeover, the NPA, which regulates the downstream petroleum sector, directed Vivo to release eight per cent of its stake to indigenous entities and interested investors, bringing to 25 per cent the total indigenous holdings in the oil marketing company.
Although the request was tied to the granting and subsequent renewal of the company’s operational licence, Vivo Energy agreed to it and subsequently pledged to work towards realising it.
The condition was part of efforts by the NPA to increase indigenous holdings in the oil marketing business, a chuck of which is held by foreign entities, including Vivo.
Legality versus corporate responsibility
Although Vivo Energy has admitted to agreeing and committing to increasing local participation in its operations, the company said in a statement issued on December 19 that it was not legally bound by any of the country’s laws to do so.
Quoting from the NPA Act, 2005 (Act 691), it said, “The act does not specify any minimum Ghanaian shareholding requirement for qualification for a licence or its renewal.”
“Although there is no legal requirement for the majority shareholder to cede eight per cent of its shareholding to local participants, Vivo Energy agreed, as a responsible foreign investor, to divest the eight per cent shares to achieve the 25 per cent Ghanaian equity in the company. Vivo Energy is currently in discussions with local entities who have expressed interest in acquiring the eight per cent shares,” the statement added.
Section Two of Article 14 of the act, however, states: “A licence granted by the board (of the NPA) is subjected to the conditions specified in the licence.”
Despite meeting the requirements specified under the act for the granting or renewal of a licence, the act also says the “board may, for reasons in the public interest, public safety or public security, decide not to issue an applicant with a licence”.
Once a licence is issued or renewed, the act opines that it will be renewed only if the beneficiary entity satisfies “all the conditions for renewal as specified in the”.