AEW 2022 discussion explores merger and acquisition trends across the African energy market

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A panel discussion held at AEW 2022 explored mergers and acquisitions across Africa’s oil and gas industry and associated challenges and opportunities.

Moderated by Mike Wynne, Vice President of International Upstream at S&P Global Commodity Insights, a panel discussion held on October 19 during the African Energy Week (AEW) 2022 conference in Cape Town investigated trends in mergers and acquisitions in Africa’s oil and gas industry and how they are impacting the continent’s energy sector.

Entitled Mergers & Acquisitions (M&A): The path towards an integrated and consolidated African energy landscape, the panel discussion was hosted at the One & Only Hotel at the Waterfront and included as speakers Ejike Egbuagu, Founder of Moneda Invest; Taiwo Okwor, Vice President of Investment at AFC; Mrs. Oritsemeyiwa Eyesan, Group General Manager of Corporate Planning and Strategy at NNPC Ltd; Humphrey Nwugo, Regional Chief Operating Officer for Southern Africa at Afreximbank; Oneyka Cindy Ojogbo, Director of Centurion Law Group; and Lloyd Manokore, Managing Consultant at Emerging Africa Advisory Group.

With global majors diversifying portfolios, the panel discussion highlighted associated challenges and opportunities for African companies and international independents as they rally towards acquiring mature assets. Commenting on the maturity of the continent’s M&As industry, Ojogbo said, “The market is not as mature as we want it to be. There is lot of work to be done to educate and inspire local firms to participate in the sector.”

In agreeing with Ojogbo’s remarks, Okwadi stated that, “There is a need for more cooperation between governments, lawyers, and international investors to define and shape the continent’s just transition. With a lack of capital disturbing the industry, the best way to boost capital to meet net zero and energy poverty reduction goals is to innovate financing mechanisms. There are going to be massive opportunities in the next decade with increased acquisition set to be driven by the decarbonization strategies of national oil companies and majors. We are seeing more and more producing assets being sold in West Africa and in Central Africa, a lot of new players acquiring assets to explore.”

According to Ojogbo, private- and public-sector partnerships need to focus on the development of local content frameworks that will enable energy-producing countries to identify the right type of partners, investors, and energy players required to maximize industry growth. She said, “We are already taking those steps but are not yet where we want to be. There is a need for modern frameworks to ensure the right deals are done fast. Most frameworks in African countries are not in line with the current changes happening in the energy sector.”

Eyesan urged African national oil companies to exploit the increase in M&A activities to generate investments required to diversify energy portfolios rather than relying on foreign capital. He said, “With NNPC rebranding itself as an integrated private energy company, we are selling surplus oil and gas assets to be able to fund green energy initiatives. While we believe that our oil and gas resources will lift Africa out of energy poverty, we also think renewables will be crucial tomorrow. However, the pace of Africa’s energy transition should not be the same as those of western countries.”

Egbuagu added that, “We think there is a lot more work required to mature the market, as well as more patience and collaborations; not just money but having industry players understand what growth means and looks like. There is a need for improved engagement between market stakeholders and regulatory authorities to accelerate deal signings and M&As. Everyone needs to be part of the process, from the banks to energy-sector players, to ensure the transition is just and to ensure consistency in the desires of governments and private players. We still have a lot of pockets of consistency, however; hence the need for more collaborative efforts to ensure standardization and consistency. Raising capital is a big problem in the continent. We would like to see Africa working together, Nigerian contractors building in Namibia, we would like to see an integration of capabilities not competition. That is our perspective of an integrated energy system.”

According to Manokore, “Africa has always been and remains deals-ready. The question is what type of deals to embark on. Deals need to be more transparent and easier to close. We need to see more people doing research and coming in looking forward to equitable returns or wins. The M&As and energy-sector agreements have changed, with African players now more knowledgeable. However, Africa is trying to utilize modelling that is not applicable in the current scenario; hence, [who?] keep on complaining about foreigners not financing. We need to come up with new modelling and delas need to be supported by robust use cases.”

To ensure M&As deals support the continent’s energy security targets, Ngozi reiterated that, “Africa needs to accelerate the use of local solutions to support independent power producers while seeking more innovative ways, such as those prosed by African Energy Transition Bank, to reform our capital portfolios.”

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