Cabinet blocks Namcor, BP deal

CABINET has squashed Namcor’s hopes of buying BP Namibia’s assets and becoming a bigger player in the fuel retail industry by refusing to financially back the deal because of the parastatal’s cash-flow problems.

In a statement from Cabinet Chambers yesterday, Information and Communication Technology Permanent Secretary Meuta Ua-Ndjarakana said the Cabinet Committee on Treasury (CCT) ‘was not convinced that buying BP Namibia is economically viable for Namcor in light of the fact that Namcor is already facing cash problems, while the projected cash flow for BP Namibia does not confirm the acquisition as a feasible proposal’.Namcor made a N$257 million loss last year, and was declared technically bankrupt with liabilities of N$354 million outstripping assets by N$70 million.Namcor Managing Director Sam Beukes in the 2009 annual report blamed an inappropriate business model, currency volatility and the global financial crisis for the state-owned enterprise’s (SOE) predicament. He said the SOE subsidiary, Namcor Trading and Distribution (NPTD), had to buy fuel on the open market, only to sell it at a regulated price in Namibia without being able to recover its costs.The company has long lobbied for a role in the fuel retail business as a means to become profitable. When BP Namibia announced in March that it would be pulling out of Namibia, Botswana, Tanzania, Malawi and Zambia, Namcor decided to bid for the deal, rumoured to be worth around N$600 million.According to the Cabinet statement, the CCT met on June 14 to consider the Namcor bid.’In the absence of information on the value of BP Namibia, the CCT also found it impossible to determine an appropriate price offer for the venture, hence making it difficult for the Government to advance a guarantee to Namcor to bid for BP Namibia.’The CCT also determined that while retail and distribution of fuel products is not the core business of Namcor and in the absence of a Cabinet directive to Namcor to venture into that business, Namcor’s request to Government could not be considered by the said Cabinet Committee,’ the statement said.Cabinet therefore resolved not to support Namcor in its bid BP Namibia’s assets, it stated.In the 2009 annual report, Beukes said that Namcor ‘was technically insolvent, but not factually so’.He said a turnaround strategy, based on three pillars, would fill up Namcor’s empty money tanks again: a cash injection by Government, true cost recovery for NPTD and a margin for the Namcor Group to recover its operational costs as well as to fulfil its exploration and production mandate.Government has already bailed Namcor out by pumping N$100 million from the National Energy Fund into the corporation’s coffers at the beginning of the current financial year.The chairman’s report in the 2009 financial statements of Namcor clearly spells out the corporation’s plans.’Namcor has further embarked on the penetration of the downstream market to fulfil its strategic intent of becoming an integrated oil and gas company by participating in the full value chain,’ it stated.In the same statements, Beukes identified Namcor’s further integration into the downstream market as a way of securing ‘alternative sources of revenue’.