Leasing of TOR to Torentco the most viable option for Gov’t in the short to medium term – INSTEPR says
A lease negotiation involving Tema Oil Refinery (TOR) and Torentco Asset Management Limited (TAML) has ignited a firestorm of controversy, with allegations of corruption and clandestine dealings swirling around the deal valued at USD $22 million. Concerns have been raised regarding the silence of Ghana’s Minister of Energy and the Managing Director of TOR, as their sector faces damaging accusations.
The Institute of Energy Policy and Research (INSTEPR), a key stakeholder in TOR’s journey since the tenure of Mr. Isaac Osei, has stepped forward to present its perspective on the matter. INSTEPR recently conducted a visit to the TOR laboratory, revealing the pressing need for modernization, as obsolete and dysfunctional equipment plagues the facility.
According to INSTEPR’s account, the process commenced in June 2021 when a three-member Interim Management Committee (IMC) was appointed by the Minister of Energy to oversee the restructuring of TOR. Among their mandates was the evaluation of viable partnerships for the refinery. During their tenure, the IMC received proposals from Intercontinental Energy-Dubai and Africafinch-Dubai. Subsequently, Decimal Capital presented a proposal that garnered unanimous approval after the new Board of Directors assumed their positions.
TOR engaged in a meticulous six-month negotiation process with Decimal Capital, resulting in an agreed-upon term sheet that secured approvals from both the Ministry of Energy and the State Interest and Governance Authority (SIGA). To facilitate the lease agreement, Torentco Asset Management Limited, a Special Purpose Vehicle (SPV), was established—a customary practice in corporate transactions.
It is important to note that TOR has long been plagued by financial struggles, remaining a consistent loss-making entity burdened by extensive debts. Records indicate that TOR incurred cumulative losses exceeding GHc2.707 billion ($540 million) between 2014 and 2018. The 2022 Income Statement unveiled a loss of GHc1.675 billion. Contrary to claims of substantial profitability, INSTEPR refutes such notions as baseless.
Under Torentco’s proposal, TOR would receive monthly payments of $1.067 million ($12.8 million annually) to cover operating expenses, in addition to a lump sum of $22 million earmarked for refinery enhancements and a $2.5 million allocation to the workers’ Provident Fund. Further provisions encompass yearly insurance coverage, upfront annual ground-rent payments, and reserved funds for plant maintenance and utility costs. If accepted, this proposal would catapult TOR from a loss-making enterprise to a positively flowing cash machine, with an estimated annual surplus of $14.79 million.
INSTEPR contends that, within the short to medium term, Torentco’s proposal represents the most viable option given the fiscal constraints faced by the government. Importantly, other companies expressing interest have not been precluded from participating in the process, as evidenced by the recent engagement with Dubai-based Legacy Capital, prompted by a missive from the Office of the President.
Critics of the deal have scrutinized the competence and motivations of Ghanaian firms while applying less scrutiny to foreign entities. With the government lacking the necessary funds or sovereign guarantees to revitalize TOR independently, the positive cash flow generated by the Torentco proposal assumes immense importance, serving as a lifeline for the refinery.
As the controversy unfolds, the fate of TOR remains in the balance. The outcome of these negotiations will not only shape the refinery’s future but also reverberate throughout Ghana’s energy sector, impacting the livelihoods of its workers and the nation’s economic landscape.
