Business

NIGERIA: Forte Oil Plc 2013 results

Forte Oil Plc has set itself new standards by being the first company to declare its 2013 results to the Nigerian Stock Exchange.
The company is also paying a dividend after a period of losses and after a small profit for 2012. Investors who bought shares at N250 per share at the share sale offer in 2008 would be happy that they are receiving returns for their investment.
The company has been able to pay a dividend because it has decided to reduce the amount in the share premium account in order to offset the accumulated losses on the balance sheet.
The company will be paying a dividend of N4 per share. The annual general meeting, AGM, of the company has been fixed for 28 March 2014 and, if the AGM approves the dividend, the dividend would be paid on 4 April 2014. The closure of the register of members of the company for the purpose of determining those qualified for divided payment will be from 10 March to 12 March 2014.
The total revenue for 2013 was N128 billion. After allowing for cost of sales, other income, distribution expenses and administrative expenses, the company’s result from operating activities was N1.88 billion.
There were other gains of N4.38 billion, net finance income of N.025 billion and when these are added to the result from operating activities we have a profit before tax of N6.52 billion and a profit after tax of N5.0 billion. One hopes that the company’s annual report and accounts would provide some explanation of the other gains as they represent a significant part of the profit distributed as dividends.
Forte Oil Plc has during the period under report acquired interests in the power sector. The company is part of a consortium that has majority shareholding in the Geregu Thermal Power Station located in Ajaokuta, Kogi State.
The interests are in the first phase of the power station which consists of three turbines capable of generating 414MW of electric power. This power station was handed over to the consortium in late 2013 at the same time other power generating companies and electricity distribution companies were handed over to new managements.
However, the performance level of the power sector has dropped since the new managements took over and there are concerns as to whether these power sector companies could become successful operations.
The downturn in the power sector has been attributed to a number of factors which include gas shortages. For the Geregu Thermal Power Station, the gas available is meant for the Ajaokuta Steel Company complex. The Ajaokuta Steel company is not functioning, hence the gas has been available to the power station.
However, there is a second phase of this power station which also has three turbines and which has been put up for sale by the Niger Delta Power Holding Company. The gas that can currently be made available at Ajaokuta is inadequate for six turbines, a new gas pipeline would be required to adequately provide for the six turbines.
Major issues before the Nigeria Electricity Regulatory Commission, NERC, include the fact that generating companies may not be receiving payments from the Market Operator as and when due because the electricity distribution companies are not making their payments when required to the Market Operator.
There are also indications that NERC is considering how to allocate risks for situations in which the gas supplier cannot supply for reasons outside the control of the gas supplier. It would appear that the consortium at Ajaokuta should consider the feasibility of modifications to the gas turbines such that fuel oil can be used whenever gas is not available.
The electricity tariffs have been structured such that operators would make a profit. One therefore hopes that the consortium at Ajaokuta and Forte Oil Plc would make a success of their investment. The public expectations are for a substantially improved performance in the power sector.
 

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