A United Arab Emirates (UAE) company has threatened to take over oil stock belonging to the National Petroleum Corporation of Namibia (Namcor) unless it settles a N$176 million debt by next week.
Namcor, which has been experiencing financial troubles, is now holding out the begging bowl, hoping for a government bailout, despite denying this move last month.
The N$176 million is part of the N$1,9 billion the corporation owes more than four petroleum suppliers.
Augusta Energy, a UAE supplier, is owed N$176 million for fuel it delivered to Namcor, of which N$50 million should have been settled by 31 October.
The company now wants these funds paid up by 30 November.
Namcor wrote to Augusta Energy on 27 October, admitting it would not be able to meet its commitment as promised on 22 September.
“Namcor is experiencing a temporary cash-flow challenge, and thus the entity proposes to make a payment of N$50 million, which was initially agreed upon for 31 October, along with the N$126 million due in November,” Namcor acting managing director Shiwana Ndeunyema wrote.
Namcor is now relying on the minister of mines and energy, Tom Alweendo’s support for a Cabinet bailout to settle the outstanding debt.
Namcor and Alweendo were set to meet on 7 November.
Augusta Energy’s Lionel Dorie responded to Namcor on 3 November, saying the supplier was surprised to receive news of challenges so late, which, he said, puts the company in a difficult position with its financial partners.
Dorie said Namcor could hopefully obtain the support it needs from the minister of mines and energy, and asked to be briefed on the outcome of the meeting.
“Provided that it is agreed that Namcor should receive the further capital sought, we will be content to wait a little longer to receive payment of the now overdue N$50 million.
“This is, of course, subject to both this sum and the next payment due of N$126 million being received in full before the next due date of 30 November,” he said.
Dorie said should it not be possible to conclude arrangements with the energy minister, Augusta Energy would be obliged to utilise the PetroSA cargo presently in storage to settle the outstanding amounts.
PetroSA is one of the suppliers Namcor currently owes.
“In that event we envisage a number of ways of doing this, whether by Augusta taking delivery of that cargo at a distressed price in diminution of the debt, or by Augusta assisting Namcor to sell it to a third party on appropriate terms that secures the amounts outstanding,” he said.
Ndeunyema yesterday told The Namibian the corporation is dealing with the matter.
“… especially in navigating the challenges currently facing our organisation. While some of these challenges are historic, as head, I fully embrace the responsibility for addressing them directly,” he said.
He said as of September, Namcor owed its creditors N$1,9 billion – a decrease of N$600 million from N$2,5 billion in May.
IN A TIGHT SPOT
Namcor has already sold the fuel that belongs to PetroSA. However, the corporation has not paid PetroSA nor Augusta Energy.
Augusta Energy does not know the fuel it wants to sell to recover its debt has already been sold.
The Namcor board, without the government’s blessing, has now given its suppliers guarantees that it would pay its debt by 30 November.
This was done despite the company not having fuel products to sell.
Namcor board chairperson Jennifer Comalie yesterday said 2022 was a challenging year. She said Namcor made a net loss of around N$600 million.
“This presents major challenges in managing our cash flow,” she said.
Comalie said the company has made progress in the last months to address these concerns.
According to her, since the losses were incurred in the 2022 financial year, it is not a challenge which can be resolved in the short term.
“We, however, confirm that we are managing our cash flow proactively, remain committed to honouring our debt and have engaged the shareholder for support to arrest the situation,” she said.
Ndeunyema said they are aware of the issues at hand and are taking ownership and accountability to resolve them.
“This commitment is shared by both the management team and the board, who are working diligently to mitigate these challenges in a manner that ensures the continued operational efficiency of Namcor,” he said.
The company’s lack of stock is considered so dire that it has told its own service stations to buy fuel from competitors.
In the event that the suppliers move to cash out its guarantees, Namcor faces the prospect of liquidation.
Augusta Energy has not responded to The Namibian’s questions.
The Namcor board is now pinning its hopes on a Cabinet bailout.
The board allegedly met with minister of finance and public enterprises Iipumbu Shiimi two weeks ago to discuss a bailout structure.
Ndeunyema said: “In collaboration with our line ministries, we have developed a turnaround strategy to not only overcome our current difficulties, but also to steer Namcor towards a future of profitable operational efficiency.”
He said this strategy has been crafted with an acute awareness of their responsibility to Namcor’s stakeholders and the broader interests of Namibia.
“We are confident that our strategy will address our operational issues, and all our stakeholders are united in the goal of emerging from this period stronger and more resilient than before,” he said.
Alweendo last week referred questions to the Ministry of Finance and Public Enterprises, which said it would respond later this week.
In 2010, the government approved a bailout strategy for Namcor, which included paying off debts of nearly N$260 million.
Meanwhile, Namibian law firm FB Law Chambers has written a letter of demand to Namcor regarding N$13 million owed to the Ndakalimwe Investments joint venture with Revival Construction and Engineering.
The letter is dated 6 November.
The contract awarded to the joint venture was to construct a high-density polyethylene pipeline to serve the oil industry at Walvis Bay.
The joint venture started with the work in January, but have not received a single cent for its work, despite eight payment certificates for work done and services rendered issued by the project engineer.
“Notwithstanding the fact that our client’s tax invoices/payment certificates were delivered to your office, to date no single invoice has been settled by Namcor, thereby breaching/violating its contractual obligations.
“It is our instruction that the outstanding invoices stand at the amount N$13,1 million, exclusive of accrued interest on late payments,” said FB Law Chambers’ Francois Bangamwabo.
He said Namcor, through extensive correspondence, has indeed acknowledged the outstanding debt in favour of the Ndakalimwe Investments joint venture with Revival Construction and Engineering.
“We hold instructions to demand payment of the mentioned amount (N$13,1 million) within seven days into our client’s nominated bank account as it appears on the tax invoices.
“Should our client’s demands not be heeded, we hold clear instruction to institute legal action against Namcor without further ado. In addition, we shall institute liquidation proceedings against Namcor in terms of the Insolvency Act,” Bangamwabo said.
The joint venture has instituted action against Namcor on Thursday.
In High Court papers dated 16 November, the joint venture through its lawyers instituted action against Namcor, the minister of mines and energy and the minister of finance and public enterprises.
The joint venture is asking for a judgement in its favour to the amount of N$12,5 million, interest on overdue payments, and for Namcor to pay its legal costs.
FB Law Chambers did not respond to questions.