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Executive Interview

Corporate acquisitions in Africas energy sector

Creation of holding group Vivo Energy to strengthen Shells presence on the continent
BY AAMERA JIWAJI frica continues to attract interest from international energy companies following the discovery of oil in three countries - Ghana, Uganda and Kenya - in the last ve years. The latest corporate acquisition, the third phase of which was completed last month, sees the creation of a holding group Vivo Energy, through the acquisiiton of majority shareholding in energy and petrochemicals company Shell by Vitol and Helios Investment partners. Two years in the making, the agreement aims to capitalise on energy opportunities aorded in Africa and simultaneously boost the ability of the ailing Shell brand to regain market share. Shell, which boasts a 100 year presence on the continent, has experienced a weakening of market share in the last decade. The creation of Vivo Energy brings Shell together with energy trader Vitol and private investment rm Helios, both of which have a strong Africa focus, and will allow Vivo to operate more than 1600 retail stations across Africa under the Shell brand, and access around 1.2 million cubic metres of storage. The inclusion of Vitol within the newly formed group suggests a vertical and a horizontal alignment strategy within the energy sector since in addition to trading in energy sources, Vitol produces lubricants and other oil based products. The brand name Shell, renowned for being a fuel and lubricant marketer, will however be retained at all stations and franchise outlets. Vivo Energy is the new pan-African growth environment and want to drive safe, protable performance and win back market share. Both Vitol and Helios have already invested in upstream activities: Vitol is involved in oil exploration in Ghana, Ivory Coast and the eastern republics of Russia, and Helios recently took a share in a Nigerian oil eld. The transaction deal, through which Vitol and Helios each own 40% of Vivo Energy and Shell holds the remaining 20%, was rst announced in February 2011 and completed its third phase last month with the transfer of Egypt, Kenya, Uganda and Ghana. This follows the take over of 10 African countries in the rst two phases of the transaction, including Burkina Faso, Cape Verde, Cote DIvoire, Guinea, Mauritius, Madagascar, Mali, Morocco, Senegal and Tunisia. The second phase also included Vivo Energy acquiring the service company Africa Downstream Oil Products (ADOP), the employing company for Vivo Energy sta who are based in South Africa. In the next six months, Vivo Energy will enter three additional African countries, two in West Africa and a third in East Africa, bringing the tally to 17. There is opportunity in Africa and of course in Kenya, so we will continue seizing opportunities, and if there are additional opportunities for growth by acquisition, we will do that as well, Chammas said. The idea is to become a larger company. There are some white spots on the map [of our African presence]. Financial institutions including reinsurance broker AfroAsian Insurance Services (accredited at Lloyds London) and French reinsurance broker Gras Savoye have also opened oces in Kenya to tap into opportunities in the oil and gas market. JP Morgan one of the global big names in nancing with a corporate loan book of over Sh121 trillion has also announced plans to set up in Nairobi.

Christian Chammas, CEO of Vivo Energy

The agreement aims to capitalise on the energy opportunities afforded in Africa and boost the ailing Shell brand
marketing company and the corporate brand behind the Shell franchise in countries in scope of the transaction, whilst Shell will remain the customerfacing brand for the majority of businesses across Africa. A change of corporate name was required as part of the agreement with Shell to secure the Shell brand at the retail customer level, said Mr Christian Chammas, Chief Executive Ocer of Vivo Energy. Chammas joins Vivo Energy from Total where he worked for31 years as Executive vice-President for Middle East and North Africa region, during which time he was based in Kenya between 1994 and 1997. Chammas has experience in ve other developing markets including Nigeria. Africa is a continent all three companies know well, Chammas said. We see new opportunities in Kenyas exciting


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