Nigerian Stock Exchange (NSE) last Tuesday, lifted the technical suspension placed on the shares of Oando plc after the closure of its Rights Issue to the public. The lifting of the suspension paved way for normal trading activities on the stock.
The technical suspension was placed on the price of Oando plc shares further to its application to raise N21 billion through Issue, in compliance with Rule 82(C) Securities and Exchange (SEC) Rules and Regulations. The offer, which Acceptance List closed on the February 19, 2010, is currently being processed for allotment prior to the announcement of the outcome of the offer.
The chief compliance officer & company secretary, Oredeji Delano, said: “The lifting of the technical suspension means that Oando shares will now experience price movements in response to competitive forces of demand and supply in line with the NSE’s trading rules”.
Stockbrokers however said that the stock had been hit by bargain hunting especially because of the discount that was offered by the offer price of N70.00 per share as against a technical suspension price of N93.00. “There is demand for the stock because some shareholders who wanted to increase their shareholding through the rights issue could not do so and that could also be linked to the fact that those who traded their rights were few,” said a stockbroker.
According to him, investors have resorted to ‘bargain hunting’ in order to drive supply for the stock. At the close of trading on Monday, a total of 361,693 shares were traded at N80.80 per share. The company recently highlighted how its business was increasingly being driven by new services and markets, when it launched its first Independent Power Plant (IPP) that would supply stable electricity to the lagos State water Corporation.
The 12.15 megawatt plant, which was financed by Fidelity Bank plc at a cost of $25.5 million will power LWC’s main water intake facility, including two other facilities with a combined installed capacity of 125 million gallons of water per day.
The Power project included the construction of a 13km gas pipeline from Oando’s existing natural gas grid in Lagos to supply fuel to the power plant. The gas fuelled IPP is eco-friendly and enabled an immediate increase in capacity utilisation of Lagos Water Corporation whilst creating substantial savings for the Lagos Water Corporation in annual energy cost.
Wale Tinubu, Group chief executive of the company had described the project as “a significant milestone for Oando, marking our entry into the Nigerian power sector and another major step in the development of our mid- and down-stream business. Our power generation strategy has always been clear – to contribute several captive power plants to Nigerian markets to boost electricity supply and help meet the huge and rapidly growing demand for power for local industry. Our objective is to redefine how energy is accessed in Nigeria and Africa. We will continue to build world class energy platforms that support industrialisation and economic development.”
Market analysts say since the IPP has come on stream, so is revenue generation for the Oando Group and its shareholders. Indeed, the revenue mix is now upstream (crude oil sale), midstream (natural gas and power) and downstream (petrolem products maketing), where Oando Mareketing holds 18 percent market share. After the N20 billion rights issue, the company intends to have a bond issue even as it finalised arrangements for a N60 billion debt restructuring over a 5-year period. There are also plans to raise the sum of N75 billion through international equity and debt raising.
The chairman, Mohammed Magoro stated in the Rights Circular that the rights issue was an important step for Oando “towards refinancing the acquisition of upstream assets, providing operational capital to fund the operation of the upstream business, and short and medium term investment in its gas and power business.” The net proceeds is estimated at N20.437 billion after deducting the total cost of the issue estimated at N681.312 million.
The company intends to pursue expansion of its oil and gas portfolio through organic and inorganic means even as Magoro was optimistic that the company would achieve its strategic objective of being the leading integrated energy solutions provider in Sub-Saharan Africa. He urged shareholders to participate fully in the rights issue “as Oando moves into the next phase of exploiting opportunities in the global oil and gas industry.”