• Monday, May 27, 2024
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Gaslink as pioneer

Gaslink as pioneer

Gaslink was conceived in many ways as a pioneering company.

It was the company through which I wanted to show the world, as Americans love to say, that I could walk the talk!

The first company I registered for was Linkso, back when I had just left NNPC and assumed duties at ECS. Gaslink was founded a while later to fill the gap that remained in the gas value chain.

In 1996, the Nigeria Gas Company (NGC), working along with our recommendations for harnessing and utilising gas, placed an advertisement in the papers. They wanted to issue a gas distribution franchise for what they called the “Greater Lagos Area” and needed a company they could partner with to build the gas distribution pipelines. That was the opportunity Gaslink was chasing. The “Greater Lagos Area” included seven industrial clusters in Lagos, which, for the purpose of clarification, included Ikeja, Oregun to Motorways, Ilupeju, Matori, Apapa, Amuwo Odofin, and Isolo.

Q: “As a gas engineer who had been part of a comprehensive national survey, there was a natural desire to prove that it was possible to translate what we had on paper into reality. My plan was to have industries in the industrial clusters switch their fuel sources from diesel or fuel oil to the cheaper, cleaner, more efficient alternative, gas.”

As I noted in the preceding chapters, during our survey we found market opportunities and delivered our recommendations to the government, but the approval was given, then reversed, and nothing happened afterwards. So, when in 1996 NGC put out a call for tenders, I was excited, and we did not waste any time placing our bid.

Why did I put in the bid? As a gas engineer who had been part of a comprehensive national survey, there was a natural desire to prove that it was possible to translate what we had on paper into reality. My plan was to have industries in the industrial clusters switch their fuel sources from diesel or fuel oil to the cheaper, cleaner, more efficient alternative, gas. This was the whole idea of the study and national policy.

As you will recall, our study, analysis, and recommendations led to the fashioning of a gas pricing policy, and fortunately, the policies did not affect the distribution end, which was to be private sector-led. I felt strongly that we could have a go at it even though I knew we had limitations since we were just a small company, a start-up, without financials, but we were confident we could raise money by bringing in more Nigerians.

In the absence of a national regulator, the NGC, as a subsidiary of the NNPC, assumed the country as its territory and natural monopoly. They were the ones to decide who got a franchise, but it was to follow a process that had bidders submit commercial and technical bids.

We put in our bids and prayed for a good showing, but the result was not released when the time came. So, after almost three years of waiting for the winner of the bid to be announced, I took a leave of absence from ECS and headed to Abuja to work with Chief Aret Adams in General Abdulsalami Abubakar’s transitional government for about nine months.

The result was announced three years later, almost three months into the new administration of President Olusegun Obasanjo. As it turned out, Unipetrol was the winner, and Gaslink was runner-up with the best technical submission. Thus, Gaslink was in a reserve position. But something happened to turn things around.

Unipetrol had six months to accept the offer and submit their proposal for developing the franchise. But during the three years spent waiting for the bid results under General Abacha, Unipetrol’s technical partner left the country as they lost confidence that the franchise arrangement would go through, given the anti-business posture of the Abacha regime. So, with their technical partner gone, Unipetrol had some challenges putting their proposal together. This created an opportunity for Gaslink. One day, an old friend of mine asked whether I would be willing “to work with Unipetrol to develop that franchise? I said yes, choosing to collaborate because the other option was to wait for Unipetrol to fail, in which case the franchise might be given to us. But there was no certainty.

This started a process, which led to a meeting with Alhaji Yusuf Garba Ali, who was the Managing Director of Unipetrol at the time. The meeting was short and cordial, and we had a simple discussion. We resolved to convert Gaslink into a Special Purpose Vehicle (SPV), which would see Unipetrol assign its franchise to Gaslink, subject to the approval of NNPC, and take a 40 percent stake while Gaslink would have the right to 60 percent.

To put it another way, Gaslink could retain as much as it wanted or could afford and then market the rest to other shareholders. Additionally, we agreed that Unipetrol would nominate the chairman of the board as well as the chief financial officer and provide financial leadership. Gaslink would, on the other hand, provide the MD/CEO (so long as it was me) as promoter, nominate the Chief Operations Officer, and appoint other key officers as needed. My first key responsibility was to market the 60 percent of the company shares domiciled in Gaslink and look for shareholders.

The deal with Unipetrol was one that fit and aligned with the company’s DNA. Gaslink was a gas utility company focused on the downstream segment of the gas ecosystem, with key subject matter experts. Unipetrol was and has always been a downstream player. Starting out as Esso, the company began operations in Africa in 1956 as a downstream marketing subsidiary of Exxon.

Corporation of the United States of America:

In 1976, the federal government of Nigeria purchased a controlling stake in the company, which was subsequently rebranded as Unipetrol Nigeria. The government’s objective was to increase the availability of petroleum products in the hinterlands using Esso’s distribution network.

Unipetrol became a public Public Limited company on March 1, 1991, and a few months later, the federal government sold its 60 percent equity to the Nigerian public in an initial public offering. By February 1992, Unipetrol was listed and trading on the Nigerian Stock Exchange (NSE).

Remember, though, that, as I noted earlier, NGC owned the franchise, but it was a BOT (Build, Operate, and Transfer) valid for 25 years. We even had, unlike today’s agreements, the option of first refusal when the time came to renew. I know people in NNPC who said they would not sign such an agreement again, but they shouldn’t really find it hard to give that option because, after you have made all the investment, why would you not want it renewed? Otherwise, we would have since become an NGC-operated entity.

When we put in the bid for the “Greater Lagos Area” gas distribution franchise, I had a few things clear in my head. My understanding was to spend four years at Gaslink, after which we would take it public by listing the shares on the NSE.

I am an entrepreneur, and I develop things and build businesses. For an entrepreneur, the biggest challenge is funding. As project managers, we had a good idea of what was needed and knew what to do. The first funding challenge we encountered was incidentally from our partner. Unipetrol was reluctant to give us money.

We had all the agreements ready; we had contractors waiting to mobilise to the site, and we had willing buyers for the gas we were to distribute, but we needed equity funds to put all the things we needed in place, so we started looking for money. It was a big challenge. Gaslink was a start-up with no track record. Its partner was Unipetrol, which was not willing to provide cash. They chose to invest in kindness. If, for instance, we wanted to buy cars and computers, Unipetrol would rather give us the cars than release physical cash.

But we did not give up. I got a number of friends to pitch in smaller sums. The first phase was supposed to be $10 million, so it was not supposed to be a big deal. My wife and I decided to use the means we had to find a solution. Then it became an act of faith. We took our needs to God in prayer.

Tony Elumelu was my neighbour at that time, so one night I went to talk to him. His Standard Trust Bank had just started, and that’s how our discussion led to talks about loans and funding. I was my own project manager, engineer, business development manager, etc.

Before that meeting, an old colleague from my NNPC days had told me about one Chief Ochonogor who had been talking about his interest in gas investment. That was how I started the search for this chief. Eventually I got his number, and I requested an appointment to make a presentation.

Our prayers were already working. We did more novena prayers, asking God to touch the man’s heart so he would not hang up on me when I called.

The man I had been fed confidential information about was Chief Ifeanyi Ochonogor, who became a very strong supporter of Gaslink. He is from Kwale in Delta State. I called him and was given an appointment. However, on the day of my appointment, something went wrong. I could not get to Apapa. I was stuck in traffic on my way to Apapa. There was no GSM phone then, just the old NITEL cellular phones with 090 numbers. I called, and the secretary told me he had left the office. Fortunately, I was told that he had said that I could meet him in Yaba. So, I changed my route to Yaba, and it turned out that Chief Ochonogor was commissioning and dedicating a new building to God. That was where I got my introduction.

I was waiting at the reception as the prayer procession and activities passed by. They were moving around the building and sprinkling holy water. Rev. Father Patrick Adegbite of Blessed blessed memory was in charge of proceedings. No one spoke to me, though, as they filed past.

When they were done and on their way down, Reverend Father Adegbite walked up to me and said, “Charles, what are you doing here?”

“I came to see Chief Ochonogor,” I said, not knowing that Chief was the man standing behind him. But while we were exchanging pleasantries, the chief left. Eventually, I was invited to see the chief in his office, where I proceeded to make my presentation.

I had just started when the chief said, “Young man, I have heard a lot about you and read a lot of your articles. I know you have been gearing up to talk to me. But first, tell me how well you know Fr. Adegbite.” In response, I said I knew Reverend Father Adegbite well and we were good friends. Then he responded, “If you are friends with that man, then you must be a good man yourself.” Continuing, he said, “We invest in character, not presentations! Anybody can make a good presentation, but it is the character of the person that makes things work.” Then, going further, he asked, “What exactly do you need because I am travelling tonight?”

I shut my presentation and told him I needed $3 million to meet my equity requirement for the venture.

He said, “Is that all?”

I said, “Yes, sir.”

We needed $10 million for the first phase. I needed to deposit three million dollars ($3 million) in equity in the bank before I could draw on the loan facility. He inquired about the bank, and I told him it was STB. He then wanted to know who I was dealing with at the bank. I explained that the MD, Tony Elumelu, had given a conditional approval for the loan, but first I had to achieve the equity threshold for the project.

After I spoke, Chief Ochonogor picked up his phone and made a call. When a lady entered, he introduced me and told her to sit down. Just sitting there, I heard him issue instructions that changed the course of my business career and life.

“Young man, please send her the presentation you have prepared, okay?” he said, and I nodded. Then, turning to the young lady, he said, “Engineer Osezua will give you his account details. Please credit his account with $3 million tomorrow morning.”

As he spoke those words, I thought I was going to fall down from the chair I was sitting on.

That was Chief Ochonogor’s final statement. My presentation was unimportant, in his opinion. He had read a lot about me and had insight into who I was. He had read articles I had written in the past and therefore could see both the work and the character. Anyway, that was how I had my account credited with $3 million without a signed agreement.

Once the meeting ended, I stepped outside and called Chief Aret Adams, my old boss, who was then the Chairman of Gaslink. After I told him what had just transpired, in disbelief, he asked, Did they write ‘To Be Trusted’ on your forehead?”

He, too, couldn’t believe that I could be given $3 million without signing an agreement.

That’s how we raised our equity contribution. The cash was deposited at STB. The chief had also offered us the debt portion as a loan. But you know bankers—they are smart businessmen. STB eventually gave us the loan as agreed, but their money was very expensive, and you see, even though Gaslink was a BOT and I was basically sure I would recover all my costs, I still needed to be prudent. STB was charging us 28 percent.

But I needn’t have worried, because as soon as we progressed with our plans and construction, all the banks that had hitherto turned us down started coming after us.

Excerpted from Chapter 6 of The Rise of Gas: From Gaslink to the Decade of Gas by Engr. Charles Osezua, Radi8 Publishers, 2023