chevron_logoChevron Nigeria Limited, which offered three oil blocs for open bidding, appears to now be foot-dragging in releasing the bid winner’s award letter to Brittania-U, the indigenous marginal operator that led the bid process with $1.6 billion, BusinessDay learnt from industry sources familiar with the transaction.

It was gathered that while all other companies that failed in the bid were given letters acknowledging their failure in the bid, Brittania-U, the acknowledged winner, is yet to be communicated to, almost two weeks after the bidding process was declared closed.

The indigenous company is rather being asked to bring letters of financial commitment from banks that would fund the payment of the transaction without being given any letter indicating that she is the preferred bidder in the exercise.

This development is contrary to the earlier belief that Brittania-U has been handed documents of the transaction.

Industry watchers say Chevron’s action is against normal procedure.

“It is not done anywhere in the world to deny an acknowledged winner of an open bid a letter of award,” says a source.

It is not clear why Chevron has decided to follow this path, but many say it raises issues around transparency, due process and corporate governance.

An investment banker that spoke to BusinessDay said the indigenous company may have paid $250million deposits as irrevocable letter of credit, which is 15% of the bid price to Chevron/BBP Paribas, one of the key conditions of the bid. But Chevron is still keeping Brittania-U in suspense over the offer letter even though there have been some level of communication between the two parties with some commitments already made by bid winner.

When Deji Haastrup, general manager, government and public affairs, Chevron was contacted to react to the allegation earlier on the fact that nobody knows when the permits would expire, he reacted through a text message that saying “we will not comment on commercial transactions that are ongoing.”

When BusinessDay also asked him to react to the allegation that Chevron has refused to give Brittania-U an offer letter, he replied again, “we do not comment on commercial transactions that are still ongoing.”

In the midst of all these intrigues three local banks, which believe strongly in local content development, have come together to raise the fund. The banks are First Bank Nigeria Limited, Diamond Bank plc and Ecobank plc. They have indicated their commitment to raise the fund for purchase of the oil blocs by requesting that they should be given a few day to sort out things with CBN, the regulatory authority.

They are said to have written Chevron and BNP Paribas, of their commitment and preparedness to fund the entire amount of $1.4 billion, being 85% balance of Brittania-U’s bid for the Chevron assets.

In the letter jointly signed by the chief executives of the three banks captioned “Request for Bank Board Commitment in Support of Brittania-U Nigeria Limited’s bid for 40% Equity Interest of Chevron Nigeria Limited in OMLS 53, and 55 in Nigeria”, the banks confirmed their commitment to jointly syndicate the bid amount of $1.4 billion and noted that Brittania-U Nigeria Limited has been their upstream client of repute with a transactional relationship period ranging from three to five years and is one of their most valued customers.

The letter further stated that the “syndication banks through the Joint Lead Arrangers – FBN, Ecobank and Diamond Bank – have put together a syndication team to provide the said amount only awaiting their respective boards to give firm approval for their individual commitments.”

In the said letter, the three banks stated that board meetings would soon be convened by the individual syndicating banks to give firm approval for their respective commitments to funding the acquisition.

“No one will expect any company, not even a multinational, to provide board approval for commitment to fund a transaction of such magnitude without any tangible evidence (an award letter) of the transaction they are to fund,” a source at one of the banks said.

 

Information from Business Day was used in this report.

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