The Board and management of Tema Oil Refinery (TOR) have announced that the partnership agreement with Torentco Limited will help restore the refinery to its former glory.
The Board of TOR believes that Torentco’s proposal will allow TOR to regain a sustained positive cash flow, demonstrate acceptable crude oil processing yields, and stem the exodus of valuable engineering staff seeking secure opportunities elsewhere.
However, the transaction is subject to a list of conditions precedent and if Torentco is unable to satisfy these conditions, TOR will continue to seek solutions.
In a statement issued Saturday, June 24, the Board of TOR addressed concerns raised by commentators regarding the rehabilitation project designed to bring the refinery back to operation. TOR acknowledged the importance of civil society organizations (CSOs) in ensuring that projects of this nature are bona fide in nature and welcomed their sincere interest in the project.
TOR stressed the urgency of rehabilitating the aging infrastructure and returning to its core refining activity for the benefit of the domestic economy.
The Board outlined the current circumstances of TOR, emphasizing that the cessation of refining activity was not caused by an inability of the plant to process crude oil, but as a result of a voluntary termination of the existing tolling agreement by the counterparty due to product accounting issues.
The refinery was saddled with enormous debt, reconciliation issues with customers, and an inability to meet its ongoing operational expenses from internally generated cash flow.
The Board recognized the dire need for urgent action to be taken and presented two proposals by the Interim Management Committee for a solution that required government guarantees for debt to be assumed by TOR.
TOR said it eventually proceeded with the proposal made by Decimal Capital, a financial advisory firm established by Ghanaian professionals, which set up a new special purpose vehicle (SPV) for the specific purpose of entering into the lease to allow its funding/crude oil supply partners to interact with TOR.
In November 2022, one of the Decimal partners was arrested for an alleged offense. TOR took a step back and evaluated how best to proceed with the proposal. The Board determined that rather than withdraw the individual from Decimal, a new entity be established with no history of the individual’s involvement – Torentco – in which any further transactions would be conducted.
TOR outlined the benefits of the proposed transaction for the company, highlighting its ability to move from being an annual loss-making entity to sustained positive net cash flow during the term of its lease.
The Board emphasized that the Torentco proposal promises to pull the relevant pieces together in a structured consortium approach, which would help TOR to become a going concern.
In conclusion, TOR reaffirmed its commitment to rehabilitating the refinery and returning to its core refining activity for the benefit of the domestic economy.
By Vincent Kubi