The government has agreed to provide N$1,3 billion to bail out the financially crippled National Petroleum Corporation of Namibia (Namcor) as a short-term measure.
The national oil parastatal made a N$700-million loss in the last financial year. The Cabinet initially rejected a proposal made in October to bail Namcor out.
However, in a letter addressed to Namcor board chairperson Jennifer Comalie on 29 November 2023, minister of finance and public enterprises Iipumbu Shiimi said the funding was meant to stabilise Namcor’s operations.
“As provided for in terms of Section 36 of the State Finance Act of 1991, the treasury hereby confirms its readiness to issue a sovereign guarantee for Namcor to secure the required funding to stabilise its operations,” Shiimi wrote.
The bailout means Namcor, which as of September 2023 owed its suppliers N$1,9 billion, now has a lifeline to avoid liquidation.
“In the meantime, we urge you to continue engaging with your creditors to give us more time to finalise the financing transaction,” Shiimi said.
Asked when the company expects the N$1,3 billion to be paid out, Comalie yesterday said: “We are busy finalising negotiations with the banks. We should have more definite dates for disbursement in the next two weeks.’’
She said the board and management team continue to work on stabilising the company.
“There has definitely been progress, and we continue to engage our stakeholders to find a mutually beneficial solution,” she said.
Sources close to Cabinet said the government will issue the guarantee and Namcor will have to borrow from banks.
“A recovery plan for the company was designed and the N$1,3 billion will stabilise the company in the short term. This package will give the company the ability to breathe and be able to renegotiate some contracts with the creditors. With this guarantee, the government will expect Namcor to trade themselves out of the hole,” the source said.
The bailout comes after former acting managing director Shiwana Ndeunyema presented a three-phase turnaround strategy both to the finance ministry and the Ministry of Mines and Energy in November last year.
The three-phase turnaround strategy presentation focused on short-term survival and stabilisation, coupled with decisive shareholder capital intervention.
Part of that is the medium-term strategies which centre on implementing a new operating model to reduce exposure and ensure sustained success.
The presentation also included the development of a 15-year strategic business plan that outlined the company’s long-term sustainability amid recent oil discoveries.
The Namibian reported last year that Namcor depended on minister Tom Alweendo’s support for a Cabinet bailout to settle suppliers’ debt. Namcor and Alweendo met on 7 November to discuss the required funding.
“The meeting was centred around the turnaround strategy, and the government has offered its commitment towards stabilising the entity,” Ndeunyema said in December.
Ndeunyema, who preferred terming it a “government intervention”, said the funding would address internal cash-flow challenges.
“Namcor did not necessarily request a bailout, but rather an intervention for the company to address internal cash-flow challenges, a significant component in implementing the turnaround strategy,” he said.
TROUBLED ENTITY
Over the years, Namcor has been immersed in power struggles, the mismanagement of funds, and allegations of corruption.
As of September 2023, Namcor owed its creditors N$1,9 billion – a decrease of N$600 million from N$2,5 billion the parastatal owed in May 2023.
Some of Namcor’s suppliers had threatened to take action, including liquidating the state-owned oil company.
But to fend off such demands before the government’s blessing, the Namcor board gave suppliers guarantees that it would settle its debts by 30 November 2023.
Those suppliers include European commodity trader Gunvor Group, owned by Swedish billionaire Torbjörn Törnqvist.
Namcor owed the company N$1,1 billion.
The two entities have now entered into a debt restructuring agreement after getting board approval, as well as ministerial support.
Namcor has in addition reached an agreement with United Arab Emirates company Augusta Energy, which had threatened to take over its oil stock due to a N$176-million debt.
Namcor has further entered into an agreement with PetroSA, of which the oil stock was sold by the parastatal without paying for it.
“Augusta Energy has responded favourably, and a repayment plan is in place, which they have accepted. Namcor has also entered into a repayment agreement with PetroSA that all parties (Namcor and PetroSA) are satisfied with,” Ndeunyema said when asked about Namcor’s repayment plans.
Ndeunyema’s acting role, which lasted eight months, came to an end this month.
The Bank of Namibia’s deputy governor, Ebson Uanguta, takes over in that acting capacity until June this year.
Alweendo yesterday referred queries to the Ministry of Finance and Public Enterprises, which in turn did not respond to questions.
“The relevant minister to answer your questions regarding Namcor’s operations is that of finance and public enterprises,” he said.
The last government intervention in Namcor’s financial troubles took place in 2010, when it paid off debts of nearly N$260 million.
Uanguta did not respond to questions sent to him yesterday.
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