Satyendra Pathak
Doha
Industries Qatar (IQ) got approval from the shareholders to purchase 25 percent stake in Qatar Fertiliser Company (QAFCO) from Qatar Petroleum (QP) for $1 billion during the Extraordinary General Assembly (EGA) meeting held on Sunday.
Delivering an opening speech on the occasion, Minister of State for Energy Affairs and Industries Qatar Chairman and Managing Director HE Saad Sherida Al Kaabi said, "This transaction will not only bring higher returns to the company, but it would also build up Industries Qatar’s presence in the fertiliser sector, in which QAFCO has a proven track record of operational excellence and a strong market position.”
Moreover, Kaabi said, purchase of the stake in QAFCO is consistent with IQ’s strategy and continued efforts to build its presence and add value across the downstream sector using the free cash flows available in an efficient and effective manner.
"The transaction would make Industries Qatar the sole proprietor of QAFCO’s share capital with full control over the company, and therefore would provide Industries Qatar with an opportunity to make strategic decisions. On the other hand, the company will also look for more opportunities to further enhance its position in the downstream sector,” Kaabi said.
During the EGA meeting, which was held electronically, the shareholders also approved two other agendas on its list.
Qatar Petroleum Privatised Companies Affairs Department Manager Mohammed Jaber Al Sulaiti said, who addressed shareholders on the occasion, said, "This transaction is in line with IQ’s strategy to enhance the overall value for its shareholders and investors. As you know, IQ currently owns 75 percent stake in QAFCO and QP owns the remaining 25 percent stake in QAFCO. The proposal is to purchase QP’s 25 percent stake in QAFCO for $1 billion according to specific terms. I would like to emphasise here that this purchase would be entirely financed from IQ’s own sources of funding available in form of cash and bank balances.”
The effective date of the transaction would be January 1, 2020 until the expiry of the new Gas Sale and Purchase Agreement (GSPA) in December, 2035.
As part of this transaction, QAFCO has entered into a new GSPA with Qatar Petroleum with effect from 1 August 1, 2020, for a period until December 31, 2035, covering all the gas requirements for QAFCO trains 1-6 and the facilitates of Qatar Melamine Company (QFC).
"This bundled deal would not only provide efficient and effective use of excess cash available at the Group level but also provide us with 100 percent control over the world’s largest single-site Urea producer, along with favourable terms of the new GSPA with Qatar Petroleum. This new GSPA would provide us with enhanced operational resilience and more opportunities to focus on operational excellence, safety and cost-efficiency. It would also bring additional financial benefits to the Group driven via improved profitability margins, Sulaiti said.
The valuation impact of the 25 percent acquisition of QAFCO for a period of 16 years, and a transfer of the same stake back to QP at a nil consideration when the 16 years term ends, would amount to QR 4.58 billion.
With all the aforementioned new impacts, the equity valuation of QAFCO after this transaction would reach to QR 15.22 billion, with a total uplift of QR 9.21 billion in the valuation due to this transaction.
With the new GSPA, at the QAFCO level from pricing perspective, the terms are more favourable when compared to the feedstock pricing as per the old agreements. The new gas agreement provides a mechanism linking the urea netback price to the feedstock price.
It is expected that this dynamic pricing regime would support QAFCO during lower economic cycles impacting the fertiliser markets.
Talking to Qatar Tribune over phone after the EGA meeting, Sulaiti said, "Despite the spread of coronavirus (COVID19), it is business usual at Industries Qatar. The Group will continue to pursue its core objectives of reducing operating and financing costs, better utilisation of assets, increase our market share in Qatar and enter new international markets.”
"Our top priority would be to reposition the Group’s core services business by minimising costs and maximising asset utilisation in order to become more efficient and better able to leverage our domestic and international strengths to increase market share and shareholder value,” he said
Asked if Industries Qatar will look to do similar deals especially when it comes to Total’s 20 percent stake in Qatar Petrochemical Company (QAPCO), Sulaiti said, "Total has a long-term partnership agreement with IQ in QAPCO. We might look for buying Total’s 20 percent stake once the partnership period is over. If a decision is taken in the middle of the agreement, we will inform accordingly.”
The shareholders also approved the proposal to increase the number of board of directors from seven eight. Taking into consideration that the General Retirement and Social Insurance Authority (GRSIA) is the second-largest shareholder in Industries Qatar, it is proposed by Qatar Petroleum that one out of eight board members to be nominated and filled by the GRSIA.
During the meeting, the shareholders authorised IQ’s board of directors to negotiate, approve, sign and take all actions necessary to finalise a long-term strategic agreement regulating the relationship between Qatar Petroleum and IQ.
Doha
Industries Qatar (IQ) got approval from the shareholders to purchase 25 percent stake in Qatar Fertiliser Company (QAFCO) from Qatar Petroleum (QP) for $1 billion during the Extraordinary General Assembly (EGA) meeting held on Sunday.
Delivering an opening speech on the occasion, Minister of State for Energy Affairs and Industries Qatar Chairman and Managing Director HE Saad Sherida Al Kaabi said, "This transaction will not only bring higher returns to the company, but it would also build up Industries Qatar’s presence in the fertiliser sector, in which QAFCO has a proven track record of operational excellence and a strong market position.”
Moreover, Kaabi said, purchase of the stake in QAFCO is consistent with IQ’s strategy and continued efforts to build its presence and add value across the downstream sector using the free cash flows available in an efficient and effective manner.
"The transaction would make Industries Qatar the sole proprietor of QAFCO’s share capital with full control over the company, and therefore would provide Industries Qatar with an opportunity to make strategic decisions. On the other hand, the company will also look for more opportunities to further enhance its position in the downstream sector,” Kaabi said.
During the EGA meeting, which was held electronically, the shareholders also approved two other agendas on its list.
Qatar Petroleum Privatised Companies Affairs Department Manager Mohammed Jaber Al Sulaiti said, who addressed shareholders on the occasion, said, "This transaction is in line with IQ’s strategy to enhance the overall value for its shareholders and investors. As you know, IQ currently owns 75 percent stake in QAFCO and QP owns the remaining 25 percent stake in QAFCO. The proposal is to purchase QP’s 25 percent stake in QAFCO for $1 billion according to specific terms. I would like to emphasise here that this purchase would be entirely financed from IQ’s own sources of funding available in form of cash and bank balances.”
The effective date of the transaction would be January 1, 2020 until the expiry of the new Gas Sale and Purchase Agreement (GSPA) in December, 2035.
As part of this transaction, QAFCO has entered into a new GSPA with Qatar Petroleum with effect from 1 August 1, 2020, for a period until December 31, 2035, covering all the gas requirements for QAFCO trains 1-6 and the facilitates of Qatar Melamine Company (QFC).
"This bundled deal would not only provide efficient and effective use of excess cash available at the Group level but also provide us with 100 percent control over the world’s largest single-site Urea producer, along with favourable terms of the new GSPA with Qatar Petroleum. This new GSPA would provide us with enhanced operational resilience and more opportunities to focus on operational excellence, safety and cost-efficiency. It would also bring additional financial benefits to the Group driven via improved profitability margins, Sulaiti said.
The valuation impact of the 25 percent acquisition of QAFCO for a period of 16 years, and a transfer of the same stake back to QP at a nil consideration when the 16 years term ends, would amount to QR 4.58 billion.
With all the aforementioned new impacts, the equity valuation of QAFCO after this transaction would reach to QR 15.22 billion, with a total uplift of QR 9.21 billion in the valuation due to this transaction.
With the new GSPA, at the QAFCO level from pricing perspective, the terms are more favourable when compared to the feedstock pricing as per the old agreements. The new gas agreement provides a mechanism linking the urea netback price to the feedstock price.
It is expected that this dynamic pricing regime would support QAFCO during lower economic cycles impacting the fertiliser markets.
Talking to Qatar Tribune over phone after the EGA meeting, Sulaiti said, "Despite the spread of coronavirus (COVID19), it is business usual at Industries Qatar. The Group will continue to pursue its core objectives of reducing operating and financing costs, better utilisation of assets, increase our market share in Qatar and enter new international markets.”
"Our top priority would be to reposition the Group’s core services business by minimising costs and maximising asset utilisation in order to become more efficient and better able to leverage our domestic and international strengths to increase market share and shareholder value,” he said
Asked if Industries Qatar will look to do similar deals especially when it comes to Total’s 20 percent stake in Qatar Petrochemical Company (QAPCO), Sulaiti said, "Total has a long-term partnership agreement with IQ in QAPCO. We might look for buying Total’s 20 percent stake once the partnership period is over. If a decision is taken in the middle of the agreement, we will inform accordingly.”
The shareholders also approved the proposal to increase the number of board of directors from seven eight. Taking into consideration that the General Retirement and Social Insurance Authority (GRSIA) is the second-largest shareholder in Industries Qatar, it is proposed by Qatar Petroleum that one out of eight board members to be nominated and filled by the GRSIA.
During the meeting, the shareholders authorised IQ’s board of directors to negotiate, approve, sign and take all actions necessary to finalise a long-term strategic agreement regulating the relationship between Qatar Petroleum and IQ.