Victoria Ends Gas Supply Contract in Cameroon
Victoria Oil & Gas has terminated a gas supply contract with Cameroon’s power generator Eneo. Its marketing subsidiary Gaz du Cameroun served it a 30-day default notice June 2, as debt mounted, but to no avail.
On September 14 2019, the generator supplier suspended operations at Eneo's Logbaba site due to non-payment of invoices. Consequently, GDC has not been required to supply gas to Eneo since that date but has continued to invoice Eneo based on take-or-pay provisions as per the binding term sheet.
It said in stock exchange notice July 3 that its repeated requests in writing and in person to the senior management of Eneo to discuss debt repayment – which at end June was $16mn, of which $9mn is due to VOG – had gone unanswered. “As we have reached the expiry of this remedy period, GDC has no alternative but to terminate the gas supply agreement with immediate effect,” it said. “The company will now rigorously pursue this unpaid debt via the legal channels available to it, including a penalty payment of three months' fees as a result of termination as per the [December 2018] signed term sheet.”
Eneo is majority owned by Actis (51%), a London based investment company, with the government of Cameroon owning 44%, and its employees owning the remaining 5%. The Logbaba power station was commissioned in April 2015, supplying 30 MW of electricity to the grid. The supply was interrupted in January 2018 as Eneo faced its own cashflow and debtor problems but restored in December 2018.
While Eneo has been the highest offtaker by volume when it is online, it has been paying by far the lowest gas price of all its VOG’s customers. A year ago, Eneo consistently took over 5.5mn ft³/day; and reached a peak of 12.85mn ft³/day. Eneo paid just under $7/mn Btu.
“Replacing the revenue generated by Eneo sale will therefore require significantly lower sales volumes, it said. It will look for “high value, privately-owned, credit-worthy customers, near our infrastructure in the first phase, followed by similar customers in clusters requiring more capital to tie-in. This strategy will be outlined in more detail in the near future.” CEO Roy Kelly said he regretted taking this “extreme action now, but all other approaches have failed to secure timely payment of aged debt, putting the company's cashflow under pressure."