Delays in SA energy fund merger
Cabinet inaction is delaying efforts to merge three Central Energy Fund (CEF) subsidiaries, parliament’s portfolio committee on mineral resources and energy heard last week.
The plan is to merge PetroSA, SFF and iGas into a new company, thus establishing a national energy champion for SA, and such mandate was given by Cabinet on 10 June last year.
Provisionally, the company is to be called the National Petroleum Company of SA.
According to submissions before the committee by CEF officials, “given solvency and liquidity challenges at PetroSA as the biggest subsidiary, and to avoid the potential collapse of the CEF Group, immediate action is critical to ensure survival of the CEF Group.”
The CEF board was mandated to manage the process and ensure the establishment of the new company.
Officials claimed that over the past five months, significant progress has been made to establish the company, including conducting detailed due diligence on assets, contracts, liabilities, rights, licences, and governing legislation, and drafting legal agreements. Market potential of R95 billion was identified.
The CEF officials identified the delay in merger archetype approval by Cabinet as a significant risk to operationalising the company by 1 April.
Indeed, Cabinet approval of the preferred merger archetype has been delayed – the final Cabinet memorandum was only signed on February 22.
According to the CEF input, the delayed approval will prevent execution of operationalisation activities – including the application to the department of mineral resources and energy and Treasury, for incorporation as a stateowned enterprise under the Public Finances Management Act
In the coming weeks, the project team will focus on five immediate next steps:
To obtain the required governance approvals for incorporation and registration;
To finalise and approve the corporate plan;
To operationalise the transitionary board and executive committee;
To operationalise the transitionary business functions; and
To enter legal agreements. The CEF Group forensic report was also presented to the portfolio committee.