The Central Energy Fund (CEF) has said the approval by the Competition Tribunal of its subsidiary, the Strategic Fuel Fund (SFF) to acquire 60% of Avedia Energy which includes the Liquefied Petroleum Gas (LPG) terminal in Saldanha, Cape Town will pave way for SFF to diversify its revenue stream in line with its strategic objectives.
Avedia, currently in business rescue, is an independent wholesaler of LPG.
Its business activities comprise the sale of LPG in bulk to national wholesalers and smaller independent players in the Western Cape as well as the operation of LPG storage facilities in Saldanha Bay.
The decision announced on Friday by the Tribunal paves for the SFF, whose primary function is to store and manage the country's strategic crude oil stockpile as well as privately held crude oil inventories allows the CEF to diversify into the LPG market, currently in greater demand as electricity supply is erratic with Eskom's consistent operational breakdowns.
“Through this asset, SFF will also be poised to promote competitiveness in the downstream LPG market by enabling the importation of cheaper liquefied petroleum gas and storing it for the country’s energy needs as well as mitigating risks associated with product shortage as a result of local refining capacity being closed," SFF CEO, Godfrey Moagi said.
The SFF said in its quest to transform the sector, the entity would also allow the previously disadvantaged South Africans (HDSAs) who want to participate in the petro-chemical business access to use the infrastructure,
CEF’s Group CEO, Dr Ishmael Poolo said that the acquisition of this infrastructure forms part of the group’s fulfilment of its security of supply mandate to facilitate access to critical infrastructure and product accessibility at an affordable price.
“The acquisition of this key enabling infrastructure is in line with the group’s newly adopted strategy of being a strategic investor, geared to position the group as a credible energy investment company that will continue to invest in profitable growth opportunities across the energy value chain in Southern Africa to fulfil its mandate,” added Dr Poolo.
The deal is to the consternation of Sunrise Energy, a struggling operator of an LPG import terminal in Saldanha Bay which said the SFF's takeover of gas importer and distributor in business rescue Avedia, will result in Sunrise having to close its doors.
RBB Consulting economist, Jacob Muller, who earlier this month presented the economic case to the Competition Tribunal that the proposed merger of Avedia’s operations with that of the state-owned SFF should be prohibited said the likelihood of Sunrise having to shut its 5 500 metric ton capacity LPG storage and terminal facilities in Saldanha Bay if the Avedia deal went ahead, would result in less competition, in unnecessary duplication of facilities and less gas import capacity being available to the province.
There would also likely be a limited or no impact on gas prices for consumers, as these were determined by regulations and based on other factors, apart from storage and import costs.
Because Avedia has been in business rescue, its 2 000 metric tons jetty-based import facilities in Saldanha Bay have not been in operation this year.
Sunrise has an agreement with Vita Gas, which pays to use all of Sunrise’s capacity, although, in terms of petroleum industry regulations, Sunrise is obliged to also make some of its facilities available to other gas companies.
In a separate matter, the Competition Commission in November referred Vita Gas to the Competition Tribunal after finding Vita Gas guilty of restricting access to Sunrise’s import facility, and the commission sought administration, declaratory and interdictory relief against Vita Gas.
Muller said the likelihood of importers supplying SFF/Avedia with very large gas-tanker vessels, as opposed to smaller tankers currently being used, would mean the SFF/Avedia’s jetty-based facilities together with various incentives granted to gas importers, would result in most importers using the SFF/Avedia facility, because it would cost less and be based on greater volumes than using Sunrise’s facilities.
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