Continental Focus, International Reach

Savannah Inks Revised GSA for Nigerian Supply

Wednesday, December 23, 2020

Savannah Energy PLC announced that its Accugas subsidiary has entered into a revised gas sales agreement (GSA) on favourable terms with Lafarge Africa PLC, part of the LafargeHolcim Group, for the supply of gas to its Mfamosing cement plant in Cross River State, Nigeria.

The revised GSA with Lafarge Africa PLC is extended for a further five years to January 2037. It also increases the effective gas price Accugas receives from US$5/Mscf to US$7.50/Mscf until 2027 together with an upfront payment of $20 million to Accugas. The daily contracted quantity of gas is reduced from 38.7 MMscfpd to 24.2 MMscfpd. The reduction will enable Accugas to release approximately 12 MMscfpd of currently reserved gas processing capacity at its central processing facility (“CPF”), enabling Accugas to enter into additional long-term GSAs with other customers, increasing the business’ future revenues and cash flow potential.

The revised structure also allows Lafarge to utilize its accumulated make-up gas balance of approximately $58 million on an accelerated basis. Lafarge’s commitments under the revised agreement continue to be guaranteed by an international investment grade bank guarantee. Accugas’ aggregate maintenance-adjusted take or pay volume will reduce from 141.4 MMscfpd to 131.8 MMscfpd; and the revised GSA is accretive to short and medium term cashflow and to Total Revenues over the term of the contract and is, therefore, Net Asset Value enhancing.

Andrew Knott, CEO of Savannah Energy, said: “Taking into account the challenging market conditions in 2020, I am pleased with the way the Savannah team and the wider Group has performed. Today, we are reiterating our Total Revenues guidance, reducing our cost guidance by US$25m and are set to deliver record Nigerian cash collections and production volumes in 2020. The deal with Lafarge Africa is also a significant “win-win” for both parties; Accugas is receiving a higher effective gas price in the near-term years, accelerating near and medium term cashflows, our contract with a key customer is being extended for an additional five years and significant spare capacity is being freed up, which we can sell gas to other customers. All while Lafarge Africa is able to utilize its existing make-up gas balance.

“We are looking forward to 2021 with excitement as we continue to work with our stakeholders to develop and grow our business for the benefit of all.”


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