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12.01.2007 Business & Finance

Committee submits report on divestiture of TOR

By Suleiman Mustapha
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The Technical Committee working on the valuation of the country's only oil refinery, Tema Oil Refinery has submitted a valuation report to Government on the cost and value of the refinery.

Finance Minister Kwadwo Baah-Wiredu, who disclosed this in a telephone interview with The Statesman yesterday, however declined to give details of the report until it had been discussed and approved by Cabinet, which has to "approve of the value put up by the technical committee before Government makes any pronouncement on the cost of TOR”.

Ghana began TOR"s privatisation plans last year and is yet to appoint an adviser to oversee the process.

The Ministry of Finance and Economic Planning will in the next few months issue a tender for expressions of interest in the international media and subsequently draw up a shortlist of applicants after the close of tender later in the year.

Government is looking to triple the crude refining capacity of TOR to 145,000 barrels per day from the current 45,000 b/d.

TOR is entirely state-owned but the government plans a part-privatisation in line with a progressive deregulation strategy for the oil sector, which began about three years ago.

The proposed expansion is expected to result in a major recapitalisation of the company leading to the sale of a significant equity stake to a strategic investor through an internationally competitive bidding process.

A $208 million modernisation programme in 1997 brought TOR up to its current capacity from 25,000 b/d. Five years later, TOR was upgraded to a conversion refinery by commissioning a residual catalytic cracking unit, allowing it to increase its gasoline and diesel production. It also gave Ghana self-sufficiency and export capacity in liquid petroleum gas and kerosene.

In June 2006, Government said it had approached two South Korean companies, SK Corp and Samsung Corp to sell a stake in the state-owned oil refinery as part of a plan to raise $6 billion for infrastructure development.

Mr Baah-Wiredu is confident that when the bidding process commences later in the year, due diligence will be done on every company that put in bids and assured of fairness for all that would put in bids.

Meanwhile, the Ghana News Agency reported on Wednesday that Government expects to rake in ¢338 billion from the divestiture of the TOR, Ghana Oil Company and the State Insurance Company this year.

This formed part of the total sum of ¢0.7 trillion expected from overall divestitures this year.

The divestiture of the three enterprises, which have been on the drawing board over the last four years, would be done through the Ghana Stock Exchange by the second half of this year.

The news is a welcome one since industry players and practitioners have over the years bemoaned the slow or no show in government promises to divest its holdings in a number of state-owned enterprises. Contacts at the GSE showed an upbeat mood on the government promise and said: “taking a cue from the 2006/7 budget and the special purpose vehicles set in motion on implementation, we are sure that it would come to pass.”

The source also said it was preparing a document in collaboration with the Ministry of Finance and Economic Planning on a comprehensive divestiture process for the country.

On revenue generation, Mr Baah-Wiredu said Government was set to raise ¢18.25 trillion by June and that revenue agencies would have to wake up and be diligent in their collection processes.

The Asante Akyem North MP, noted that Government was going to review downward the ¢2.6 trillion total exemptions granted in 2006. It hoped that the other half of the year would bring in a similar amount to shore up expected loans and grants of ¢6.0 trillion, and ¢9.0 trillion respectively from Ghana's multilateral donors.

Mr Baah-Wiredu said, to raise the amount, Government was looking to ensure that all the revenue agencies doubled their work rate to generate the ¢37.5 trillion or more of the total target from the domestic front, albeit with spending target of ¢54.3 trillion.

The difference of ¢16.3 trillion would come from grants and loans, lotteries (¢0.1 trn) and others (¢1.2 trn). “This we will do through constant scrutiny of the various revenue agencies and a way of making sure that those listed to pay taxes and revenue to the state do so and regularly,” he added.

Giving the expenditure breakdown, the Finance Minister said personal emolument is estimated at ¢13.2 trillion; ¢3.1 trn for administration and ¢2.6 trn for pensions, social security and gratuities.

Mr Baah-Wiredu indicated that Government was expecting funds from the HIPC Initiative, MDRI, MCA as well as programmes and projects, while pulling in domestic and external loans.

Government is also keen on generating substantially from the Ghana five-year Bond, which is to reduce the pressure on government funds.

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