Moroccan refinery saga rumbles on
Thursday, May 03, 2018
A Moroccan court extended the liquidation period of bankrupt Moroccan refiner Societe Anonyme Marocaine de l’Industrie du Raffinage (SAMIR) for the eighth time in April.

At the same time, new bidders were rumoured to have emerged in the protracted search for an acceptable buyer of the firm’s key asset – the kingdom’s only refinery.

Meanwhile, the controversial former owner – who is blamed by Rabat for saddling the privatised company with unsustainable debts before refusing emergency financial support – launched a counterattack against the government through an international court.

SAMIR was declared bankrupt in March 2016 – with debts thought to be around 44 billion dirhams (US$4.8 billion) and after Saudi/Ethiopian billionaire Mohammed al-Amoudi, the company’s main shareholder through his Sweden-based Corral Petroleum Holdings vehicle, reneged on a promise of a capital injection.

Operations at the firm’s main asset – a 200,000 bpd refinery at Mohamedia on the Atlantic coast – ceased the preceding August, as the company was unable to raise funds for crude feedstock.

However, the Commercial Court of Casablanca has repeatedly postponed liquidation of SAMIR’s assets to allow the administrators time to find a buyer prepared to commit to maintaining refining operations – considered to be both nationally strategic and of local economic importance by Rabat.

Trade unions have kept up pressure on the government to ensure such continuation – highlighting the thousands of jobs directly and indirectly at risk. However, offers have thus far failed to meet the strict conditions set by the trustees, led by Mohammed el-Krimi, in the invitation for expressions of interest (EoIs) issued in March last year. These include not only the obligation to restart the refinery but also the provision of substantial financial guarantees.

On April 20, the court extended the deadline by a further three months.
The refiner’s assets have been valued at around 21.4 billion dirhams (US$2.3 billion) and El-Krimi has reportedly been looking for bids of US$2.5-3 billion – although the likelihood of securing such an offer will decrease the longer the refinery remains inactive.

Several prospective bidders of varying degrees of credibility have entered and left the bidding – with the process complicated by lack of clarity around the status of the company’s debt. Around 13 billion dirhams (US$1.3 billion) of this is owed in duties to the Moroccan authorities and the remainder is held mainly by local banks and international traders.

A bid by a heavyweight team of US private equity giant Carlyle Group and leading Swiss-based trader Glencore proposing a debt/equity swap was rejected, while prominent local distributor Afriquia scotched rumours early on in the process that the firm would table an offer.

The local subsidiary of French giant Total – one of the kingdom’s main distributors of oil products – was forced again in mid-April to deny local press reports that the company was interested in acquiring the storage facilities at the Mohamedia site. The authorities claimed to have ruled out from the outset the sale of the refinery facilities purely for their use in fuel storage.

Nonetheless, the kingdom’s liberalised fuel import and distribution system has adapted smoothly to being dependent wholly on product supplies from abroad.

Shortly afterwards, reports of a new bid emerged from a consortium comprising UK-based trader BB Energy, an Iraqi state company and an unnamed European oil company.

The proposal apparently envisaged the creation of a special purpose vehicle owned by SAMIR’s creditors, to which would be transferred the 240-hectare (2.4-square km) Mohamedia site for leaseback to the trio in order to restart, upgrade and operate the refinery.

Iraq would meanwhile secure an outlet for the country’s increasing crude production. Baghdad’s Oil Minister Jabbar al-Luaibi showed interest earlier this year in investing in refinery assets overseas to this end. However, Baghdad’s domestic downstream investment plans have been stymied for a decade by lack of funds coupled with bureaucratic logjams, and whether the bid will advance further than the many previously mooted for the Moroccan asset seems doubtful.

The UAE’s Al-Otaiba Group is also reported to have left a live bid on the table.

Al-Amoudi is widely blamed for SAMIR’s failure – allowing the company to become overloaded with debt and then reneging on a promise of a US$1 billion capital injection in late 2015, having failed to persuade Rabat to waive billions of dollars of tax arrears.

However, the billionaire businessman in mid-March delivered on a threat to file a suit at the World Bank-affiliated International Court for the Settlement of Investment Disputes (ICSID), alleging unfair treatment by the Moroccan authorities. This followed his release from prison in Saudi Arabia following Crown Prince Mohammed bin Salman’s (MbS) crackdown on suspected corruption.

The terms of the complaint were not made public but when warning of his intent to take such action as early as 2016, Al-Amoudi claimed that Rabat had flouted the conditions of the investment agreement between the parties – originally signed in 1997 when SAMIR was controversially privatised.

In mid-April, Naciri & Associates Allen & Overy – the local affiliate of the global legal giant and led by high-profile Moroccan lawyer Hicham Naciri – was selected as the government’s representative in the case, which experts speculate could drag on for years.

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