Project in Doubt; Lead Investor of Uganda Oil Refinery RT Global Withdraws from Deal at Negotiation Stage

The Lead investor of the Uganda oil refinery project, Russian firm RT Global Resources has opted out of the deal during the negotiation process.

RT Global resources was announced the preferred bidder for financing and construction of the $4 billion facility in Hoima in February 2015.

The consortium of companies that won the contract to build the refinery includes; Russian firm RT Global (Leader), VT Bank also from Russia and a South Korean conglomerate GS.

They beat three others; Japan’s Maruben Corporation, China’s Petroleum Pipeline Bureau (CPPB) and South Korea’s SK Engineering & Construction Group in the last stage for the multi billion dollar midstream infrastructure.

It is not yet clear why the Russian Defense and Technology Corporation led firm decided to pullout. However, a source in the Energy Ministry who spoke on condition of anonymity said company officials selected to negotiate the principal agreements had “failed to negotiate in good faith” and had “failed to execute” a shareholders’ agreement.

In an interview with the East African Newspaper, the Ministry of Energy Permanent Secretary Kabagambe Kaliisa confirmed the development but was quick to say “it was not a walk away as such.”

“They had demonstrated all it takes, and in fact we had finished negotiations with them and closed all the envelopes,” he noted. “But they kept going back and forth over the concessions we had given them, negotiated and finished. We gave them all the time.”

He added “as a procedure they were supposed to get the necessary clearance back home and it was what we were waiting for. However we received communication they were withdrawing the bond.”

Uganda was expecting to conclude negotiations in September, Finance Minister Matia Kasaija announced during budget reading.

The agreements included; The Project Framework Agreement between government of Uganda and the lead investor (RT Global Resources), The Implementation Agreement between government and the Refinery company and The Shareholder Agreement to signed between the National Oil Company (NOC), The Refinery holding company and the lead Investor Special Purpose Vehicle.

The East African newspaper reported that an undercover source said the ministry had cashed in a $2 million bid bond which RT Global Resources consortium had executed with a local bank.

A performance bond is a surety bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor.

RT Global East Africa regional representative Andrey Kozenyashev decline to give detail to the media on development. “there is nothing to comment about.” he said.

It should be noted that in September 2015 during a summit in Kampala, Kozenyashev raised concerns on the government failure to respond to the demands of the investor.

See: Uganda to sign refinery deal in October as investors raise concern over land and roads

 

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