Angola’s Potential $6.4 Billion Sonangol Stake Draws Gemcorp

Angola can expect interest from Gemcorp Capital LLP, a firm already invested in the nation’s energy sector, when it offers a potential 30% stake in oil company Sonangol EP.

Under President Joao Lourenco, one of Africa’s biggest oil-producing nations has implemented reforms in recent years to draw investment and mitigate a decline in output. The process is at an early stage, but Sonangol has estimated the value of the stake it plans to sell at about $6.4 billion, according to board member Baltazar Miguel.

“We’ll have a look at the right moment” after the government decides on a process to move forward, Parvoleta Shtereva, head of investments at London-based Gemcorp, said in an interview. The company -- which comprises fund management as well as physical commodities and energy businesses -- is already in a joint venture with Sonangol to build Angola’s Cabinda refinery, and is a lender to the government.

Angola’s economy is dependent on an oil sector which accounts for one-third of GDP and more than 90% of exports, according to the World Bank. While volatile crude prices have demonstrated the nation’s vulnerability, it’s still largely focused on drawing investment into its industry, which is suffering a long decline.

“Diversification is needed, the investment is needed, but you would need security of energy supply for pretty much every industrial process,” said Shtereva, who considers the nation’s reforms and efforts to be generally underestimated. The Cabinda plant is expected to start operating next year, using local crude and reducing fuel imports.

China Debt

Angola also leads sub-Saharan African countries in borrowings from China, most of which is in the form of resource-backed loans. That could add a degree of complexity to Sonangol’s stake sale, which is targeted for the end of the year or early 2021, Finance Minister Vera Daves de Sousa said in November.

“Any valuation of the company needs to take into account Angola’s depleting oil fields and high costs of production, as well as Sonangol’s opaque pre-export finance contracts,” said Robert Besseling, an analyst at London-based Pangea-Risk. “A sale of non-core, non-oil assets will attract some interest from local private investors in Angola, but a privatization of core oil assets will mostly be shunned by international investors.”

©2021 Bloomberg L.P.

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