New deal comes with a price of $7.5 per thousand cubic feet of gas
Savannah’s Accugas subsidiary has entered into a revised Gas Sales Agreement GSA with Lafarge Africa for the supply of gas to its Mfamosing cement plant in Cross River State, Nigeria.
The company says the new deal “establishes a more sustainable long-term contractual position for the benefit of both parties”.
The revised GSA sees the contract term with Lafarge extended for a further five years to January 2037, giving a remaining contract life of 17 years. The new agreement also allows for an increase in the gas sales price from 2027, with additional US-Consumer Price Index indexation from 1 January 2029.
The revised GSA has a reduction in the daily contracted quantity (DCQ) of gas from 38.7 MMscf/d to 24.2 MMscf/d. This reduction in the DCQ will allow Accugas to release approximately 12 MMscf/d of currently reserved gas processing capacity at its Central Processing Facility (CPF), enabling Accugas to enter into additional long-term GSAs for these volumes, which will increase the business’ future revenues and cashflow potential.
To compensate Accugas for this reduction in DCQ, the revised GSA includes an advance payment of $20Million and a prepayment structure over the period to 2027, which effectively results in a gas price of $7.50/Mscf on take-or-pay volumes during this period. “This revised structure also allows Lafarge to utilise its accumulated make-up gas balance of approximately $58Million, whilst we have preserved the capacity to supply higher volumes when these are required by Lafarge”, Savannah says in a statement. “Lafarge’s commitments under the revised GSA will continue to be guaranteed by an international investment grade bank guarantee.
“Overall, the revised terms are expected to have a cumulative positive impact on Accugas’ cash flows over the short and medium term. Following the agreement, Accugas’ aggregate maintenance-adjusted take or pay volume will reduce from 141.4 MMscf/d to 131.8 MMscf/d.