After years of inefficiencies, mismanagement, and alleged corruption culminated into huge albatross of debt on the neck of the Tema Oil Refinery (TOR), the government is taking steps to address the debt situation.
Amid the new wave of transformation at TOR, the management has disclosed a multi-pronged strategy to tackle its staggering $517 million debt burden.
Speaking during an engagement with fellows of the Africa Extractives Media Fellowship (AEMF), Managing Director Edmond Kombat revealed that the refinery is actively working with the government and key stakeholders to clean up its balance sheet and restore financial stability.
Renegotiating Debts and Netting Off Obligations
TOR is currently engaging with creditors to find amicable reconciliation with some debt figures. Management has set up a dedicated team to renegotiate outstanding debts, with early findings revealing that some creditors may also owe TOR.
This has opened the door for “net-off” arrangements, where mutual debts are reconciled and reduced.
While some of these adjustments are still being validated, the approach, the Managing Director says, is already helping to shrink the refinery’s overall debt exposure.
“I put a team together to renegotiate with most of the people that we owe. And some of them, we realised that they also owed us. So we’ve done a few net of unconfirmed reports, but I think the debt profile has reduced,” the MD indicated.
Independent Validation by KPMG
To bring credibility and clarity to the process, TOR has brought in KPMG to independently review and validate its debt records.
According to management, some liabilities have remained on the books for years despite claims they were already settled. This has raised concerns about discrepancies and possible inefficiencies in record-keeping.
The audit by the international accounting and auditing firm is expected to separate legitimate obligations from questionable claims, ensuring that the final debt figure reflects reality.
Debt-to-Equity Conversion Talks with Government
Edmond Kombat further reveals that one of the most significant proposals on the table involves restructuring part of TOR’s debt into equity.
Since the refinery is wholly owned by the state, management is in discussions with the government to convert certain liabilities owed to the state into equity stakes. This move would effectively reduce TOR’s debt burden while strengthening its capital base.
The proposal is currently under consideration at the cabinet level, with a policy directive expected in due course.
“Government has shown an indication that they want to take some of the debt off. So one of the debts is owed to the government. So we are asking them to convert it into equity because we are owned 100% by the state,” he revealed.
Engagement with Sister Companies and Foreign Creditors
Beyond government obligations, TOR’s debt portfolio includes liabilities to sister state-owned entities as well as foreign creditors.
Management says discussions are ongoing with these stakeholders to explore flexible repayment terms, restructuring options, or possible settlements that can ease the financial pressure on the refinery.
These negotiations are critical, given the complexity and diversity of TOR’s creditor base.
He says, “Two of the big debts are owed to our sister companies. We’re also talking to them to see what we can do to resolve it.”
The Bottomline
Edmond Kombat gave the assurance that authorities have signaled a willingness to play an active role in resolving the refinery’s financial challenges, including taking on part of the debt and facilitating restructuring efforts.
This backing is seen as crucial to restoring confidence in the facility, which has long struggled under the weight of legacy liabilities.
Management is optimistic that these combined efforts will yield results within the current political cycle.
By the end of the government’s term, TOR expects to have completed a comprehensive restructuring of its balance sheet, laying the foundation for operational revival and long-term sustainability.
A functioning refinery has implications for fuel security, job creation, and economic stability.
Clearing the debt overhang, to many analysts, is more than a financial exercise; it is a critical step toward giving the facility a fresh start.
