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Vivo Energy to invest over $550 MM in South Africa, continue supply contracts with local refineries

CAPE TOWN (Reuters)—Vivo Energy, owned by global commodities trader Vitol, will invest an initial 10 B rand ($550.79 MM) in its South African operations following its merger with Engen, South Africa's trade minister Ebrahim Patel said on Wednesday.

The investment is part of a range of public interest and competition commitments, designed to prevent job losses and continue supply contracts with local refineries, that domestic regulators sought when the merger was considered.

"The company (Vivo) has committed to a minimum of about 10 B rand over the next five years to be invested in areas like green energy, infrastructure and the upgrading of its operations," Patel said at a signing ceremony with senior company executives.

The company may invest a further 4 B rand, subject to feasibility, in biofuels production and marine infrastructure, among other projects, he added.

Besides the capital investment, there was also provision for workers' ownership that will be financed via a vendor funding mechanism so that workers did not pay for their shares directly.

The agreement also requires Engen to continue buying fuel refined from Glencore's Astron refinery in Cape Town for a period of 15 years and from Sasol's refineries to the north of the country for a period of up to 10 years.

Astron Energy and Sasol had opposed the merger at competition hearings over fears that their locally refined products would be displaced by imports.

"This provides a significant buffer for local refineries and a boost to maintain and expand oil refining locally," Patel said of a supply commitment valued at an estimated 100 B rand over the next five years.

Engen and Vivo Energy formally completed the transaction on to combine their businesses on Tuesday, after regulators agreed in April for Malaysia's Petronas to sell its 74% stake in Engen to Vivo Energy.

The combined Vivo Energy group now has over 3,900 service stations and more than 2 B liters of storage capacity across 28 African markets.

"Africa and South Africa has and will remain a key focus for Vitol's investment," Harvey Foster, Vitol's country manager said.

($1 = 18.1557 rand)

(Writing by Wendell Roelf and Bhargav Acharya; Editing by Alexander Winning and Christina Fincher)


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