Bulls Power banks on gas
A new entrant in Zimbabwe’s energy industry, Bulls Power Fuels, is targeting to sell 200 000kgs of liquid petroleum gas (LPG) within the next 36 months as it looks to grow market share through its subsidiary, Bulls Gas. This comes as the energy industry has become a hub for investment in the past year, with national LPG imports rising 86% between January and October last year. Business Reporter Melody Chikono (MC) caught up with Bulls Power Fuels CE Michael Munhuwei (MM) at the launch of the company’s subsidiary Bull Gas recently. Below are excerpts of the interview.
MC: Give us an overview of Bulls Power Fuels.
MM: This is an energy company. The decision was: what do we start with, petrol and diesel station, or gas or solar? Solar was a bit tricky for us, so we pushed gas. In the next 36 months we will be doing gas but in the process we will be pushing our other ventures in petrol and diesel. We are targeting the Chirundu-Beitbridge highway, especially Masvingo area and would be happy if we can have at least two stations within that period.
We are thrilled with the opportunities which this sector presents. In terms of turnover, I must say right now we are not looking at the numbers, we are looking at expanding.
MC: In terms of investments, in the next four or five years, what is the broader picture?
MM: On the holdings side we will see more growth in the gas business than in the petrol and diesel stations. The limiting factor is the funding aspect. We are not getting much from the local market. From a capital growth point of view we have to secure funding offshore. Partly based in Bahrain, much of the funding is coming from there and is the source of expansion for Bull Gas right now. I hope this will stop very soon once we address our problems as a nation economically.
MC: In terms of funding, what can you say are your capital requirements?
MM: Truly speaking we have not set a specific figure. We will take it one step at a time and seek funding per project rather than overally. Like I mentioned, right now we are looking at developing Masvingo and Zvishavane. We will do it as we go and, when we are done, we will then sit down and say what’s next? So I cannot certainly say I need US$20 million and realise in the end I need US$50 million. So we are looking at each project as it comes. Masvingo and Zvishavane are our focus right now. After this launch we are going to finalise on those sites and start sourcing funding for the four sites and, once we are done, we look at the next project.
MC: In terms of production, where do you see yourself in the next year?
MM: Before the turn of 2019, we will be selling not less than 200 000kgs a month. We have five locations where we distribute our product to customers. Our target storage capacity countrywide is 200 000kgs within the next 36 months. This will, in turn, create employment which is the national focus at present.
We are already doing commercial because we have retail and wholesale licences. There are lot of players in the sector who do not have enough capacity to attain the wholesale licence. A wholesale licence comes with a minimum capacity of 40 tonnes. If you do not have 40 tonnes you will not get the licence, thus a lot of players only have retail licences.
MC: On the supply side, what can you say about Bulls Gas?
MM: It is quite a challenge. This is due to the issue of funding I alluded to earlier. The gas comes from South Africa, Botswana, Mozambique and Zambia. There will have to be an amount of forex involved and it’s not a secret in Zimbabwe that forex is a challenge.
MC: Where are you getting the funding?
MM: We are engaging our bankers on a daily basis. Some of them are here and they can only promise to go back to the authorities or to the Reserve Bank of Zimbabwe to get an allocation. As and when they get it they will assist but, until then, we have to soldier on, making use of the little we have.
MC: You also indicated your intentions to expand your footprint. What are you looking at?
MM: We cannot determine exactly how much but, like I said, there a number of companies who only have retail licences. Those are our footprint in areas we are not yet established, like now we are not in Karoi but we have a player in Karoi who comes to fill their cylinders. We would like to be present in every province of the country but, like I said, funding is currently an impeding factor.
MC: In terms of investments, what component of freeing investment is there in Bulls Power Fuels?
MM: At the moment there is none. From what I have seen, partnerships tend to drag; drag others or you will be dragged. At the moment I am the sole investor in the business and I do not see it changing in the next five years. Our greatest focus point now is expansion and the team we have now is capable of running the operations. Should we need investors in the long run, it will have to be arranged.
MC: On your focus on expansion, are you looking at going into the region or just Zimbabwe?
MC: We are looking at Uganda. Why? Because it is a unique market in the sense that the only players there are Total and Shell. They deliver cylinders to people and they have not yet adapted to a situation we have in Zimbabwe where one can go with a 9kg cylinder but buy 1kg. In South Africa, if it is a 9kg you will have to buy 9kg not 1kg.
So the system in Uganda is like in South Africa. It is a market that we have seen and I think if our country stabilises and we recover in terms of forex we will go there.
MC: At such a time, would you will be in a position to supply both Zimbabwe and Uganda?
MM: We can. The very important thing is that of transportation which we are working on. Before the end of the year we will have our trucks coming in and will ferry our gas from South Africa and Mozambique. On Uganda, our entry point is Mombasa. Total and Shell drive from Mombasa to go to Uganda with the gas so we will do the same.
MC: What would you say about your entry into the energy sector?
MM: We are thrilled with the opportunities which this sector presents. In terms of turnover, I must say right now we are not looking at the numbers, we are looking at expanding. I must say we have not made a profit since we commenced in August last year but it will come at some point. We are looking at US$300 000 to US$400 000 per month which will translate to just below US$4 million by end of next year.