Philip Aikinomioria

Sahara Group Case Study Strategy Analyst Outline 1 Overview 4 Positioning for Growth 2 Current Market Assessment 5 Conclusion 3 New Market Assessment 6 Appendix 2 Overview Overview Snapshot of current and future markets Current Markets 1 Future Markets 2 Upstream 3 1 Trade 4 Downstream 2 Finance 3 Power Contracting and Procurement 4 Midstream Data and Tech Current Market Assessment Current Market Assessment 1/3 A review of the current portfolio and benchmarking against industry growth Downstream Upstream Contribution of Sectors to Overall Revenue 2.2 2.4 -49.4% -7.7% +6.6% 2.5 3.0 -42.3% 2.0 1.0 29% 1% 2019 12% 47% 2020 2021 2019 Trade +1.3% 12% 12.3% 3.9 4.0 2020 2021 Power +9,900% +1.5% 4.0 +11% 1.0 12% 19% Upstream xx% xx% Downstream Sector GDP CAGR -) Market Share Power Trade 2019 2020 2021 0.0 0.0 2019 2020 2021 Despite GDP growth decline in the upstream sector, Sahara revenue reported positive growth. This might likely be as a result of increased production by Sahara over the periods. The revenue from the downstream business has been on steady decline in line with industry movement. This decline can be attributed to FX scarcity and high importation cost. The revenue growth in the trade segment has been moderate. This is probably because the business has reached its maturity stage. The power revenue significant growth far above the industry can be traced to the substantial investments made by Sahara, and the business being in its growth phase. Current Market Assessment 2/3 Industry review and policies that will impact the current markets Upstream • The upstream sector is projected to grow by a CAGR of >2% in the next 5 years. Industry Growth Estimates Key Policy Impacts • Oil price has been projected to hover around $80-85/b in the next 5 yrs. • Nigeria oil production to hit 2million bpd in the next 5yrs Downstream • Downstream sector is projected to grow slowly at a CAGR of <1% due to uncertainties in the sector. • The refining segment is likely to dominate the market as demand for petroleum product is expected to grow by 14.6%. • Dangote refinery to boost capacity to 650,000b/d. • Passage of the PIB will provide transparency and drive investment in the sector • FG implementation of PIA will drive investment and deregulate the sector. • 100 Oil and Gas projects, including 25 upstream projects; as government is focused on growing the hydrocarbon sector. • FG keen desire to established domestic refinery and Dangote refinery project could spur growth in the downstream sector . Power • By 2030, Nigeria plans to increase power generation to 30,000MW. • Demand is projected to grow at a CAGR of 12% in 5 years as the economy grows. • 30% of estimated power to be generated by renewable energy by 2030 Trade • West Africa consumes over 34bn liters of petroleum product annually. • Nigeria boasts of the highest total trade volumes in the West African region (90% export from crude oil) • Intra-Africa trade (AfCTA) projected to grow trade by 30% and trade deficit down by 51% • Positive outlook for the power sector as FG plans to spend over $3bn to boost the sector through PPI initiative. • FG construction of new port to position Nigeria as regional trade hub and prioritize IntraAfrica trade. • FG development of renewables and off-grid solution attracting international players into solar mini-grid construction • Implementation of Pan-African Payment and Settlement (PAPSS) by AfCTA to drive more trade opportunities Current Market Assessment 3/3 Key insights and observations that will impact future growth Upstream The Nigerian Upstream sector is experiencing growth with major investment going into offshore asset and gas production. Growth in revenue would be largely driven by increase in production capacity and oil price. Development of assets (offshore and onshore) will play a major impact on revenue growth for Sahara group. Sahara group upstream revenue will have to grow at a CAGR of 32% to hit $10bn by 2026. Downstream Sahara downstream sector has experienced significant revenue decline at a CAGR of 42% from 2019 to 2021. Sahara’s revenue decline also reflects the industry decline rate at a CAGR of 40% within the period in review. Growth in the industry will be very slow and highly dependent on long term government policies. With refining likely to dominate the market in the future, there are other opportunities to play in the sector to drive revenue. Power Positive outlook in the power sector and a key focus area for the FG to drive economic growth Sahara Power revenue growth of 9,900% from 2020 to 2021 was driven by growth in generation and distribution To drive Sahara Power revenue growth, generation to increase to over 10,000MW by 2026 (CAGR of 33% ) Sahara Power can achieve higher revenue than projected $5bn by 2026 with focus on renewable (solar) and power plant The trade sector will continue to grow with FG focusing more on export trade to drive economic growth Sahara Trade revenue has been relatively flat in the last 3 years with no projected growth in 2026. This could mean that the market has reached maturity level, or there are current operational challenges affecting growth To achieve growth, develop innovative trade offerings across the value chain players of the energy sector (oil, gas, solar etc.) Trade New Market Assessment New Market Assessment Industry growth and policies that will impact the new markets Finance • Industry Growth Key Policies Contracting and Procurement The Nigerian financial services sector is forecasted to grow from $18.47bn in 2022 to $29.08bn in 2026. • • By 2025 the proportion of households earning over $5,000 is forecast to double. • • Nigeria Fintech industry is projected to grow at a CAGR of 23.4% ($324bn by 2026) • New regulations strengthening the central bank's oversight could constrain lending in the near term. Procurement and contracting market grew in the last 6yrs at 7.6% and expected to grow at a CAGR of 8.2% by 2027. Midstream • Global demand for crude oil is Increasing and projected to hit 104mbpd • Natural gas distribution market is expected to grow at a CAGR of 10% and pipeline transportation by 12% Positive outlook in the market with a valuation between $50 - $100bn yearly in revenue Data & Tech • ICT sector has maintained steady growth in the past 10 years and second highest contributor to Nigeria GDP • The sector is expected to add over $88bn to the Nigeria economy by 2027 • Over 90% of crude oil, gas and other petroleum product are moved by sea. • Nigeria has the fastest growing data center in Africa and expected to grow at a CAGR of 17% • The Nigerian government has budgeted N5.46trillion in capital projects in its 2022 Financial budget • The passage of petroleum bill to give more transparency, drive growth and investment into the oil and gas sector • FG to facilitate $40bn private capital investments in digital infrastructure into the ICT sector. • FG to focus on more oil and gas projects and power projects to drive economic growth. • FG to put an end to security challenges affecting pipeline crude oil transportation • The FG projects N150bn investment to make digitization a key driver of national economic development strategies Positioning for Growth Positioning for Growth Wining in these new markets Current Market • Development of offshore and onshore asset to drive production • Increase focus on gas development and production to drive additional revenue Upstream • Increase generation to drive export to other West African countries through the West African Power Pool • Increase focus on renewable energy (solar) • Create an R&D section to develop a strong play in alternative energy Power • Develop compelling trade products leveraging technology to the meet the demand of retail consumers • Develop trade finance product across the entire value chain of the energy sector • Downstream is not an attractive market due to high risk as a result of uncertainties in the market • Although the Dangote refinery will boost production in the long term, the market will still be seen as a high operational and political risk Trade Downstream New Market • Deploy AI and IoT technologies that help devices collect and provide insights to create robust decision that support entire energy value chain. • Deploy smart grids / meters with data driven decisions that influences customer behavior to capture the retail market • Invest in R&D to develop innovative solutions • Optimize operations (logistics fleet, pipelines, vessels etc.) in distribution of crude oil and gas product • Leverage AfCTA trade to distribute products across the African continent • With technology disrupting financial services, partnership or acquisition of FinTech to create unique proposition (payments, funding etc.) across the value chain • Other areas of growth include asset and pension management, capital market • Redefine supplier relationship and identify cost saving initiatives to drive spend efficiencies. Procurement & • Contracting Actively participate in key energy projects (private and government) Data & Tech Midstream Finance Growth Projections Growth revalued based on industry assessment Sahara Group 2026 Projections Upstream 10.0 Revalued Sahara Group 2026 Projections Power 10.1 Trade Finance 8.2 5.0 3.0 4.0 5.0 1.0 2026 2026 2026 Contract & Procurement 2.0 2026 2026 Midstream 2.2 2026 2026 Data & Tech 2.5 Others 3.0 2.0 1.0 0.5 0.5 2026 Sahara Group 2026 Projections 2026 2026 Revalued Sahara Group 2026 Projections 2026 2026 2026 2026 2026 2026 Conclusion 1 The group should prioritize high growth markets such as Power. Being a major player in this industry, Sahara can potentially grow its market share to unprecedented levels by a substantial investment increase into the sector. 2 Investment is also required in the development of field assets to drive up production volumes which will impact the Upstream and Midstream revenues. 3 New market such as Data and Tech is the future of industrialization. Hence, investment in R&D will aid the development of solutions that meet markets demands. 4 The group should consider leveraging technology and data insights to drive efficiency across all identified market areas. 5 Despite the decline in the Downstream sector, there still exist some opportunities within; Logistics and Storage which can be a potential source of additional revenue for the group. 6 Currently, entrance into the Financial sector is difficult due to tight regulatory policies and low margins. However, the Fintechs remain a viable area to play with huge potentials for growth and partnerships to gain significant market share. Philip Aikinomioria JENNIFER O L ATUNDE - THO RP E Apt 9 Canal View Estate, Opp Shoprite, - - - THANK YOU Appendix: Basis of Projections Upstream Midstream Power • Projected Sahara offshore and onshore production volume by 2026 (70% producing • Oil price • Estimated gas production = 1 billion scf • Gas price = $2.5scf • Projected crude oil and gas export volumes • Average price for shipping crude oil • Average price for gas distribution • Sahara current power generation capacity • Revenue mix of Generation and distribution to total revenue • Projected Sahara Production capacity by 2026 (80% estimated to be produced) Appendix: Basis of Projections Procurement & Contracting Trade Data & Tech Finance • Total industry market size (current and projected) • Projected Sahara market share by 2026 • Current market share (revenue) from sales of petroleum product • Projected demand of petroleum product by 2026 • Projected Sahara market share by 2026 • Projected ICT contribution (market size) to Nigeria economy • Projected Sahara market share • Projected FinTech market size by 2026 • Average revenue generated by FinTech yearly • Average margin on return on asset and pension fund • Projected industry Total Asset under management by 2026 • Projected Sahara market share of total asset under management by 2026