2014 overview

17 February 2015

There were important milestones for AOG in 2014, with the start of production at two of our energy companies, Addax Bioenergy and Oryx Petroleum, amidst a challenging international environment.

Oryx Energies – new business model confirmed

In 2014, we continued to implement the integrated downstream model we introduced in 2013, when we merged our trading and downstream activities. The model enables us to master the value chain from product sourcing on the open market (via our trading arm) to strategic storage and distribution to the final customer. This proved a competitive advantage in markets across sub-Saharan Africa, as we offered consumers and businesses the quality, reliability and pricing of energy products that are essential to the social and economic development of the region.

We also delivered on our commitment to invest strongly to expand our business, as part of our ambition to make Oryx Energies the preferred energy brand in sub-Saharan Africa.

• We completed a second LPG sphere in Abidjan, Côte d’Ivoire, in September, quadrupling our storage capacity in order to respond to the strong LPG demand in the country;

• We inaugurated our state-of-the-art oil terminal in Las Palmas, Spain, in September, with the aim of facilitating the flow of commerce from this strategic location, including to West African countries;

• We also added 11 service stations to our retail network, through acquisitions or the construction of new sites in Burkina Faso, Niger, Kenya and Zambia, and continued to grow the number of our distributors, to bring energy products closer to the consumer;

• Work on the new jetty at the Kissy Oil Terminal in Freetown, Sierra Leone, advanced during the year, but completion was delayed due to the Ebola outbreak;

• We inaugurated the first 36 distribution centres (Pia Markets) in Benin, confirming the success of this innovative idea. With partners Aléchou and Castel, the Pia Markets offer access to a small supermarket, an internet café and everyday non-food items (fuels, lubricants, LPG) in one place, for urban and rural communities across the country.

We were also proud to be granted Level 2 Broad-Based Black Economic Empowerment (BBBEE) contributor status in South Africa, in March, as part of our commitment to the country’s transformation agenda. In June, we were honoured to see Oryx Energies designated one of the top five companies in Burkina Faso, in recognition of “the company’s outstanding contribution to the country's socio-economic development.”

In September, we launched our first-ever pan-African advertising campaign, with the aim of driving brand and product awareness across the region, and leveraging our ambitious asset investment programme. The campaign began in Benin and Tanzania, and is due to roll out across a total of 12 selected markets from 2014 to 2017.

At the same time, our ISO 9001, 14001 and 18001 certification processes advanced according to plan. SGS was selected as the certification body for the project, which is planned for completion in 2016. HSSE training and monitoring programmes also continued in order to maintain the health, safety, security and environmental behaviours that form an integral part of Oryx Energies’ success.

Finally, Oryx Energies launched à $107 million capital increase in November, with the participation of employees.

Addax Bioenergy: first production of ethanol and renewable electricity

Our pioneering sustainable energy company, Addax Bioenergy, completed the construction of the ethanol distillery and electricity plant, and in May started the production of sugarcane bioethanol and renewable electricity (from sugarcane biomass) at its facility near Makeni, Sierra Leone. As planned, the initial production was of short duration, due to the start of the rainy season, but produced ethanol in accordance with EU specifications. Operations restarted on schedule in December.

Addax Bioenergy also earned full sustainability certification of its sugarcane estate, factory, transport and storage facilities from the Roundtable for Sustainable Biomaterials (RSB). This followed the initial certification of our sugarcane estate in 2013, when we became the first biofuels entity on the African continent to be certified. This confirms the project’s compliance with ambitious sustainability criteria, including food security, human rights, and environmental management standards.

The May period also coincided with the tragic outbreak of the Ebola virus in the country. We sadly lost four employees to the virus from October 2014, while four others fully recovered. A number of measures were taken from May to prevent the spread of the disease and ensure the rapid diagnosis and treatment of both employees and communities in our project area. Measures included the construction of an on-site Ebola Isolation Unit, manned by expatriate and local nurses, the construction of a 100-bed Ebola Treatment Centre and an Ebola Isolation Unit in Makeni, the installation of chlorine wash stations and temperature screening across the factory and agricultural estate, and the distribution of soap to all employees to use as disinfectant. All actions and procedures were overseen by an Ebola Task Team, comprising senior management.

As part of broader community efforts, we donated four second-hand vehicles to the Ministry of Health and Sanitation (MOHS) to support the fight against the virus. Other equipment donated included chlorine, sprayers, cell phones, loud hailers, shovels and picks for the MOHS in Bombali and Tonkolili.

2014 was thus a year of significant achievements for Addax Bioenergy, in a very difficult environment, marred by the deaths of six employees and the important efforts to fight the Ebola virus. AOG organised an internal Ebola appeal in October, matching employee contributions, to support Red Cross actions against the virus.

Oryx Petroleum: first crude oil production

The expansion of our upstream business, Oryx Petroleum, continued with first production and sales of crude oil in June, marking an important milestone for the company.

Production and sales were in the Kurdistan Region of Iraq, where crude oil production from Demir Dagh started to be sold. Exploration and development activities in the region made significant progress during the year, despite some interruptions due to the security situation. Gross production from Demir Dagh is expected to increase from 15,000 bbl/d at the end of 2014 to 35,000 - 45,000 bbl/d by the end of 2015.

We successfully completed a CAD 224 million equity offering in July to secure the additional capital necessary to continue pursuing our growth plans. AOG remains the majority shareholder with approximately 75% of Oryx Petroleum’s outstanding share capital.

More recently, we expanded our exploration portfolio with the acquisition of an 85% interest in the AGC Central License area, offshore Senegal and Guinea Bissau. Oryx Petroleum now has seven license areas throughout its focus area of Africa and the Middle East.

AOG Real Estate: new acquisition

AOG Real Estate continued on its growth path in 2014, through the active management of a portfolio of direct and indirect real estate investments.

In October, we extended our direct investment portfolio with the acquisition of a 15,600 m2 office building at Quai Ouest, in Paris, in collaboration with our Parisian real estate partner, Emerige. The building will be fully refurbished and is expected to be completed in December 2016.

Our redevelopment projects in Maillol, Paris (162,000 sq ft of leisure and residential), and Cannon Street, London (90,000 sq ft of offices and retail space) advanced during the year. The projects are due for completion in February 2017 and June 2016, respectively.

In the meantime, our core portfolio of commercial properties in London, Paris, Geneva and Malta brought higher yields than planned.

Our indirect investment portfolio in North America also fared well. In particular, we completed the sale of shares in a US REIT company that brought a return of just over 130% on our initial investment.

AOG Real Estate has developed a solid core portfolio of commercial properties, aimed at long-term yields, and has carried out five major property redevelopments (of which 3 are ongoing). With a small team, professional and trusted partners (Emerige, Morgan Capital Partners and Brookfield), AOG Real Estate’s total contribution to the Group’s consolidated net income came to over $260 million for the period 2010 – 2014.

In addition…

We were pleased and proud to receive two awards at the 2014 European Transform Awards ceremony, held in London in April. The awards followed the Group’s repositioning and rebranding in early 2013, to better express the diversification of our investments since the Group was founded in 1987.

2015 – looking ahead

We foresee further expansion of our businesses in 2015, in particular:

• Oryx Energies is set to grow its position in sub-Saharan Africa, offering the fuels, lubricants, LPG and bitumen necessary to the economic and social development of the region;

• Addax Bioenergy should continue the development of its 9,000 hectares of sugarcane in Sierra Leone, ramp up the production of sugarcane bioethanol and renewable electricity, and generate its first revenues;

• Oryx Petroleum is expected to expand commercial oil production and sales from Demir Dagh in the Kurdistan Region of Iraq, as well as continuing other appraisal and exploration activities, on the path to becoming a full-cycle exploration, development and production company;

• AOG Real Estate will continue to grow and to create value for AOG’s bottom line.

We have proven once again that AOG thrives on the twists and turns of the unexpected, and 2014 brought a number of these.

I express my gratitude to all our employees, who adapted so well to the unexpected and enabled us to keep moving forward. My thanks also go to our partners and service providers, without whom we could not succeed. I look forward to the new opportunities and challenges that 2015 will undoubtedly bring.

Jean Claude Gandur
Chairman of the Board, AOG