Fusion Capital eyes oil earnings

Saturday August 4 2012

By COSMAS BUTUNYI Special Correspondent

Private equity player Fusion Capital is readying itself to take advantage of the anticipated boom from the discovery of oil and gas in the East African region.

Together with a local developer, the East Africa-focused firm is constructing 16 serviced luxurious apartment units in the Bukoto suburb of Kampala, Uganda.

This comes as the country prepares to begin commercial extraction of the resource sometime next year.

In the partnership, the private equity firm that has existing bases in Nairobi, Kigali, Kampala and Dar es Salaam, provided capital to facilitate expansion of the developer’s existing business.

According to Luke Kinoti, the group chief executive officer of Fusion Capital, the entire project is currently valued at slightly over $2 million. Fusion Capital provided a structured finance facility worth $1.4 million.

Mr Kinoti added that the developments target the increased demand by business visitors to the country.

East Africa is attracting investors following oil discoveries in Uganda and Kenya as well as gas in Tanzania.

As the prospects brighten, the huge flow of foreign investment into the oil and gas sector is also expected to start creating additional demand for the importation of heavy machinery needed to develop the drilling sites and the pipeline network to transport the oil.

“There is a growing demand for long stay visitors making this an interesting proposition for Fusion,” said Musa Cheptarus, the Uganda country manager of Fusion Capital.

As the project continues, the firm noted in a newsletter that it was already attracting the interest of possible suitors and that oil companies have “expressed strong interest” in buying the entire development once complete.

The developments are expected to be completed at the end of 2012.

“Fusion Capital is not intending to invest directly in oil extraction,” the firm stated in the newsletter, adding that the discovery of the resources would however lead to numerous related opportunities as local economies gear up.

“The discovery of oil and gas within the region is a positive development for the SME industry,” Mr Kinoti noted, adding that an opportunity would present itself for the enterprises with the governments’ intention to encourage the large oil and gas companies to source as much of the goods and services required from locally established companies.

Mr Kinoti said the mineral discoveries is likely to see enterprises in the region enter into supply and support arrangements with the oil and gas sector.

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