Fuel association accuses Nasan of fuel supply breach

Fuel and Franchise Association of Namibia (Fafa) chairperson Michael Ludeke yesterday said there is concern in the industry that Nasan Energies is allegedly creating supply shortages at newly divested service stations to pressure the energy ministry into allowing them to source from Vivo Energy.

Nasan Energies recently took over several retail fuel sites divested under merger conditions imposed by the Namibian Competition Commission (NaCC), which approved the transaction on 19 March, following deals involving Vivo Energy Namibia.

The company was further boosted after energy minister Modestus Amutse directed that Nasan be allowed to supply fuel to the affected divested sites for a three-month transitional period while longer-term operational arrangements are stabilised.

By last week, Fafa said several fuel retailers had effectively run dry after committing working capital to prepaid fuel orders.

The association wrote a demand letter dated 4 June to Nasan representative Jean-Blaise Ollomo after the company allegedly failed to honour its commitments to deliver fuel to retailers and franchise operators, even after receiving upfront payments.

The letter was copied to Amutse, NaCC chairperson Andreas Penda Ithindi and chief executive officer Vitalis Ndalikokule.

Ludeke confirmed to Namibian Sun that the association had indeed written the letter, which accused Nasan of failing to honour undertakings made to retailers after collecting upfront fuel payments under its Bring the Cash Incentive.

"There is widespread concern within the downstream petroleum industry that Nasan is deliberately creating an artificial supply shortage at the divested retail sites," Ludeke said.

He added that there are concerns the approach is designed to pressure Amutse to permit Nasan to source product from Vivo Energy.

No answers

Ludeke told Namibian Sun that messages sent to Nasan via WhatsApp were read but never responded to.

He further said that, as at 7 June, no response had been received from Nasan Energies to the formal demand letter issued last Thursday.

Ludeke said the association does not object to Nasan sourcing fuel from any legitimate supplier, provided that retailers operating the divested sites receive a reliable and uninterrupted fuel supply.

He added that Nasan's treatment of its dealers in the first week since assuming control is deeply troubling and falls short of the standards reasonably expected following a merger or divestiture.

“Nasan’s current modus operandi appears to run counter to the public interest considerations and the objectives the Namibia Competition Commission sought to achieve when imposing the divestiture conditions, in particular, the protection of existing employment, the viability of small and medium enterprises, and security of supply in the downstream petroleum sector,” he said.

Amutse did not answer calls yesterday and did not respond to an SMS from Namibian Sun. Nasan officials also did not answer calls.

Cash incentive

Fafa has alleged that Nasan representative Jean-Blaise Ollomo issued a written communication on 2 June introducing the Bring the Cash Incentive, under which retailers would receive a rebate of 50 cents per litre applied immediately to the invoice.

The arrangement requires retailers to place orders for a full truckload of at least 40 000 litres in total across products and to make payment at least 24 hours before the scheduled loading.

Fafa said Nasan further promised that payments received and cleared before 12:00 would result in fuel being loaded “the very next working day”.

However, the association alleged that a “material number” of retailers who made upfront payments did not receive fuel deliveries, while others allegedly received fuel “well outside” the promised 24-hour and next-working-day delivery windows.

“The practical consequence is that, having committed substantial working capital upfront to Nasan in good faith and on the express undertakings given, the affected retailers are left without fuel,” the letter states.

Fafa further alleged that some retailers secured additional lines of credit from commercial banks and other lenders to participate in the incentive programme.

According to Fafa, Nasan directors and senior management allegedly agreed during the meeting that the Bring the Cash Incentive would run for three months: June, July and August.

Written confirmation

Fafa further alleged that retailers who chose not to participate in the programme would continue to receive fuel under the same seven-day credit terms as those applied by Vivo Energy Namibia.

The letter further states that retailers accepted the upfront payment requirement “conditionally upon, and exclusively for the purposes of, the Bring the Cash Incentive”.

According to Fafa, Nasan undertook to issue written confirmation of the arrangements on 2 June but failed to do so.

The association further argued that each transaction concluded under the Bring the Cash Incentive constituted a binding “contract of supply”, based on Nasan’s written communication.

The association demanded written confirmation from Nasan of the duration of the incentive programme and requested that existing supply commitments be honoured.

Fafa warned that failure to comply could result in arbitration proceedings under the Petroleum Products and Energy Act, urgent court applications and further complaints to the competition commission.