Notore: Champion of the Nigerian

Green Revolution

by Ikponmwosa Izedonmwen

Head, Corporate Finance

September 2011

Outline

1

Introduction to Notore

Fertilizer Market

Addendum

Domestic Investors

2

Jite Okoloko

Michael Orugbo Mike Osime Richard Herb

Foreign Investors

12% ownership in NCI

Africa’s leading private equity group

$1.6 billion under management, across six

funds focused on Africa

Over 50 investments, across 40

countries, in all major regions of the African

continent

provides corporate finance support and

guidance on best-in class corporate

governance

14% ownership in NCI

An emerging market leader in the construction and fertilizer

industries

Currently with a market capitalization of over $6 Billion USD

Ownership in three Urea factories across North Africa

Provides technical oversight via a technical service

agreement

Group CEO, Notore

28% ownership in NCI

Founding Partner of Ocean & Oil Group

Fmr MD/CEO of Oando Energy Services

Non-Executive Director at Oando Plc; Director at

Union Bank

Bachelors Degree from University of Benin

Alumnus of the Harvard Business School OMP

Programme

5% ownership in NCI

Private sector-led investment bank and

development finance institution created to help

mobilize and channel required capital towards

driving Africa’s economic development

Has a US$1 billion capital base to support early

and intermediate stage projects across Africa

3% ownership in NCI

Worked with NNPC

Fmr MD/CEO of O-Secul Nigeria Limited

Corporate member of the Nigerian Society of

Engineers and COREN certified

Bachelor’s degree in Engineering from Teeside

University in the UK

2% ownership in NCI

MD/CEO of ICMG Securities Limited and

Chairman of Broadband Technologies Limited

Degree in Actuarial Science, obtained from the

University of Lagos in 1981

MBA from the Strathclyde Business School in

Glasgow

Fellow of the Chartered Institute of Stockbrokers

2% ownership in NCI

Entrepreneur with 35 years experience in the fertilizer

industry

Director of the Nigerian Business Council

Chairman of Eko Hotel and Suites in Lagos.

Degree in Chemistry from the University of London

TITA-KURU PETROCHEMICALS LTD

(TY HOLDINGS)

22% ownership in NCI

Manufacturer & exporter of hyrdo-carbon based

products

Installation, laying & maintenance of pipelines for

lifting crude oil and natural gas

BLAKENEY MANAGEMENT

5% ownership in NCI

UK bases hedge fund

£5billion fund under management

Focused on emerging markets

1981: NAFCON incorporated as joint

venture between FGN (70%) and

Kellogg Brown and Root (30%)

1987: Plant commenced production of

fertilizer and subsequently officially

commissioned with a design capacity of

1,500 MT/d of urea

1990-92: Plant recognised as one of

KBR’s most efficient plants running at

over 110% capacity

1999: NAFCON is shut down

following key equipment failure

2000: FGN decided to privatize

NAFCON

2003/2004: 2 attempts by the

FGN t o sell NAFCON as going

concern failed

2005: Notore acquired the asset

of the abandoned 500,000 MT

Urea Plant for US$152m

2006: Notore signed 20 year gas

supply contract with Nigerian

Gas Company

2007:Raised record US$222m

facility from syndicate of Nigerian

Banks

2007:Overcame significant

operating challenges and begins

extensive rehabilitation of plant

2009: Additional $20 m equity

injected from existing shareholder

2010: Commenced commercial

production & dispatch of ammonia

& urea in January & March

respectively

2010: Additional $55m equity

infusion through two leading

institutional investors in July

Our footprints in time

3

2011: Average daily urea production (Jan – Jul) =

1,100MT /day. ca. 75% of name-plate capacity

5/11: Commenced implementation of Technical

Services Agreement with TATA Chemicals India

8/11: Concluded scheduled maintenance program

to improve plant reliability and efficiency

9/11: Successfully restructured our balance sheet

by extending the amortization profile our loans

Notore Industrial Complex strategically located at Onne, Rivers State, Nigeria

– Abundant supply of natural gas

– Land available for expansion opportunities

– Own jetty (by the Atlantic ocean) for easy import of raw materials and export of products

50 Megawatts of power generating capacity

Signed 20 year gas contract at a competitive price in June 2006 for supply of sufficient gas to feed

current plant and planned expansion i.e. Trains I & II

Own the only urea fertilizer plant in the whole of Sub Saharan and Southern Africa; annual

production capacity is 500,000 metric tonnes of Urea and 600,000 metric tonnes of blended NPK

Asset located in Nigeria, a large and growing market for fertilizer; domestic consumption in Nigeria

is currently estimated to be between 900,000 – 1,100,000 metric tones per year

Own Nigeria’s Largest Fertilizer Marketing, Sales and Agric Services Team as well as an effective

fertilizer supply chain

Competitive Advantage

4

5

Overview of Businesses

Notore

Fertilizer

• Completed rehabilitation of ammonia plant in January 2010

• Completed rehabilitation of Train I for urea capacity of 500,000 MT per

annum in March 2010

• Completed scheduled maintenance to increase daily ammonia and urea

production capacity to 90% of production capacity

Notore

Power

• 25MW of the 50MW installed capacity is currently generated and supplied

to fertilizer plant. Excess power is available to trade

• Executed PPA with a neighboring customer to supply Power on a “Take or

Pay” basis

• Working with the Government on a pilot project to generate 250MW into the

National Grid

Notore

Seeds

• Secured license to operate as a seeds business

• Working with partners to commercialize best available seed varieties

• Plans to invest in R&D to develop next generation Miracle Seeds

• Identifying sales opportunities for crop protection products

• There are strong synergies with the Fertilizer business (Supply Chain)

2012 Urea production at 90% of capacity, i.e. 400,270 metric ton

• Average urea selling price: $520 per ton

In 2012, EBITDA is expected to be circa. $ 102 million and $ 115 million in 2013

Concluded the restructuring of 70% of our current project loans to longer term loans to align

our cash flows/cash generation capacity with out debt service obligations

Further expansion planned with the construction of a new 1,500, 000 Metric ton plant (Train

II) at our Onne Facility. CAPEX ca. US$900 million. Construction is expected to start in

2013.

Plans to complete the listing and public offering of Notore Fertilizer Co. shares via an Initial

Public Offering (IPO) on the floors of the Nigerian Stock Exchange and an international

actively traded stock exchange/bourse in 2012

6

Financial Highlights - Fertilizer Business

Outline

7

Introduction to Notore

Fertilizer Market

Addendum

Market Size

The global fertilizer industry is one of the largest agribusiness sectors estimated at

150million tons per year, with China and India accounting for over 40%, and the US,12%

Fertilizers are a significant factor in improving crop yields. The primary fertilizer products

include nitrogen, phosphate, and potash.

• Collectively, these nutrients represent 90% of the world’s fertilizer consumption with

nitrogen alone representing approximately 65% of global fertilizer consumption.

Urea prices are cyclical and driven by global supply and demand and energy prices

Since the large increase in natural gas prices in the U.S. in 2000, the cost of urea

production in the U.S. has provided a floor to international urea prices

Source: IFA, IFDC

8

Global Fertilizer Market

Spain

$4.50

UK

$4.67 Belgium

$4.57

India

$2.32

Korea

$6.00Japan

$6.10Louisiana

$3.85 Puerto Rico

$4.45

Gas Contributes 80% - 90% to the Raw Material Costs of Producing

Urea

Toronto

$4.60

China

$7.20

New York

$4.01

Notore Gas Discount vs:

China: (85%)

UK: (77%)

US: (75%)

Argentina: (74%)

India: (54%)

Egypt: (11%)

Argentina

$4.10

Sources: ONGC prices (India); EIA estimates (New York, Russia); Credit Suisse research (China); US FERC (other countries/regions: landed LNG prices); World Bank reports

(Egypt) ; ICIS (Qatar). Data in $US/mmbtu

Russia

$0.93

Egypt

$1.19

Qatar

$1.50Notore

$1.06

9

Notore Gas Pricing in Lowest Quartile Globally

Africa was recently classified as one of the world’s most rapidly growing

economic regions It is expected that by 2015:

200 million Africans will enter into the consumer

goods market

GDP per capita will grow at 4.5% CAGR ,

implying over 35% increase in spending power

The continent also owns over 25% of the

world’s total arable land but generates

only 10% of global agricultural output

Africa currently has only 20 companies

each generating a minimum annual

revenue of $3billion

Nigeria was recently classified by the

World Bank as a Category 2 conducive

environment to do business in (same

league as Morocco, Egypt and Ethiopia)

10

Significant Growth Potential in Africa

Fertilizer Market Outlook

11

The International Fertilizer Association

(IFA) Africa forum has written a position

paper on fertilizer policy proposing the

following:

Fertilizer related taxes and custom

duties be abolished to include

eliminating tax breaks for local fertilizer

manufacturing and/or blending

companies

Regional blocs should grant tax exempt

status for agricultural inputs including

fertilizersSource: FAO Statistics, Abuja Declaration of Fertilizers

Current average fertilizer consumption in West and Central African is about 10kg/ha

Africa’s estimated CAGR for fertilizer consumption (MT) is roughly 3.5% up to 2015

Product supply is largely dependent on importation as only one fertilizer producing

company (i.e. Notore) exists in West and Central Africa

Current consumption rate in Africa is still far below the FAO recommended

200kg/ha

0

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015

Forecast on Fertilizer Consumption (kg/ha) in West and Central Africa

2006 Abuja Declaration CAGR = 40%

Today's assumptions from research CAGR = 27%

Nigeria’s Agricultural Challenge

12

Whereas

Use of inputs (fertilisers and Seeds) has been targeted as the key path to higher

yields

Majority of Government agricultural budget goes into inputs subsidy (> $700M in

2010)

Natural gas is abundant in the country

There is enough arable land to produce seeds for the Sub Region

Potential fertilizer market size over 3.5million MT

What gets to the farmer are:

Only 10% - 20% of subsidies

Little inputs at Very high costs (Fertiliser >$700/MT– a 37% increase over average

international FOB price)

Isolation and desolation

A vicious cycle of subsistence

The Nigerian Fertilizer MarketProduct Place

•No formal distribution system

•Competition* sells primarily to government

•Three Types of Markets

*Competitors:

oTak Continental and

oGolden Fertiliser

Promotion

•No investment in Marketing

•Major Challenges in the Market

o Distortion of Market Price

o Poor Quality Bulk Blends

o Short Weight Bags

o Availability in Season

Products Used Utilization

(kg/Ha)

13

• Significant price

premium in local

market

• Customer willing

to pay premium

price for quality

brand

Price

Notore in the Nigerian Market Space

Produce Inputs (Fertilisers and Seeds)

Notore non-government fertilizer sales activities in 23 states

Educate farmers on inputs and best farming practices

Give farmers access to inputs (lead with fertiliser)

Provide inputs that are appropriate and affordable

Crop Specific blends

Pack size: 50kg, 10kg and 1 kg bags

Pricing

14

Notore currently controls 60% of the non-government urea market

Our Commercial Focus is to take Education and Good

Quality & Affordable Inputs to the Poor Farmer across

Nigeria

2009: With Government Extension

Recruited 60 Dealer Partners,

1500 Agro Dealers, 6 Transport

Partners

Trained 210 ADP Staff of16 states

Implemented 420 demonstration

plots

Trained over 40,000 farmers

2010:With Private Extension (Village Promoters)

Introduced private sector extension

Trained 180 VPs in 15 states

Implemented 917 demonstration plots

Trained over 58,000 farmers

Introduced 1kg fertilizer pack size

15

Impact: 175 private extension jobs each making N150,000

Resulted in 70-120% higher yields for trained farmers

Increased grain outputs of 196,000MT

Notore generated N9.8 Billion GDP

Our Achievements as at September 2011

143, 348 MT of Urea Produced

(against 71, 411 MT produced in

2010)

36, 622 MT of Urea Exported

(26%)

83, 587 MT of Ammonia

Produced

Introduced 10kg fertilizer pack

size to the market in August

930 Village Promoters working

with our Agricultural Services

team

Test planting of Foundation

16

Work Done

930 private extension jobs

(already achieved)

- 750 additional village

promoters added in 25 states

(30 VPs per state)

To reach 1,300,000 farmers by

December 2011

Average 100% higher yields

Increased grain outputs of

2Million MT

Generation of N80 Billion GDP

Expected Impact

Our fertilizer business strategy is to secure the West and Central African

markets via 2.3 million MT production capacity and a world class supply chain

17

Train I

Refurbishment/restart

of Urea plant

Train II

Secure additional plant to

Increase capacity

Completed

Completed

~ Additional urea and

blended NPK production

capacity

20 year Gas Contract

Train I

Refurbishment/restart

of NH3 plant

Ensure Market Visibility in West and Central Africa

Notore 5-Year Fertilizer Strategy

Outline

18

Introduction to Notore

Fertilizer Market

Addendum

Potential Market

•Rice and Maize Seed Market $1 Billion

Rice: $800 Million

Maize: $200 Million

Market Entry Cost

•R&D: about $8 Million • Develop improved seeds with required quality

for Nigerian farmer and customers

•Infrastructure: about $10 Million• Seeds processing mill with 100,000 MT /

annum capacity

• Processing involves applying herbicides and

removing impurities

Time to Market and Margins

•One-year time horizon

•Estimated Operating Margins of 30%

Strategic Fit

•Increase Sales From Fertilizer Business

•Diversify Revenue Streams

•Leverage on our distribution network

•Feed directly into our Foods Business

•Catalyst to Green Revolution

Crop Land

cultivated

Seeds

planted

per Ha

Cost per Kg of

seed

Rice 5 Million 60Kg $2.50

Maize 5 Million 15Kg $2.50

Notore Seeds Market Entry Assessment

19

2020

Acquire Seeds License (Done)

Commence trading of seeds

Phase I:

Engage farmers to produce 1,000 MT of maize seeds and 500 MT of rice

Phase II:

Increase production capacity of maize seeds to 2,000 MT

3-Year Seeds Business Strategy

Launch Seeds & Crop

Protection Business Grow Business

Commence Seeds Production

Continue to grow Business

Implement technical sales training

for the crop protection business

2011 2012 2013