2. KZN Oils (Pty) Limited – RFP
Introduction
KZN Oils (Pty) Limited (KZN Oils) is a 100% BEE company that has been operational in the South African Oil Industry since 1998 and is a partner of Chevron South Africa (Pty) Limited as a reseller of fuel, lubricants and other petroleum related products. KZN Oils has been planning for the expansion of its business via the Branded Marketer concept and has the necessary financial and operational capacity to expand further to become the Caltex Wholesale Marketer in KwaZulu-Natal North.
2. Contact
Our CEO Mr Rajen Reddy is the primary contact and can be contacted at:
45 North Coast Road P.O. Box Tel: (031)
Briardene Rochdale Park Fax:(031)
Durban Springfield
Alternately he can be contacted through his personal assistant –
Melanie Brisset Tel: (031) and
Fax: (086)
or via

3. Company Overview 3.1 Company Overview
KZN Oils is a going concern that is prospering in the South African Oil Industry and is currently a reseller of fuel, lubricants and other petroleum related products. The company has its head office (see picture) in Durban and the company’s warehouse and call center (see pictures in attachments) are located down the road from the head office. The current Commercial, Logistics and Lubricants divisions of KZN Oils will soon be joined by a new Retail division to operate the Branded Marketer business. The Retail division will be supported by the existing Business Support, Finance and Human Resources divisions. (proposed organisation chart attached).
The company sponsors a programme of social upliftment covering poverty, unemployment and health, and has been recognized for these sponsorships. The company also has a programme to ensure the highest standards of Safety and Environmental protection. (see attachments)

4. Company Overview 3.2 Company Structure & Ownership
KZN Oil is a BEE company which was formed by the CEO – Mr. Rajen Reddy - a previously disadvantaged South African and the company is 100% Black owned. In addition the company enjoys 26% Black Women Ownership via the ownership of Phaphama Afrika Business Development represented by Zanele Mbogazi (Chairperson of Phaphama ). (BBBEE certification attached). The management of the company is also predominantly Black – see the certificate referred to above.
3.3 Financial
As a going concern – and as with KZN North the capital for the retail division will be accommodated within KZN Oils (Pty) Limited. We have received in principle, an agreement from our bankers to provide the necessary finance. Detailed discussions have started with our bankers to ensure the various forms of finance are available as required by the RFP. The planned Debt/Equity ratio will be developed as part of these discussions – we expect up to 20 to 30%% will be Equity investment. We expect to be paying a maximum interest rate depending on the type of finance of prime %.

5. Staff Strategy 3.4 Staff Strategy
See the attached KZN Oils Organization Chart. The Branded Marketer operations will report directly to the Retail Manager. The existing KZN Oils call centre will be used for the Retailers to place orders. The call centre agents have been handling orders for the other parts of KZN Oils business for many years now. The Logistics Manager will have responsibility for the efficient operation of our fleet of vehicles that is well aligned to our network’s delivery requirements, ensuring delivery of required products to the network. In addition the existing Property and Maintenance sections will attend to the Retail division’s requirements in these areas.
The recruitment of a highly experienced Retail Manager has been achieved and Mr Richard Bing will head up the retail sales efforts. We believe 2 additional Sales Representative will have to be hired so that all service stations are serviced by our retail staff.
We have been planning our entry into the Retail market via the Branded Marketer route for a year now, and have used the skills of the existing staff listed below to prepare for this exciting development.

6. Staff Strategy
3.4, continued
Our CEO, Mr Rajen Reddy will personally get involved in the Retail business using his vast business experience, contacts and previous knowledge of personally operating a service station, ensuring that our new partners and their staff feel an integral part this new business concept.
Our Chairman, Mr. Peter Linnegar is an ex director of Chevron South Africa (Pty) Limited and has over 38 years Industry experience in areas including Supply & Distribution, Logistics, Retail and most recently Commercial. His guidance as we enter this exciting new area of business will ensure that any possible gaps are attended to before we go live.
Mr Richard Bing an ex Chevron employee has had many years Retail experience both in the Durban and Johannesburg Regional offices, as well as internationally. In addition to Sales experience he has handled Service Station Development, Property & Facilities Operations and in fact brought the 1st Branded Marketer – Caltex Eastern Cape Marketer on board.
Mr Preggie Somasundram, with extensive experience in Operations, Logistics and Health & Safety heads our Logistics Department. His recent responsibilities for a major Oil Company included managing a large terminal in Durban with a staff of 23 and 3 contractors with fleets of vehicles. Duties also included Shipping – both Imports and Exports.

7. Staff Strategy
3.4, continued
Mr Yasheen Dorasamy, B Acc (Hons in Acc) is the head of the Finance Department and since 2008 has brought his experience of auditing with KPMG and initially internally within KZN Oils to the finance department.
Mr Sibusiso Shandu, our acting General Manager lends his more than 25 years of business experience, including 15 years with the National Ports Authority to our various teams. His business, financial and International Trade qualifications give a rounded, customer focussed approach to business.
Mr. Neil Biggs, an ex Chevron employee who spent 3 ½ years launching the Branded Marketer concept in the Caltex countries of Philippines, Malaysia, Thailand and South Africa is also advising KZN Oils as we prepare for our entry into the Retail business.

8. Operational Strategy 3.5 Operational Strategy
KZN Oils are a going concern that is already involved in the Oil Industry in South Africa and will be operational as a Branded Marketer in KZN North from August 16th.
We believe that Mpumalanga South cluster fits in very well with our existing Branded Marketer business which is immediately adjacent to the southern part of the Mapumalanga South cluster.
We will use the established systems and procedure set up for our 1st cluster for Order taking, delivery scheduling, credit control, invoicing etc. for adding the Mpumalanga South cluster to our business.
We will also be set up for the significant administrative load resulting from receiving and paying rentals and rebates, and paying rates on our new properties that need to be catered for in our various systems.
We have already given special attention to the very important aspect of maintenance of our partner’s facilities which is provided by a 3rd party and which we need to ensure runs smoothly in the transition from Chevron to KZN Oils supply.
As KZN Oils will be undertaking the deliveries to our partners, on the transport side we need to acquaint ourselves with the capacity and access of the sites and use journey plans for our fleet to ensure a flawless change of transporter. We believe we will be able to use our Newcastle depot to support deliveries to our partners near to this depot.

9. Business Model for BM Entity
3.6 Marketing Plan:
As mentioned earlier, the Branded Marketer will be a division with KZN Oils however we have developed a Marketing Plan for our Retail network that we will use to get buy-in from our partners.
We believe it is essential that our Partners guide us in this Marketing Plan, because it is only through our combined efforts that we will achieve our goals.
We have drafted a Marketing Plan that we will use as a strawman for discussion when we meet with our new partners. Care will be taken to ensure that the plan in no way contradicts the Caltex plans but rather supports and reinforces our mutual goals.
Tank Replacement:
Given the age of the tanks at the existing service stations – there are 108 UST’s more than 15 years old – (with some as old as 48 years old according to Caltex records), there will be a significant tank replacement program. We will replace the old tanks as required by Chevron in the first five years (we have allowed time for getting necessary permits and planned for greater activity in later years) – and have factored both the required Investment capital and the resultant volume loss into our proposal. Where the sites tenure also requires renewing within this period we will try and do “discount deals” to reduce the significant Investment requirements which extend our payback period of the economics.

10. Business Model for BM Entity
New Sites:
The plan for new sites has targeted 10 sites in the first 15 years of operation and we will strive to exceed this . The ten sites are 5 New to Caltex (NTC) and 5 New to Industry (NTI) sites. We need to undertake a quick network planning review of our network to target locations where we would want to expand our business. We have already performed a survey of all the sites but of course could not have an in depth official visit to our partners locations. So while we have already ear marked several competitor sites for take over and have several promising leads for new site opportunities, we will only finalise these plans after we can visit the sites and fully assess the competition.
Other:
As mentioned earlier we are concerned about the extent of our network which is currently, or soon to be, unsecured in terms of agreements with owners. We plan to address this urgently and have set up our Property section with the necessary skills and details to attend to this from Day 1 - but also to ensure that future expiry of agreements is addressed well ahead of the expiry date.

11. Assumptions 4. Assumptions
We have used the 2010 monthly sales for the service stations to be acquired as provided by Chevron SA, and while we are concerned about some which are currently unsecured, or becoming untied in the near future, we have assumed the existing sites continue to operate for the full 15 year period.
Given the average site volumes for this cluster and that of our competitors we have assumed NTI and NTC maturity volumes of 250,000 liters and 200,000 liters respectively.
We believe that while there is some foreign fuel in the network which we will be able to eradicate it is not as bad as some more rural areas.
We have also assumed that margins will grow at 5%pa and similarly expenses will escalate at 5% pa.
We are comfortable having been through the Branded Marketer process for KZN North that if we follow a similar process we will not have any areas of misunderstanding.

12. Value-Added Services 5. Value-Added Services
We have considerable experience and expertise in the area of Equipment and Maintenance and believe this will add value to our partners as we move into the future. In addition we have a team that has Construction experience in our field and believe this will add value when we need to remodel sites.
Our plans also include giving attention to servicing the rural areas within our cluster. We believe there is considerable potential in providing environmentally and safety proven Energy Centres to provide the energy needs of the rural communities.
6. Supplementary Information
KZN Oils is a well known and respected company operating throughout South Africa but mainly in KwaZulu-Natal. We have been recognised by many organisations such as the Durban Chamber of Commerce, First National Bank, Standard Bank and others for our business achievements. We have also been recognised for our Corporate Social Investment in the areas of AIDS, Poverty, Unemployment, sickness, disease, Cancer, support for the Blind and Deafness, SMME and many more.

13. Cash Flow for 15 Years
7. New Service Stations plus tenure at existing sites
New site acquisition has been mentioned in 3.6 above and tenure renewal will similarly be achieved mainly via “discount deals”.
8. Cash Flow for 15 Years
We have calculated the economic returns of the proposal based on various assumptions. Starting at the service station sales level we have developed a Profit & Loss assuming required margins, forecast operating costs, Investment requirements and finally calculated a cash flow. A 15 year cash flow in your requested format is attached as requested.
Based on analysis of the various scenarios, we can offer a purchase price of Rxx million. This is supported by a UST discount in the 1st five year of xx.x cpl and a base discount of xx.x cpl.
We have done a desk top exercise to estimate the valuation of the assets which will be owned by KZN Oils. This has resulted in the split for the purchase prices as listed below. We reserve the right to vary the various components of the offer listed below once we have been able to get a valuation of the properties done - after we have been granted access to the sites.

15. Warehouse

16. Call Centre

17. Organisational Chart

18. SABS Certification

19. BEE / HDSA

20. Awards