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Presentation to Investors & Analysts
For the period ended June 30th, 2020
Presentation to Investors & Analysts For the period ended June 30 - - PowerPoint PPT Presentation
Presentation to Investors & Analysts For the period ended June 30 th , 2020 1 Disclaimer From time to time, Transnational Corporation of Nigeria Plc (Transcorp) and its subsidiaries (the Group) make written and/or oral forward-
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For the period ended June 30th, 2020
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Disclaimer
looking statements in presentations (including this presentation) and other communication. In addition, representatives of the Group may make forward-looking statements orally to analysts, investors, the media and others. All such statements are intended to be forward looking
and beyond and strategies to achieve them, and the Group’s anticipated financial performance. Forward looking statements are typically identified by words such as “will”, “should”, “believe”, “expect”, “anticipate”, “intend”, “estimate”, “may”, “project” and “could”.
which are beyond the Group’s control and the effects of which are difficult to predict – may cause actual results to differ materially from the expectations expressed in the forward-looking statements. Risk factors that could cause such differences include, exchange rate, market exchange, and interest rate, operational, reputational, insurance, strategic, regulatory, legal, environmental, and other risks. All such factors should be considered carefully, as well as other uncertainties and potential events, and the inherent uncertainty of forward-looking statements, when making decisions with respect to the Group and we caution readers not to place undue reliance on the Group’s forward- looking statements.
presented for the purpose of assisting the Group’s investors and analysts in understanding the Group’s financial position, objectives and priorities and anticipated financial performance as at and for the periods ended on the dates presented, and may not be appropriate for
time to time by or on its behalf, except as required under applicable securities legislation.
all reasonable care to ensure the accuracy of the information herein, neither Transcorp nor any of its subsidiaries/affiliates makes representation or warranty, express or implied, as to the accuracy and correctness of the information. Thus, users are hereby advised to exercise caution in attempting to place reliance on these information and carry out further research or seek the opinion of professional advisers before reaching conclusions regarding their investment decisions.
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Presentation Outline
Overview Operating Environment Group Financial Performance Segment Review Outlook
COVID-19 Response & Intervention
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About Transcorp
A diversified conglomerate…
Listed Company with approximately 300,000 Shareholders with commanding presence in the Power, Oil & Gas and Hospitality sectors. With an Aggressive Growth Agenda With a Purpose of Improving Lives, Transforming Nigeria Deeply rooted values are the 3Es of Execution, Enterprise and
Excellence
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Our Investment Philosophy
Guided by a sound investment philosophy
Long-term Shareholder Returns Socio-economic Impact
Operational Efficiency Return on Investment Corporate Governance Growth Capacity
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The Group at a Glance
Transcorp is committed to creating value and making socio-economic impact
With eyes set on generating 25% of the total power requirement in Nigeria, Transcorp Power Limited remains a leader in the Nigerian power sector. Through ownership of choice assets and provision of exceptional service, Transcorp Hotels Plc is redefining hospitality standards in the continent while remaining truly African. We are on a mission to ramp up domestic upstream capacity.
…in strategic sectors of the economy
plant
500 MW expected to increase rapidly
Hilton Abuja: Nigeria’s foremost hotel and the leading business hotel in Africa - 670 rooms, 5 hotel
Hotels Calabar – 132 rooms, 3 hotel
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POWER ▪ Deepen
power business through acquisition of additional power plants. ▪ Emerged preferred bidder for AFAM power plant. ▪ Membership into the West African Power Pool (WAPP). ▪ Explore
investments in renewable energy and off-grid solutions. HOSPITALITY: ▪ Deepen operational efficiency. ▪ Sweat existing assets. ▪ Completion
the
$100million upgrade of Transcorp Hilton Abuja ▪ Issuance of Certificate of Discharge by the National Council on Privatisation ▪ Expand into new businesses and locations. OIL AND GAS: ▪ Commence production of oil and gas in OPL 281. ▪ Acquire new oil & gas assets.
Our Journey
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Our achievement milestones speak volumes
PHASE ONE 2004 - 2011 PHASE THREE 2019 - 2025 PHASE TWO 2012 - 2018 ▪ 2004: Incorporation
Transcorp. ▪ 2005: Acquisition of Transcorp Hilton Abuja. ▪ 2006: Listing on the Nigerian Stock Exchange. ▪ 2006: Emerged winner
OPL281 Bid ▪ 2010: Acquisition of Transcorp Hotels Calabar. ▪ 2011: Heirs Holdings becomes core investor. ▪ 2012: Transcorp Ughelli Power emerges preferred bidder for Ughelli Power Plc (UPP). ▪ 2013: Successful takeover of UPP. ▪ 2013: Execution
management agreement with Hilton for Transcorp Hilton Ikoyi. ▪ 2014: Execution of Production Sharing Contract on OPL 281. ▪ 2014: Execution
Management Agreement for Transcorp Hilton Port Harcourt. ▪ 2014: Issuance of Transcorp Hotels IPO. ▪ 2014: NSE Awards Transcorp the Most Compliant Firm in Nigeria. ▪ 2015: Issuance of Transcorp Hotels N20bn bond. ▪ 2015: Merger
Transcorp Ughelli Power Limited and UPP as Transcorp Power Ltd. ▪ 2016: Commencement of full Upgrade Project for Transcorp Hilton Abuja. ▪ 2017: Commission of GT15 a 115MW Gas Turbine by Transcorp Power. ▪ 2017: Decision to divest from Teragro Fruit juice concentrate plant. ▪ 2018: Year-end closure with highest profits in two Group companies. ▪ 2018: Conclusion of additional land acquisition for Transcorp Hilton Ikoyi. ▪ 2018: TPL surpasses BPE-set minimum performance target for power generation.
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…a team of experienced professionals
www.transcorpnigeria.com Chinweugo Nwafor Group Head, Internal Audit Christopher Ezeafulukwe MD/CEO Adebayo Salako Chief Technical Officer Okaima Ohizua ED/ COO
TRANSCORP POWER LIMITED
Mutiu Bakare Group Chief Finance Officer Owen Omogiafo President/GCEO Chike Anikwe Acting Group Company Secretary Oluwasayo Akinwale Group Head, Marketing & Corporate Communications
GROUP LEADERSHIP
Kevin Brett GM, Transcorp Hilton Abuja Chuma Mgbojikwe GM, Transcorp Hotels Calabar Dupe Olusola MD/CEO Helen Iwuchukwu ED/COO
TRANSCORP HOTELS PLC
Gabriel Nkanga Director of Resources
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Source: Trading Economics, Worldometer, IMF
Legend:
Upward GDP Growth Downward GDP Growth
Global Economic Impact of COVID-19
World economy to slowdown in 2020
USA
Brazil
Canada
India
Nigeria
South Africa
UK
China 3.2% Russia
Europe
Australia
Japan
Global GDP Growth Rate
as at Q2 2020
Infected 23.68 million Deaths 814,029 Recovered 16.14 million 2019 2020F 2021F World Output 2.9
5.4 Advanced Economies 1.7
4.8 United States 2.3
4.5 Euro Area 1.3
6.0 Emerging Markets and Developing Economies 3.7
5.9 China 6.1 1.0 8.2 Nigeria 2.2
2.6 South Africa 0.2
3.5 Low-Income Developing Countries 5.2
5.2 IMF Projected GDP Growth COVID-19 Update as at 24th of August 2020
*Forecast
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Source: CBN, NBS, Trading Economics, mbpd = million barrels per day, United Capital Research, Oil Price, Comercio Partners, Arrhenn Analysis
Key Macro Indicators
Performance highlights for the economy
INFLATION CONTINUED ITS UPWARD TREND DESPITE THE CUT IN MPR TO 12.5% DUE TO THE LOCKDOWN IN Q2, QoQ GDP GROWTH IS EXPECTED TO FALL DESPITE EARLIER DECLINE, THE LIQUIDY INJECTION FROM IMF LOAN REVIVED THE RESERVES AS THE IMPACT OF COVID HITS HARDER, THE PURCHASING MANAGERS INDEX FALLS
10 15 20 25 30 35 40 45 50 10 20 30 40 50 60 70 80 Foreign Reserves Crude Oil Prices Brent Crude ($ pb) WTI Crude ($ pb) Foreign Reserve ($ bn)
1.7 1.75 1.8 1.85 1.9 1.95 2 2.05 2.1 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Crude Oil Production (mbpd) GDP growth rate Oil Production (mbpd) Quarterly GDP Growth Rate
3 13 23 33 43 53 63 Manufacturing PMI Non-Manufacturing PMI 50 pts Threshold No CBN PMI Report in April 0.00% 2.50% 5.00% 7.50% 10.00% 12.50% 15.00% Headline Inflation Monetary Policy Rate
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Income Statement
HY 2020 HY 2019 (N’ Million) (N’ Million)
Revenue 34,956 37,762 Gross Profit 14,700 17,280 Operating Profit 9,518 11,168 Profit Before Taxation 930 5,050 Profit After Taxation 778 4,614
Statement of Financial Position
HY 2020 FY 2019 (N’ Million) (N’ Million)
Total Assets 301,796 313,133 Total Liabilities 190,771 204,394 Shareholders’ Fund 111,026 108,738
Financial Highlights
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▪ Group revenue declined by 7.4% year-on-year due to the 48.6% reduction in revenue from the Hospitality business. This drop in revenue was as a result of the impact of the lockdown and social distancing measures imposed by the government in order to control the rapid spread of COVID-19 pandemic. ▪ However, Transcorp Power recorded a 6% year-on-year appreciation in revenue which increased from ₦28 billion in HY 2019 to ₦30 billion in HY 2020. This growth was driven mostly by the improvement in the gas supply to the power plant.
COMMENT
Revenue Breakdown by Subsidiaries
HY 2020 (N’ Million) Contribution HY 2019 (N’ Million) Contribution Transcorp Power 30,175 86% 28,459 75% Transcorp Hotels 4,781 14% 9,303 25%
TOTAL
34,956 100% 37,762 100%
Group Revenue Breakdown
Contribution of subsidiaries to revenue…
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Source: USAID, NESISTATS, FGN & World Bank PSRP Report.
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Power
Sector overview
Residential customers account for 62% of total consumption
27% is utilized by commercial consumers
Only 11% is used by industrial customers. With a generation capacity
large gap to be filled in the power industry.
45% of the population or 88 million people have some
level of access to grid electricity. A population of more than
195 million people
Given the gap in the sector and the increasing demand for electricity, the power sector remains an attractive investment choice. Consumers
Bulk of Nigeria’s electricity is generated from thermal sources (gas-fired power plants).
81% 19% ELECTRICITY GENERATION MIX (INSTALLED CAPACITY, MW)
Gas/Thermal 10,142MW Hydro 2,380MW
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www.transcorpnigeria.com Source: NERC Quarterly Report 2019
Key challenges in the power sector
Liquidity Crunch
Operators across the value chain continue to battle increased pressure
cashflow and low collection from final consumers.
Inadequate Supply
Pipeline vandalism and infrastructural instability continue to account for slow growth in amount of gas supplied to GenCos.
Low Load Off-take
Due to contraints
power transmission, it has been difficult for load to be taken off.
Tariff Shortfall
Tariff collection scheme remains poor thereby leading to increasing receivables for GenCos.
Power
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Sectoral developments and improvements
Power
Source: FGN & World Bank PSRP Report
Commencement of Power Sector Recovery Operation (PSRO) powered by World Bank to boost electricity supply to 4,500 MW/hour by 2022 Creation of Power Sector Recovery Program (PSRP) to enhance service delivery and improve viability of power sector Presidential Power Initiative set up to increase capacity of National grid to a capacity of 25,000 MW in three phases NBET responding positively towards making payments for
Introduction of Service-Reflective Tariff (SRT) to create self-sustaining electricity market In Nigeria and achieve equitable billing The NERC launched a metering scheme to enhance the level of transparency in bill estimation and payment by customers
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Our strategy amidst the power sector issues WAY FORWARD ▪ Our partnership with the Nigerian Gas Company (NGC) has continued to ensure the protection of gas supply infrastructure resulting in assured gas delivery to our plant. ▪ The full operationalization of the activated Gas Supply and Aggregation Agreement (GSAA) amongst us, our gas suppliers and the Gas Aggregation Company of Nigeria has commenced. This is one of the results of
supply. ▪ We look forward to the impact of the Nigerian Gas Transportation Network Code, which went live on August 10th, 2020. TPL’s signing onto the Code will end the current best endeavour arrangement with NGC and make NGC contractually bound to transport gas to our Plant. GAS SUPPLY ▪ Despite the challenges in the national grid, we had relatively stable gas supply during Q2 2020. ▪ Towards the end of the quarter, Ughelli Gas Plant faced some problems which led to a temporary shut
90MMscfd to 30MMscfd. However, this had no significant impact on our power generation as gas supply from Utorogu Gas Plant increased significantly to cover for the deficit. The Ughelli Gas Plant has been fixed and restored to service. ▪ With the impact of COVID-19 on oil prices, there is now some shift of attention to gas production for local
to improve gas supply to our gas plants.
Power
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WAY FORWARD ▪ We will continue to monitor and follow-up on the on- going power infrastructure rehabilitation projects across the country, and plan accordingly. ▪ We will continue to explore opportunities available in the new NERC guidelines that allow us to supply power directly to eligible customers. This is a significant boost to the eligible customer market. ▪ Recently, NERC also released a consultative paper on determining the independence or otherwise of the System Operator (SO) from TCN. This is a positive development for the sector as an independent SO will enable TCN concentrate
transmission services while the SO ensures optimal performance of the grid. TRANSMISSION ▪ In Q2 2020, TPL received and complied with a number
instructions from the National Control Centre, Osogbo, which considerably impacted the
available capacity due to transmission/ distribution constraints. ▪ One of the two transmissions lines that evacuate power from our Plant tripped on 30 July 2020. This resulted in a loss of 200MW generation for the two and a half hours that the line was out of service. It was subsequently fixed and returned to service by TCN. ▪ Two grid collapses were recorded in Q2 2020, precisely on April 29th and June 2nd 2020. They lasted for a cumulative period of four and half hours.
Power
Our strategy amidst the power sector issues
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Income Statement
HY 2020 HY 2019 (₦ Million) (₦ Million)
Revenue 30,175 28,459 Gross Profit 11,612 10,274 Operating Profit 9,969 8,639 Profit Before Taxation 5,252 5,556
Statement of Financial Position
HY 2020 FY 2019 (₦ Million) (₦ Million)
Total Assets 156,153 161,821 Total Liabilities 113,698 129,250 Total Equity 42,455 32,571
year from ₦28.5 billion in HY 2019 to ₦30.2 billion in HY 2020 due to improvement in the gas supply in Q2.
year to ₦10 billion in HY 2020 from ₦8.6 billion in HY 2019.
by 5% year-on-year from ₦5.6 billion in HY 2019 to ₦5.3 billion in HY 2020. This was due to the 250% net foreign exchange losses.
shareholders fund by 30% year-to- date on the back of increase in its retained earnings.
COMMENT
Financial highlights
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Key performance metrics
Increasing capacity utilization due to improved gas supply
Power
563 560 466 462 497 333 349 283 256 353 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20
Available vs Generated Capacity (MW)
Available Capacity (MW) Generated Capacity (MW)
0.5 1 1.5
0% 20% 40% 60% 80%
Q2'19 Q3'19 Q4'19 Q1'20 Q2'20
Capacity Utilization vs Gas Consumed
Capacity Utilisation Gas Consumed (Rebased)
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Source: World Travel & Tourism Council Report – June 2020, AHLA, *Coldwell Banker Richard Ellis Group Incorporation
Hospitality
Sectoral impact of COVID-19
hospitality and leisure jobs have been lost since February
In Global unemployment rate directly linked to Travel & Tourism job losses
in room revenue since mid-February in US Hotels
Restriction of mobility and virtual business operations have adversely impacted the revenue of industry players
economics)
hotel occupancy (CBRE)*
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Highlight of government initiatives to encourage recovery in the Hospitality sector.
Hospitality
Reopening of 14 airports across the nation for full operation by both private and charter aircrafts. The Monetary Policy Committee downward review
MPR to 12.50% in May 2020. CBN requisition
banks to restructure as much as 41% of their loans to customers. The Federal government’s ₦2.3 trillion stimulus package and survival fund for Micro Small and Medium Enterprise (MSMEs). CBN’s ₦50 billion Targeted Credit Facility to ease COVID-19’s effect
the agriculture, hospitality, airline, and health industry. The CBN and Bank of Industry’s ₦235 billion intervention fund to re-finance and restructure banks’ loans to COVID-19 affected sector.
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Key performance metrics
Hospitality
51% 74% 35% 5% 7% 11% 54% 69% 38% 20% 18% 21%
Jan '20 Feb '20 Mar '20 Apr '20 May '20 Jun '20
Occupancy Rate
THP Industry
75,815 83,313 83,571 81,632 76,256 83,132 60,244 67,873 64,629 38,226 37,199 42,177 Jan '20 Feb '20 Mar '20 Apr '20 May '20 Jun '20
Average Daily Rate (₦)
THP Industry 38,888 61,495 29,550 4,255 5,137 9,065 32,338 46,519 24,695 7,771 6,658 8,636 Jan '20 Feb '20 Mar '20 Apr '20 May '20 Jun '20
Revenue Per Available Room (₦)
THP Industry
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Financial highlights
Income Statement
HY 2020 HY 2019 (₦ Million) (₦ Million)
Revenue 4,781 9,303 Gross Profit 3,088 6,999 Operating Profit/(Loss) (762) 2,795 (Loss)/Profit Before Taxation (3,638) 819
Statement of Financial Position
HY 2020 FY 2019 (₦ Million) (₦ Million)
Total Assets 113,092 114,746 Total Liabilities 59,187 57,203 Total Equity 53,905 57,543
from ₦9.3 billion in HY 2019 to ₦4.8 billion in HY 2020. This was due to lockdown, travel restrictions and social distancing measures imposed by the government which effectively reduced
available room.
recorded a loss of ₦3.6 billion during the period under review.
dropped by 1% and 6% respectively.
COMMENT
Hospitality
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Oil and Gas
Major Energy indicators
Source: Country Economy, OPEC, NBS, DPR, PWC Nigeria 1Million Barrels Per Day, *Million Barrel
Average brent crude oil price for the month of June 2020.
Sectoral value in terms of real GDP
Industry contribution to Nigeria, Q1 2020 GDP m
Proven crude oil reserve in Nigeria
Marginal undeveloped fields are available for bid after the election
XXX Average daily production for the year Q1 2020.
Estimated total lost income from gas flaring. Cubic feet of proven natural gas reserve.
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The Petroleum Industry Bill is still awaiting passage into Acts by the National Assembly despite initial self-imposed deadline for the Bill. This has led to increased uncertainty as to the future of the industry. Inadequate infrastructure in the form of transportation and distribution network for natural gas remains a challenge to the development
the domestic
& gas value chain.
Delay in the Passage of PIB Infrastructural Deficit
Nigeria lost $48 million to oil theft in the first half of 2020 (NNPC). The
agitations by indigenes in the Niger Delta has remained a challenge for the oil and gas industry. The increased fluctuation in global oil price has reduced government revenue, and the partial deregulation
PMS price in the downstream sector continues to shrink the profit margins of sellers.
Price fluctuations and PMS price regulation Insurgency/pipeline vandalism
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Challenges hindering the sector in Nigeria…
Oil and Gas
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Estimated Oil Reserve and Gas are 189.73mn Million Stock Tank Barrels (MMSTB)and 377.48 Billion Standard Cubic Feet (BSCF) respectively.
Partnerships
Identification
competent and capable technical/financial partners to jointly develop asset Commence funding considerations and financing options for OPL 281 Work Programme Obligations
2018 - 2020
Drilling Expansion
Site Survey and Location Preparation Community Engagement and conclude FTOs with Host Communities Drilling of Obote-2X Well. Increase production
the hydrocarbons (oil & gas) depending
Expand gas productions Conversion of OPL to OML
2020 - 2021 2021 - 2022
Production
Acquire 3D Seismic Data Drilling of second well Complete all Work Programme obligations
2021 - 2022
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Milestones accomplished so far…
Oil and Gas
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Hospitality Power Business
ADR (₦) 80,300 80,052 Occupancy(%) 8 24 RevPAR (₦) 6,148 19,334 Average (MW) Available Capacity 497 528 Average (MW) Generated Capacity 353 375 Q2 2020 Actual Q3 2020 Target
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Q3 2020 Outlook
Guidance for future performance…
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Strategic Fit Gas Availability Sufficient Evacuation Capacity Cost-efficient Capacity Recovery Eligible Customer Opportunity
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Afam Acquisition
Investment attractiveness…
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Secure Formal Approval from NCP
Issue of 15% Bank Guarantee Negotiation of Transaction Agreements Execute Transaction Agreements Payment of 25% Acquisition Cost Payment of Balance 75% Acquisition Cost Takeover
Q4 2019 Q4 2019 Q4 2019 Q1 2020 Q1 2020 Q2 2020 Q3 2020 We will explore the possibility of early takeover.
Secure Funding Indicative Timeline
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Afam Acquisition
Outlook…
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Response to COVID-19
Interventions so far…
We have proactively responded to the pandemic by maintaining the health and safety of our internal and external stakeholders. Among
Transcorp Hilton Abuja.
sanitizers, Liquid soaps & cash donations) to its host communities- Ekrerhavwe Community, Ekakpamre Community, Eruemukohwarien Community as well as Ughelli South and North Local Governments of Delta State to cushion the effect of coronavirus pandemic. A total of 1,308 families benefitted from this intervention.
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Contact:
Mutiu Bakare mutiu.bakare@transcorpnigeria.com Florence Nasamu florence.nasamu@transcorpnigeria.com Oluwatobiloba Ojediran
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