TIDMKIBO
RNS Number : 2875S
Kibo Energy PLC
08 March 2019
Kibo Energy PLC (Incorporated in Ireland)
(Registration Number: 451931)
(External registration number: 2011/007371/10)
Share code on the JSE Limited: KBO
Share code on the AIM: KIBO
ISIN: IE00B97C0C31
("Kibo" or "the Company")
Dated: 08 March 2019
Kibo Energy PLC ('Kibo' or the 'Company')
Update to Conversion of Sanderson Minority Interest in Mbeya
Development to Kibo Shares & Continuation of Forward Payment
Facility
Kibo Energy PLC ("Kibo" or the "Company"), the multi-asset,
Africa focused, energy company, notes that further to the Company's
announcement on 5 March 2019 with regard to the Conversion of the
Sanderson Minority Interest in Mbeya Development into Kibo Ordinary
Shares and the continuation of the Sanderson Forward Payment
Facility, it wishes to further clarify the transaction with the
following information:
Conversion of Sanderson's 2.5% Interest in Mbeya Development
-- Sanderson Capital Partners ("Sanderson") initially acquired
its 2.5% equity interest in Mbeya Development Company Ltd (the
"Project Company"), which holds 100% of the Mbeya Coal to Power
Project ("MCPP"), and which was at the time a 100% subsidiary of
Kibo, on 1 September 2016 by converting the full outstanding loan
amount of GBP1,500,000 owed by Kibo to Sanderson at that time under
a Loan Facility announced 3 March 2016 into the aforementioned
equity interest. The terms of the September 2016 Conversion were
calculated based on a net present value of 100% of the MCPP's coal
resource of GBP 60,000,000 (discounted for risk) at the time of the
conversion. Please refer to the RNS dated 1 September 2016 for more
information in this regard.
-- As stated in the previous RNS dated 5 March 2019, Kibo has
now re-acquired the aforementioned 2.5% equity interest from
Sanderson on the basis of a valuation of GBP 66 million for 100% of
the MCPP's Mbeya Coal Resource ("the Valuation"). The consideration
will be settled by means of the allotment and issue of 126,436,782
new Ordinary Shares at their par value of EUR0.015 (the "Conversion
Shares") to Sanderson. At the time of the conversion agreement,
ordinary shares in Kibo were trading below par value. The issue
price was agreed as par value due to the Company not being able to
issue shares below their par value under Irish company law.
-- The Valuation was based on the weighted average total of the following elements:
o the net present value of the proposed Coal Mine based on a 1.5
million ton per annum production figure as determined in the
definitive mining feasibility study for the Mbeya Coal Mine
amounting to c. GBP79.5m. The calculation also incorporates a risk
factor discount of 27% and assumes a lead time for first production
of 7 years. This provided a value estimate for the Mbeya coal mine
separate to its value to the integrated MCPP coal to power project
(ie the value of it were it to sell coal at arm's length to an
undetermined power project); and
o estimated market value of MCPP's Coal Resource of 120.8Mt
(Refer RNS dated 11 April 2016) held under Mbeya Coal LTD with
reference to "$/tonne of coal in Resource" market-based multiples,
amounting to c. GBP37.2m.
o The MCPP was from inception developed with various
commercialization options in mind and all these options remain open
to the Company, despite the TANESCO decision announced on 14
February. The MCPP's current development status was furthermore not
in any way affected by the 14 February announcement and it remains
a fully developed bankable project, positioned for an ultimate
generating capacity of 1000MW to take advantage of the fast-growing
local market via TANESCO, private local off-takers as well as the
power export market. The TANESCO decision announced on 14 February
did not disqualify the Company from engaging with TANESCO on other
existing or future opportunities, nor does the current TANESCO
tender in any form or manner satisfy / address the country's
growing immediate or long-term electricity demand - the electricity
market remains vastly undersupplied. (NOTE: The Company is still
pursuing its request for clarification from TANESCO on its decision
not to qualify the Company for tender No. PA/001/2018-19/HQ/N/033).
The lucrative and fast-growing Tanzanian and regional markets,
across both public and private sectors, therefore remains open and
available to the MCPP, albeit that it will not be able to access
the market via the specific opportunity that the current TANESCO
tender for coal fired power offers. Apart from the energy market
the Company also has the option to develop the MCPP coal resource
as a dedicated coal mine (or a part thereof) to supply coal into
the local and regional coal market as evidenced in the Company's
MOU with Mbeya Cement LTD, see RNS of 20 April 2017.
-- The current transaction valuation has increased by just 10%,
or GBP6,000,000, since the 2016 transaction where Sanderson
acquired a 2.5% interest in the Project Company from Kibo. The
Company believes that, notwithstanding the Company's share price,
the Valuation reflects the progress made and value added to the
MCPP's coal resource since 2016 to date, which inter alia includes
the following milestones reached:
o Integrated Financial Model Completed - November 2016
o MCPP Update: EPC Contract Awarded to SEPCO III - December
2016
o Final Approval for ESIA Scoping Reports - January 2017
o Completion of Integrated Bankable Feasibility Study - January
2017
o MCPP Receives Formal Reconfirmation - June 2017
o MCPP Awarded ESIA Certificate from the Government - October
2017
o Final Lot of EPC Contract Signed on MCPP - May 2018
o MCPP's Mbeya Coal Mine updated Special Mining Licence
re-submitted and subsequently recommended for grant by the Tanzania
Ministry of Minerals - July 2018
-- The Company also considers that the ability to do business on
the Mbeya coal Resource will be considerably enhanced with a clean
ownership structure where counterparties, such as but not limited
to, authorities, suppliers, and potential project debt funding
providers, are only dealing with one owner. While the benefits from
this are not readily quantifiable, they would be expected to avoid
unnecessary costs or delays as a result of a minority party being
present that may be value destructive in the shorter and longer
term. This may potentially take on a particular significance as
Kibo continues to seek clarification on the TANESCO decision
announced on 14 February 2019 while also pursuing alternative paths
to commercializing its Tanzanian assets, which amongst others
include the export market and private local market off-takers.
Continuation of Forward Payment Facility
As stated in the previous RNS dated 5 March 2019, the Term Sheet
also provides for the continuation of Kibo's USD 2,940,000 Forward
Payment Facility (the "Facility") signed between Kibo and
Sanderson, which currently remains undrawn.
Since the events notified in the RNS of 14 February 2019, the
Company's shares have been trading well below their par value of
EUR0.015. This unexpectedly and suddenly placed Kibo under
considerable funding pressure as it did not, and could not
possibly, foresee the events announced 14 February 2019, the result
being that sourcing additional funds through an equity placing was
no longer considered a viable option in a reasonable time frame
as:
a) Kibo is unable to issue shares at a price below par value under Irish company law;
b) equity providers are highly unlikely to subscribe to a
placing for shares at a significant premium to the prevailing share
price (i.e. at par value or above). Kibo notes that on the day
prior to the announcement of the Sanderson Transaction (being 4
March 2019) its ordinary shares closed trading at 0.95p, against a
par value of approximately 1.30p; and
c) the lead time necessary to adjust the Company's par value (to
enable a capital raising) is significant in the context of funding
requirements, given the process includes the calling and holding of
a general meeting to obtain shareholder approval to amend the
capital structure of the Company. There is also no guarantee the
resolution to do so would be passed by shareholders.
The Company also notes that the longer the process to obtain
additional funding goes on, generally the weaker the position of
the party seeking funds becomes to negotiate terms with potential
funding providers, which typically translates into ever more
expensive funding (if funding is available at all).
Sanderson was under no obligation to maintain Kibo's access to
the Forward Payment Facility, and the securing of its continuation
provides the Company with the option of short-term funding, with
first draw-down amounts of GBP 100,000 and GBP 400,000 agreed and
any subsequent draw-downs to be agreed on a case by case basis, as
necessary according to funding requirements within the Facility
limit of USD2,940,000. The repayment terms of these subsequent draw
downs will be the same as the initial draw downs.
The Company believes that the certainty and immediate
availability of the continued Forward Payment Facility brings with
it considerable value for Kibo shareholders as it:
-- provides a certain and immediately available source of funding allowing Kibo to:
o overcome its short-term funding challenges
o have confidence that in the medium term it can retain access
to critical funding if necessary
-- provides flexibility to not draw the entire amount, leaving
the option open to source additional funds at potentially more
attractive prices in the future to:
o refinance (or even close out) the Sanderson Forward Payment
Facility should it wish to do so
o utilise instead of drawing down further from the Sanderson
Forward Payment Facility
o retain competitive tension for the provision of funding to
Kibo
-- provides Kibo the opportunity to consider the best course of
immediate action with respect to its par value/capital structure
without the pressure of having to avoid a potentially damaging
funding shortage
-- ensures that the Company has access to sufficient working
capital to continue its operations on its projects even in the very
difficult prevailing market conditions and uncertainty that was
caused by unforeseen events in Tanzania. This will enable the
Company to maintain momentum behind its on-going development work
across its African and UK projects while also examining a range of
additional funding options, which would be expected to be greater
with a higher share price (which would deliver increased value to
all shareholders).
**ENDS**
This announcement contains inside information as stipulated
under the Market Abuse Regulations (EU) no. 596/2014 ("MAR").
For further information please visit www.kibo.energy or
contact:
Louis Coetzee info@kibo.energy Kibo Energy PLC Chief Executive Officer
Andreas Lianos +27 (0) 83 4408365 River Group Corporate and Designated
Adviser on JSE
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Ben Tadd / +44 (0) 20 3700 SVS Securities Limited Joint Broker
Tom Curran 0093
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Jason Robertson +44 (0) 20 7374 First Equity Limited Joint Broker
2212
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Andrew Thomson +61 8 9480 2500 RFC Ambrian Limited NOMAD on AIM
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Isabel de Salis +44 (0) 20 7236 St Brides Partners Investor and Media
/ Gaby Jenner 1177 Ltd Relations Adviser
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Notes to editors
Kibo Energy PLC is a multi-asset, Africa focused, energy company
positioned to address the acute power deficit, which is one of the
primary impediments to economic development in Sub-Saharan Africa.
To this end, it is the Company's objective to become a leading
independent power producer in the region.
Kibo is simultaneously developing three similar coal-fuelled
power projects: the Mbeya Coal to Power Project ('MCPP') in
Tanzania; the Mabesekwa Coal Independent Power Project ('MCIPP') in
Botswana; and the Benga Independent Power Project ('BIPP') in
Mozambique. By developing these projects in parallel, the Company
intends to leverage considerable economies of scale and timing in
respect of strategic partnerships, procurement, equipment, human
capital, execution capability / capacity and project finance.
Additionally, the Company will benefit from its robust and
experienced international blue-chip partnership network across its
project portfolio, which includes: SEPCO III (China), General
Electric (USA); Tractebel Engineering (Belgium); Minxcon Consulting
(South Africa); ABSA / Barclays Africa; and Hogan Lovells
International LLP.
Additionally, the Company has a 60% interest in MAST Energy
Developments Limited ('MED'), a private UK registered company
targeting the development and operation of flexible power plants to
service the Reserve Power generation market.
Johannesburg
08 March 2019
Corporate and Designated Adviser
River Group
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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