Kibo Energy PLC, the multi-asset, Africa focused, energy company, is pleased to announce that it has acquired a direct 100% interest in shovel-ready reserve power generation project, Bordersley, which will comprise a 5MW gas-fuelled power generation plant and is targeted for commercial commissioning end Q1 2020.
This is the first reserve power generation project being developed by the Company’s 60% owned subsidiary, MAST Energy Developments Limited (‘MED’), which is focused on building its initial portfolio to circa 100MW.
· 100% of revenues from Bordersley to Kibo and Kibo taking 100% ownership of the Bordersley SPV
· Production at Bordersley power plant targeted to commence end Q1 2020
· Bordersley revenues expected to contribute significantly to ongoing Kibo Group funding requirements
· Positive impact on Kibo balance sheet
· Shovel-ready site significantly de-risked with PPA, OE, EPC in place
· MED remains responsible for managing the development of Bordersley and delivery and maintenance of a steady state production site
· No further funding obligations for next 18 to 24 months on the part of Kibo towards MED working capital, development capital plan to be completed by MED
Louis Coetzee, CEO of Kibo Energy, commented, “We are delighted to take a direct 100% interest in Bordersley, having significantly de-risked this shovel-ready site and met all our working capital requirements for the next 18 to 24 months. With the right partners also in place, including EPC contractor, owners engineer and a power purchase agreement with Statkraft, we anticipate commencing commercial commissioning at the end of Q1 2020; 100% of revenues generated from Bordersley will now flow to the Kibo bottom line and make a marked contribution to the group’s ongoing funding requirements.”
MED is focused on acquiring and developing a portfolio of small-scale Reserve Power generation projects totalling circa 100MW, initially in the UK, to balance out the national grid at critical times. In line with this strategy, and as per the RNS’ dated 21 May and 21 June 2019, MED acquired a 100% interest in its first site, Bordersley, which will comprise a 5MW gas-fuelled power generation plant supported by a Grid Connection Offer and a Gas Connection Offer and is targeted for commercial commissioning end Q1 2020.
As part of Bordersley’s development, key partners have been appointed including:
· Clarke Energy as the preferred Engineering, Procurement and Construction (‘EPC’) contractor
· Encora Energy Limited as the preferred owners engineer (‘OE’)
· Statkraft Markets GmbH for a power purchase agreement (‘PPA’)
Having advanced Bordersley to its current stage, Kibo moved to consolidated full ownership of the SPV equity and associated economic interests. MED was the 100% owner of the Bordersley SPV, and MED is 60% owned by Kibo and 40% owned by the original MED vendors, St’ Anderton on Vaal Limited (‘St’ Anderton’). Consequently, St’ Anderton held a see-through economic interest in Bordersley’s cash flows of 40% (through their 40% interest in MED) in addition to Project Royalties due to it under the original vend agreement (see RNS dated 15 August 2018).
Kibo has acquired all of St’ Anderton’s direct and indirect interests in the Bordersley power project described above giving it a 100% economic and 100% equity interest in Bordersley (the ‘Acquisition’). Consideration for the Acquisition consists of the allotment and issue of 46,067,206 ordinary shares in the capital of Kibo to St’ Anderton at an issue price of £0.0525 per share and payable in five tranches (‘Consideration Shares’) such that the full consideration is only payable in the event that Bordersley is progressively derisked:
· An immediate payment of 22,067,206 ordinary shares in the capital of Kibo at an issue price of GBP0.0525 per share (‘First Tranche Shares’);
· Upon receiving confirmation from MED that a preliminary notice to proceed with construction on the Bordersley power site has been issued by the Owners Engineer for the construction and commissioning of the Bordersley site – 6,000,000 ordinary shares in the capital of Kibo at an issue price of GBP0.0525 per share;
· Upon receiving confirmation from MED that a final notice to proceed with construction on the Bordersley power site has been issued by the Owners Engineer for the construction and commissioning of the Bordersley site – 6,000,000 ordinary shares in the capital of Kibo at an issue price of GBP0.0525 per share;
· Upon receiving confirmation from MED that the Owners Engineer for the construction and commissioning of the Bordersley site has commenced with commissioning of the Bordersley power plant – 6,000,000 ordinary shares in the capital of Kibo at an issue price of GBP0.0525 per share; and
· Upon receiving confirmation from MED that the Owners Engineer for the construction and commissioning of the Bordersley site has confirmed steady state production at the Bordersley power plant – 6,000,000 ordinary shares in the capital of Kibo at an issue price of GBP0.0525 per share.
The issue price of the Consideration Shares and the associated number to be issued to St’ Anderton was determined by using the methodology set out in the original MED vend agreement as guidance, and was calculated as c. £2,420,000 comprising:
· 100% of the net present value of the Project Royalties (being the royalty equal to 5% of the gross revenue less gas and trading costs) amounting to c. £370,000; and
· 40% of the net present value of the Project Revenue (being net profit before tax) flowing to St’ Anderton from Bordersley through MED amounting to c. £2,050,000.
Shares issued at a high premium
The issue price of 5.25p is a significant premium to Kibo’s last traded price of 1.05p, translating into an effective acquisition valuation of approximately 0.2x NPV (or c. £480,000) on the basis that all milestones for the various share tranche issues are met.
Having ring-fenced St’ Anderton’s direct and indirect interests in Bordersley, and already owning the remaining 60% indirect interest via its 60% interest in MED, Kibo will also be acquiring 100% of the equity in the Bordersley SPV from MED for consideration of £100 cash. This is also expected to result in a significantly positive impact on the balance sheet of Kibo as Bordersley is recognised in the accounts.
Under the terms of a Master Service Agreement between MED and Bordersley MED remains responsible for, amongst other things, implementation, management and delivery of a development, construction and funding plan for the Bordersley site to the satisfaction of the new owner of Bordersley, and thereafter the management and operation of the site on behalf of the owner. Consequently, Kibo has fulfilled all its working capital requirements regarding the project and MED for the next two years, while development funding requirements will be an outcome of the development, construction and funding plan to be completed.
St’ Anderton undertakes that, in order to enable Kibo’s brokers appointed in compliance with AIM Rule 35 to maintain orderly market in the securities of Kibo, it shall not loan any shares it holds in the capital of Kibo, or sell or offer to sell or offer for sale, whether on the open market or privately, any of the Consideration Shares, without first giving written notice to Kibo for at least five trading days before such sale or offer for sale is made. Such notice shall contain the price per share at which St’ Anderton is willing to sell as well as the number of shares offered for sale, and Kibo shall be entitled to procure the placing of those shares at that price through its brokers.
St’ Anderton and MED further agreed that St’ Anderton shall advance the total proceeds of any and all Consideration Shares sold by St’ Anderton before the second anniversary of the Signature Date of the transaction agreement to MED as a loan on shareholders loan account. MED shall credit the loan account of St’ Anderton in the books of MED with the amount of such advances, and the terms of the loan shall be identical to the terms applicable to the other balances owing by MED on shareholder loan accounts from time to time.
St’ Anderton is a related party of Kibo for the purposes of the AIM Rules as its directors are also directors of MED, a subsidiary of Kibo. For clarity, the St’ Anderton directors are not directors of Kibo. Consequently, this transaction is considered a Related Party Transaction under AIM Rule 13. The Directors of Kibo consider, having consulted with its nominated adviser, that the terms of the transaction are fair and reasonable insofar as its shareholders are concerned.
Total Voting Rights
Application will be made for the First Tranche Shares (the “Shares”) to be admitted to trading on AIM and the JSE AltX markets. Trading in the Shares is expected to commence on AIM and the JSE on or around 2 July 2019 (‘Admission’). Following Admission, the Company will have 799,053,798 shares in issue. The foregoing figure may be used by shareholders as the denominator for the calculations to determine if they are required to notify their interest in, or a change to their interest in, the Company under the FCA’s Disclosure Guidance and Transparency Rules.
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