Kibo Energy PLC, the multi-asset, Africa focused, energy company, is pleased to announce an update regarding its agreement with Shumba Energy Ltd (‘Shumba’) that significantly repositions its interests in Botswana, namely the Mabesekwa Coal Independent Power Project (“MCIPP”) and associated coal asset (see announcement dated 25 September 2019).
Overview
· Signed first of a series of agreements to implement the Heads of Agreement (‘HoA’) with Shumba to reorganise the arrangements for the MCIPP and its associated coal asset in Botswana
· Shareholder Agreement signed in respect of restructuring Kibo Energy Botswana (Pty) Ltd (‘KEB’), providing Kibo with a 35% interest in KEB, which holds a total 761Mt coal resource and has three large customers
· Signed Shareholder Agreement concludes restructuring of first Botswana subsidiary company, Kibo Energy LTD (Botswana)
· Remaining agreements on track to be completed by 20 March 2020 in which Kibo will also hold:
o 85% interest in an energy project, which is to be called KP2
o 35-40% interest in a new 300MW energy project, KP1, that will exclusively provide a new petrochemical plant with energy
· Agreement gives Kibo access to a revenue stream from an estimated annual coal production of 7.5Mt coal p/a
Louis Coetzee, CEO of Kibo, commented, “We are delighted with the progress being made as we advance the restructuring of our interests in Botswana to significantly lower development and execution risk. Being part of several much larger projects naturally provides many benefits and advantages to the Company and its shareholders. Not least because, having finalised the shareholder agreement today, we’ll be holding a 35% interest in an enlarged project with a total 761Mt coal resource that already has three large customers, whereas before we had one. We also continue to hold an 85% interest in the energy project, which is to be called KP2 and in addition, a 35-40% interest in a new 300MW energy project, KP1, a bespoke 300MW power plant that will exclusively provide a new petrochemical plant with energy, where the costs of feasibility / technical studies are to be funded by Shumba.
“We can now fully leverage our coal resource at Mabesekwa by providing and fast-tracking three different revenue streams, which would give Kibo access to a revenue stream from an estimated annual coal production of 7.5Mt coal p/a. compared to producing 1.5Mt p/a for its own consumption at the MCIPP power plant. As I mentioned in past announcements, there is no funding impact in addition to what Kibo currently has for the development of the MCIPP power plant other than we may have to nominally increase our operational capacity to meet the additional operational / management demands for the development of two 300MW power plants. This is a real opportunity for a shorter and faster route to revenue generation; we look forward to updating shareholders on further progress soon.”
Background & Details
In September 2019, Kibo and Shumba signed a binding Heads of Agreement (‘HoA’) with Shumba and various subsidiaries of each party (‘the Parties’) to reorganise the arrangements for the MCIPP and its associated coal asset in Botswana.
The reorganisation sees the MCIPP Retained Assets consolidated into Kibo Energy Botswana (Pty) Ltd (‘KEB’); this enlarged project in which Kibo has a 35% interest has a total 761Mt coal resource. An additional Joint Venture (‘KP2’) between Kibo and Shumba (held 85%/15% respectively) will advance the existing MCIPP energy projects in Botswana. Additionally, Kibo and Shumba will jointly manage and oversee the development of a bespoke 300MW power station (the ‘KP1 Power Plant’) through the incorporation of a new company to be held 35%-40% by Kibo and the balance by Shumba. Shumba will provide the full development funding requirement for associated feasibility and technical studies.
Notably, the KP1 Power Plant is envisaged to provide 300 MW power to a Petrochemical Plant (‘PCP’), which will provide Botswana first and then Africa with energy fuels and specialty chemicals. The PCP is being developed by Coal Petroleum (‘CP’), which is 80% owned by Shumba with other partners including leading Chinese EPC companies PowerChina International Group Limited and Wison Group. CP is engaged in advanced discussions with several regional purchasers of fuels and other petrochemicals in Botswana, South Africa, Namibia and Zambia.
The consolidated MCIPP Resource will supply the PCP, the KP1 Power Plant and the MCIPP power plant with coal.
Accordingly, a series of agreements are being advanced between the Parties to implement the HoA. The first key agreement is the Shareholder Agreement in respect of restructuring KEB, which has now been finalised; this concludes the restructuring of the first Botswana subsidiary company, Kibo Energy LTD (Botswana). The remaining agreements are on track to be completed by 20 March 2020.
