TORONTO (miningweekly.com) – CIC Energy is optimistic that it will receive offers from companies interested in its power-generation and coal-export projects in Botswana, after the firm terminated a takeover agreement with India's JSW Energy, chairperson Warren Newfield said on Tuesday.

The company has been approached by “more than two” parties and is not concerned that it will not be able to secure a new offer, CIC executives told analysts on a conference call.

They declined to provide more details, but, when pressed, conceded that the potential suitors included interest from India, as well as elsewhere in the world.

CIC said earlier on Tuesday that it was also still open to nonexclusive negotiations with JSW, but that it “believes shareholder interests will be better served by pursuing an alternative transaction.”

Shares in the company rose 5,3% on Tuesday, to C$3,16 apiece by 15:59 in Toronto.

JSW, an Indian power utility, agreed in November last year to buy CIC Energy for C$7,75 a share, or about C$422-million.

The parties have been trying to close the deal since then, and had set a deadline of May 31 for certain conditions to have been waived or met.

JSW had wanted assurances from the government of Botswana related to a future power purchase agreement but was not able to reach an agreement before the cut-off date.

CIC now intends to send a letter of termination to JSW, and will then open its data room to other potential buyers as soon as possible.

“It is disappointing that after almost eight months the transaction with JSW has not been completed despite several extensions to the original deadline,” CIC president Greg Kinross said in a statement.

CIC Energy owns the Mmamabula coal project in Botswana, and has a stake in the planned Moopane power project at the site, after concluding a shareholders agreement last year with Chinese-backed Golden Concord Group Limited (GCL).

CIC said in February it had extended the deadline to close the JSW deal, after GCL filed a notice of arbitration with the Hong Kong International Arbitration Center, claiming that CIC's local subsidiary had a contractual obligation to agree on the terms of a power purchase agreement and a coal supply agreement with GCL, and demanded written confirmation that it would do so.

Then in April, CIC said the deal could not close unless a 'letter of comfort' was obtained from the government in relation to the company's Mookane domestic power project.

The company said at the time that the government would hold negotiations with JSW, but that the deal could be broken off if no agreement was reached before the end of May.

NOT AS MEANINGFUL

Newfield said on Tuesday's conference call that the assurances JSW eventually wanted were “much more comprehensive” than what it had indicated at the beginning of negotiations.

More than one analyst questioned how the company could be confident that another buyer would be able to get the assurances it needs from the Botswana government about an eventual power purchase agreement, when JSW was unable to do so.

But Kinross said on Tuesday's call said that both CIC and the government had learned from the failed JSW process and could approach a future deal in a better way.

The government is better informed, and understands the kinds of assurances a buyer would require, and at the same time has better crystalised its own position on various issues, he said.

"And I also think that with the types are buyers we are speaking about, without saying too much, we would approach it in a way that those specific issues that JSW did not get comfort on would not be as meaningful in determining the outcome of the transaction,” he said.

Newfield said that the company had made it clear to JSW that there would be no more extensions to the deadline, and that the deal would collapse unless it reached an agreement with the government by May 31.

“Our hope was that they'd come with a more reasonable position. But obviously that never materialised.”

CIC also still views the GCL arbitration case as “entirely without merit”, the firm said on Tuesday.
 

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