Africa-focussed energy company Kibo Energy has signed a memorandum of understanding (MoU) for the acquisition of a 60% equity interest in UK company Mast Energy Developments (MED).
Under the terms of the MoU, Kibo can acquire a 60% shareholding in MED for £300 000 payable to existing MED shareholders in new Kibo shares and a share of future project revenue royalties, which will be reinvested in the company in the short term to an amount of £2.2-million.
MED’s business strategy is to acquire and develop a portfolio of small-scale power generation assets. Various “shovel ready” sites have already been identified in the UK, which are capable of sustaining gas-fired power generation and ancillary structures from 20 MW upwards.
MED has full planning permission and permitting in place, long-term lease agreements, grid and gas connection offers, as well as positive feasibility studies, pertaining to technical and commercial viability.
In conjunction with the potential financial benefits for Kibo from the transaction, particularly the prospect of near-term revenue generation, the JSE- and Aim-listed company on Wednesday said it is envisaged that both parties will be able to use their knowledge and expertise within the power industry to assist in the development of further energy projects in the UK and Africa.
Kibo CEO Louis Coetzee said the proposed acquisition provides Kibo with near-term revenue generating assets and enables the company to combine its knowledge of the power generation market in mature and emerging markets.
He further noted that there is “distinct short-term revenue generating potential in the UK”, which is positive for Kibo.
The prospect of receiving gradually increasing revenue streams in the short term, as well as the re-investment of royalties in the early stages of production, will assist the company’s working capital requirements as it develops its rapidly expanding larger-scale energy asset portfolio in Africa, Coetzee pointed out.
In addition, he noted that it creates a situation where Kibo is able to expand its product offering and increase its exposure to different sectors of the African energy market.
MED CEO Darrel Krowitz added that the acquisition “not only provides an opportunity for MED to augment the Kibo Energy portfolio with small-scale power solutions for industry and national grid stability, in Southern Africa”, but also allows Kibo to diversify into the UK’s flexible power markets.