LNG-focused energy firm pursuing ‘diversified’ African investment pipeline

26th April 2017

By: Terence Creamer

Creamer Media Editor

     

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Black-empowered energy company African Energy Partners (AEP), which plans to list as a special purpose acquisition company on the JSE’s AltX board on June 1, to raise up to R500-million to pursue liquefied natural gas (LNG) prospects in Africa, reports that its investment pipeline includes a “diverse” range of prospects in South Africa and the rest of the continent.

CEO Edwin Kikonyogo tells Engineering News Online that AEP will participate across this entire infrastructure value chain, with the opportunities falling into three categories: operating natural gas plants in South Africa and elsewhere in Africa; brownfield plants available for conversion from heavy-fuel oil or diesel to LNG or natural gas; and greenfield LNG-to-power developments.

“There are several LNG-to-power opportunities in Africa that AEP is targeting to participate in, including South Africa’s gas-to-power programme when it gets under way,” Kikonyogo reports.

In 2016, the Department of Energy released a project memorandum for a proposed Liquefied Natural Gas Independent Power Producer Procurement Programme, in which it indicated that Richards Bay, in KwaZulu-Natal, and Coega, in the Eastern Cape, had been selected as the initial sites for the programme.

At the time it was anticipated that the commercial process could get under way in either late 2016 or early 2017. However, following protracted delays to the conclusion of contracts between renewable-energy generators and Eskom, as well as the stabilisation of South Africa’s electricity supply position, the procurement programme had been delayed.

“There is strong impetus for LNG in Africa that is independent of any South African initiative,” Kikonyogo says, noting that LNG was commercialised in Africa, with the world's first commercial natural gas liquefaction plant opening in Algeria in the 1960s.

“Africa has a long history in LNG, but virtually all of Africa's LNG production has thus far been exported. This export-only landscape is changing fast . . . and the time for African LNG import investment has arrived and is in fact long overdue.”

He says AEP’s investment pipeline is diversified with regards to regional footprint, investment size and energy offtaker profiles.

“Identified investments range in size from 8 MW cogeneration plants for specific industrial offtakers and LNG conversion opportunities of 250 MW, inclusive of LNG importation and regasification infrastructure and LNG supply, to 400 MW-plus greenfield LNG-to-power, covering combined cycle gas turbine plants, LNG importation and regasification and fuel supply.”

AEP’s first “viable acquisition” must take place within two years of listing and the company’s intention is to acquire mostly controlling stakes in a portfolio of operations. “Our target operations offer a mix of medium- and long-term offtake agreements and a contracted cost base, which makes for good long-term earnings visibility.”

The founding directors will contribute at least 5% of the capital raised and besides Kikonyogo, the company will be led by COO Nkosi Gugushe and CFO Kevin Simons. Its board includes some well-known energy personalities such as David Wright (chairperson) and Erica Johnson, and also comprises Silvanus David, Carla Cloete, Meriam Kekana and Sifiso Sibiya.

AEP is undertaking an investor roadshow and the offer will take the form of a private placement, with only a small retail component, which will be allocated at the board’s discretion.

The cash raised will be held in an escrow account and will only be available for deployment following shareholder approval. AEP is anticipating making it first acquisition within the first year.

Edited by Creamer Media Reporter

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