Africa-focused energy company Kibo Energy's wholly owned UK subsidiary Sloane Developments will acquire a production-ready 9 MW flexible power project.
The acquisition is in line with Kibo's strategy to acquire and develop a portfolio of small-scale flexible power generation assets that will help balance out the UK’s national grid at critical times.
Sloane Developments has agreed the heads of terms for a share purchase agreement to acquire a 9 MW flexible gas power project for £1.7-million, subject to successful listing of Sloane, with £1.5-million to be paid in cash at completion of the listing and £200 000 to be settled through the issue of new listed ordinary shares in Sloane to the vendor.
Sloane has a direct 100% interest in a shovel-ready 5 MW gas-fuelled power generation plant – Bordesley, in the UK, which is currently under development. Sloane is also in the process of preparing for a listing on the Standard List of the London Stock Exchange (LSE).
“The acquisition of this 9 MW gas power project will represent the second shovel-ready site in our subsidiary’s growing portfolio of flexible power plants in the UK. In addition, potential exists to optimise synergies between the acquisition site and Bordesley resulting in significantly improved site economics," Kibo CEO Louis Coetzee says.
Together with Sloane’s upcoming listing, this acquisition will provide an outstanding platform from which to take full advantage of the opportunity that has been identified in the reserve power market, the fastest growing energy sector in the UK.
“Following the LSE admission, Sloane will be in a position to develop its portfolio at scale and pace, as opposed to on a project-by-project basis and advance significantly towards immanent revenue generation. This is an exciting period for both Sloane and Kibo and we look forward to providing further updates on progress made in due course as we look to capitalise on the significant growth opportunities available in the rapidly growing reserve power market and realise value for all stakeholders,” he says.
The acquisition is an important step to solidify Sloane’s strategic intent to establish itself as a significant presence in the reserve power market, with the ultimate objective of developing a reserve power portfolio in aggregate of 300 MW generating capacity.
Through the acquisition, Sloane will create a strategic platform from which it can significantly accelerate the development of its project portfolio by developing multiple sites simultaneously, and significantly improve and enhance the commercial integrity and investment attractiveness of the Sloane reserve power portfolio by establishing early – almost immediate – revenue opportunity.
This will also create an opportunity to bring its Bordesley reserve power project into production at a much earlier date than currently scheduled and at significantly lower cost than currently planned for, and mitigate investment risk materially through the acquisition of a freehold site with established infrastructure, operating engines in situ, connected to balance of plant as well as gas and grid connections.
The company expects to realise significant cost, time and capital expenditure savings in respect of the overall development plan for the Sloane reserve power portfolio as a direct result of the competitive price that was negotiated for the acquisition, as well as compelling economic, commercial and technical merits of the acquisition, and a unique strategic fit with the Sloane development strategy.
The 9 MW gas project is production-ready, and is on a freehold site with established infrastructure including 9 MW grid export connection and several multinational original equipment manufacturers operating units in situ.
Further, permitting is in place and the gas kiosk has been commissioned.
The project has imminent operational status and attractive economics, the company says.
"Positive results of third-party financial modelling exercise based on 7.5 MW generating capacity include post tax summation of annual revenue stream over project life of £7.29-million and internal rate of return of between 19% to 21%. The project is expected to rapidly create revenue to stimulate value accretion."
The income is guaranteed, with a blue-chip offtaker in place.
Kibo adds that the target market is rapidly growing, and increasing volatility arising from structural shift from fossil fuels to renewable sources and rising spend on gas and electricity is resulting in tight capacity margins during peak times.
"The acquisition, in line with the proposed LSE admission, will facilitate development of a portfolio of flexible power plants in the UK operating in the rapidly growing reserve power market. The acquisition provides opportunity to potentially bring Bordesley into production well ahead of the current target date for first production, which is currently set for the fourth quarter."