Dual-listed Kibo Energy has extended a conditional take-or-pay power purchase agreement (PPA), first announced in February, from the initial ten years to 20 years.
The PPA outlines the construction, commissioning and operation of a 2.7 MW plastic-to-syngas power plant to generate baseload electricity for an industrial business park developer in Gauteng, South Africa.
The project is the company’s first under its joint venture, Sustineri Energy, in which Kibo Energy holds 65% and Industrial Green Energy Solutions (IGES) holds 35%.
The extended term period to 20 years will improve the already compelling project highlights, Kibo says.
It outlines that this includes an increase in the projected earnings before interest, taxes, depreciation and amortisation from about R388-million to about R953-million, of which an amount of about R619-million is attributable to Kibo.
Moreover, the projected internal rate of return has increased to 15% to 18%, from the previously expected 11% to 14%.
Finally, the construction phase is scheduled to start in the first quarter of 2023 with project commissioning 11 to 14 months thereafter.
“We are excited to be forging ahead with our first waste-to-energy PPA that aligns with our commitment and renewed strategy to disinvest from coal and advance clean energy in the African market,” comments Kibo CEO Louis Coetzee.
“The original PPA guaranteed revenue generation over ten years, with the realistic potential to secure significant additional revenue from the sale of heat and other by-products and gained keen interest from funders.
“Extending the term period from 10 to 20 years further cements this potential. It signifies a confidence in the project and significantly increases its attractiveness to prospective debt and project funders,” he adds.
Coetzee says Kibo had already seen significant interest from potential debt and project funders prior to the term extension and it believes that the term extension will make the already advanced process of securing debt and project funding significantly smoother and quicker.