AIM-listed Kibo Energy, the multi-asset, Africa focused, energy company, has signed a memorandum of understanding to acquire a 60% equity interest in Mast Energy Developments.
Mast Energy Developments (MED) is a private UK-registered company targeting the development and operation of flexible power plants to service the reserve power generation market.
Under the terms of the MOU, Kibo Energy can acquire a 60% shareholding in MED for a consideration of £300 000 payable to existing MED shareholders in new Kibo Energy shares and a share of future project revenue royalties, which will be reinvested in Kibo Energy 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, capable of sustaining gas fired power generators and ancillary structures from 20 MW upwards. They have full planning permission and permitting in place, long term lease agreements, grid and gas connection offers and positive feasibility studies, pertaining to technical and commercial viability.
“Kibo’s initial review of MED’s business plan indicates that its first asset under acquisition in the UK described above can be up and running within 12 months, thus potentially providing revenue streams to Kibo in the short term,” says Kibo Energy CEO Louis Coetzee.
“Similar lead time periods from site acquisition to generator installation and power generation are indicated for other projects of similar size in the UK,” he adds.
Financial modelling indicates projected IRRs of 13-16% and NPVs of £16 -19 million for the initial assets described above. MED is exploiting a growth niche market in the UK for small scale reserve power generation to balance out the national grid at critical times.
In conjunction with the potential financial benefits for Kibo from the transaction, particularly the prospect of near term revenue generation, it is envisaged that both parties will be able to utilise their knowledge and expertise of the power industry to assist in the development of further energy projects both in the UK and Africa.
Kibo’s established portfolio of assets in southern Africa is focused on large scale energy projects and with the addition of MED’s product offering, the company will also be able to access and exploit a different, very lucrative sector of the African power market.
The acquisition is subject to the completion of a comprehensive due diligence by Kibo on MED and all relevant/applicable regulatory and statutory approvals.
“This 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 allows it to diversify into the UK’s flexible power markets which we believe will add short and long-term value to Kibo shareholders,” says Darrel Krowitz, CEO of Mast Energy.