Letter to Shareholders
Kibo Energy PLC (Incorporated in Ireland) (Registration Number: 451931)
(External registration number: 2011/007371/10) Share code on the JSE Limited: KBO
Share code on the AIM: KIBO ISIN: IE00B97C0C31
("Kibo" or "the Company")
Dated: 25 March 2019
Kibo Energy PLC ('Kibo' or the 'Company')
Letter to Shareholders
Whilst much has changed since I last wrote at the start of the year, our strategy for value remains unchanged. This strategy is focused on progressing a diverse portfolio of advanced power generation and mining projects in Sub-Saharan Africa and the UK, utilising established international relationships with key development partners.
We have four key projects which we are developing in parallel: two thermal coal power projects in Botswana and Mozambique, a UK focused flexible energy portfolio and an advanced coal to power project in Tanzania. Each hold significant value, which I don't believe is reflected in the current share price.
The Benga Independent Power Project ("Benga Project") in Mozambique, (65% interest), our first pure energy project, is progressing rapidly as we look to construct and operate a 150-300 MW coal-fired power station with feedstock provided by regional coal producers. Our Joint Venture partner, Mozambique energy company Termoeléctrica de Benga S.A., i and the Government are very co-operative and fully on-board with our plans. The feasibility study is ahead of schedule and well advanced with 98% completed to date. We are now working on finalising the coal supply agreement ("CSA") for the Benga Project as well as the power purchase agreement ("PPA") with private offtakers. Both the CSA and the PPA for private offtake are well-advanced and we hope to finalise these during April 2019. In parallel to these agreements, PPA-negotiations with the Mozambique power utility, EDM, are also progressing well as reflected in the recently renewed and expanded MOU that we announced in December 2018.
(Before I move onto the next project, the board and I would like to send our thoughts and prayers to the Government and people of Mozambique as they come to terms with the devastation triggered by the cyclone last week.)
The Mabesekwa Coal Independent Power Project ("Mabasekwa Project") in Botswana (85% interest) is currently at feasibility stage, following the completion of a Mining Scoping Study, which highlighted a 30-year Life of Mine, and a Power Pre-Feasibility Study indicating maximum power capacity of 600 MW based on a coal delivery rate of 3.2 Mt p/a. We are currently awaiting our Mining Licence for the Mabesekwa Coal Mine and like Benga, Mabesekwa is on a clear development path with visible deliverables that we believe, when reached, will increase the inherent value of the project.
Our 60% owned UK subsidiary, Mast Energy Development Ltd, is making great strides as it looks to support the UK energy mix with much needed flexible energy projects. Its strategy is to acquire and develop a portfolio of small-scale power generation assets. Various "shovel ready" sites have already been identified, capable of sustaining gas fired power generators and ancillary structures from 20MW upwards. Financial modelling by Mast Energy / Kibo during its initial review of Mast Energy's business plan indicates projected IRRs of 13-16% and NPVs of GBP16-19 million for the initial assets. We're close to completing the acquisition of the first sites and due diligence on several more are nearing conclusion from which further site acquisitions will in all likelihood follow. In time, we anticipate that this model can be introduced to our operations in Africa; fossil fuel reliant energy assets will be enhanced with clean burning and renewable technology, with the intention to migrate all existing and new assets to more sustainable energy sources in the medium to long term.
Naturally, the outcome of the tender process at our 100% owned Mbeya Coal to Power Project ("MCPP") in Tanzania was disappointing. However, the value of this asset should not be written off given that the fundamentals remain the same: An Integrated Bankable Feasibility Study report for the entire project indicated total potential revenues of US$7.5-8.5 billion over an initial 25-year mine life, post tax equity IRR between 21-22%, debt pay-back period of 11-12 years and a construction period of 36 months. Its strategic location close to potential private offtake partners and the export market provides many opportunities to commercialise the project, which we are actively pursuing. It should also be noted that the current TANESCO tender process for coal fired power does not satisfy TANESCO's full quota for coal fired power and we expect other opportunities will follow to meet the ultimate quota for coal fired power in Tanzania from which the MCPP is not excluded. Kibo is also still pursuing its clarification request to TANESCO to provide reasons for not qualifying the MCPP in terms of the current tender for coal fired power.
Our projects haven't been pulled out of a hat; they have been chosen for specific reasons after extensive evaluation. The fact that we have attracted and continue to retain the active involvement of international companies to work with us including GE and SEPCO III is a testament to this. Africa represents a rapidly growing market economy with an acute power deficit. Today, two in three people in Sub-Saharan Africa live without power, while manufacturers lose an average of 56 days of production a year due to power shortages. In Mozambique and Tanzania, only 24.2% and 32.8% respectively of the population has access to electricity while Botswana will need to add up to 500MW of committed, dispatchable electricity generating capacity by 2040 in order to keep pace with the demand. Even the UK is in a state of flux as it adjusts to decarbonising, decentralising and digitising the power market; this could create a £6 billion flexibility market by 2030 according to a report by Aurora Energy Research.
Our projects are positioned to address these concerns. However, these are major projects that aren't going to evolve overnight; it takes time to navigate the intricate agreements needed to bring them to commercialisation. We have, and continue to, hit all our targets in a timely manner, and whilst we have good relationships with the various governments and international organisations, we cannot dictate their timetables or actions.
Our strength lies in our diversity and we look forward to updating you on progress across our substantial portfolio throughout the year.
This announcement contains inside information as stipulated under the Market Abuse Regulations (EU) no. 596/2014 ("MAR").
For further information please visit www.kibo.energy or contact:
Kibo Energy PLC
Chief Executive Officer
+27 (0) 83 4408365
Corporate and Designated
Adviser on JSE
Ben Tadd /
+44 (0) 20 3700 0093
SVS Securities Limited
+44 (0) 20 7374 2212
First Equity Limited
+61 8 9480 2500
RFC Ambrian Limited
NOMAD on AIM
Isabel de Salis /
+44 (0) 20 7236 1177
St Brides Partners Ltd
Investor and Media Relations Adviser
Notes to editors
Kibo Energy PLC is a multi-asset energy company focused on progressing a diverse portfolio of advanced power generation and mining projects in Sub-Saharan Africa and the UK, utilising established international relationships with key development partners. It is simultaneously developing three coal-fuelled power projects in Africa: the Benga Independent Power Project in Mozambique; the Mabesekwa Coal Independent Power Project in Botswana; and the Mbeya Coal to Power Project in Tanzania. Additionally, the Company has a 60% interest in MAST Energy Developments Limited, a private UK registered company targeting the development and operation of flexible power plants to service the Reserve Power generation market.
25 March 2019
Corporate and Designated Adviser River Group
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