TIDMNCCL
RNS Number : 7141B
Ncondezi Energy Limited
14 June 2021
News Release
NESA Power Joint Venture Term Sheet Signed
14 June 2021: Ncondezi Energy Limited ("Ncondezi" or the
"Company") (AIM:NCCL) is pleased announce the signing of a term
sheet with binding exclusivity ("Term Sheet") between Ncondezi's
wholly owned renewable energy subsidiary, Ncondezi Green Power
("NGP") and Nesa Capital (Pty) Ltd ("Nesa Capital") and Nesa
Engineering (Pty) Ltd ("Nesa Engineering") (collectively "NESA")
detailing the proposed formation of a new joint venture company
("JVCo") to create a leading regional Southern African champion in
the Commercial and Industrial ("C&I") renewable energy and
storage sector:
-- NESA comes with an experienced management team with a proven
track record developing and managing a 15.5MWp solar PV plus 0.2MWh
battery storage C&I portfolio across 66 sites in South Africa
(the "NIH Portfolio")
-- Term Sheet key highlights:
o Outlines proposed structure to create a regional champion in
the southern African C&I renewable energy sector;
o Provides NGP and NESA mutual exclusivity until 30 November
2021 to form JVCo and raise capital for its activities; and
o Outlines the plan for JVCo to acquire a controlling stake in
the NIH Portfolio, currently under separate ownership by Nesa
Investment Holdings ("NIH")
-- JVCo to be a newly incorporated company with assets from NGP and NESA, including:
o NGP's 400kWp solar PV and 0.9MWh battery storage project
currently under construction
o NGP's project pipeline in Mozambique
o NESA's C&I renewable energy management team
o NESA's EPC business
o NESA's pipeline in South Africa
-- The term sheet provides that NGP will acquire a minimum 40%
equity stake in JVCo pre new equity capital with various options to
increase its equity stake subject to certain terms.
-- NESA, NIH and NGP have entered into a binding agreement
granting NESA and NGP exclusive rights to negotiate terms on which
they would acquire, through the proposed JVCo, a minimum 51%
interest in the NIH Portfolio by 30 November 2021 with a subsequent
option to acquire up to 100% within a 5 year period.
-- Following the proposed capital raise and transaction, JVCo
will have a combined operational portfolio of 15.9MWp solar PV and
1.1MWh battery storage across 67 sites in South Africa and
Mozambique, subject to funding and acquisition of the NIH
Portfolio
o Projected CO2 savings up to 22,000t per annum
o Projected US$40m in contracted EBITDA with average contract
life of 17 years
-- Current combined project pipeline of JVCo if successfully
implemented would lead to 94.5MWp solar PV and 13.5MWp battery
storage across a further 47 potential sites
o Potential CO2 savings up to 130,000t per annum
-- The Board is pleased to announce that discussions regarding
capital raising are already underway targeting a fund-raise
directly into JVCo for working capital purposes and towards its
acquisition and long term growth strategy:
o Non-binding offers have been received from multiple parties to
provide equity funding into JVCo
o Term sheets have been received from debt providers to leverage
the combined operational portfolio
o JVCo capital structure expected to be finalised in Q3 2021
-- Optimal ownership structure for the Company's coal baseload
and renewable energy projects are being reviewed given changing
investor appetite for renewable versus fossil fuel projects
Ncondezi Chief Executive Officer, Hanno Pengilly said : " We are
delighted to announce entering into the Term sheet with NESA to
give the parties a period of exclusivity to negotiate an exciting
JV. The proposed JV with NESA would create a Southern African
champion with a cash generative project portfolio, enabling us to
rapidly increase our presence in the sector with a clear pathway
towards 100MWp solar PV and 13.5MWp battery storage over the next 3
years.
The transition to renewables and carbon neutrality is
accelerating, and Africa stands out as a key market with the
highest energy costs and lowest energy access rates. The proposed
JV would be established with a proven management team, track record
and project execution platform. Its strong presence in South
Africa, Africa's largest energy market, where the maximum C&I
project size has recently increased from 1MW to 100MW, provides a
strategic position in a key market with additional expansion
opportunities into neighbouring countries.
Finally, as we continue to progress the baseload and renewable
energy C&I sides of our business it is becoming increasingly
clear that they attract different investors. The Company has
initiated an internal review to identify the optimal strategy to
ensure both the baseload power and renewable energy C&I
businesses are able to achieve their full value for
shareholders."
Nesa Engineering Executive Director, Peter Frolich said : "We
are excited to progress the JV with Ncondezi Green Power, as this
fits our strategy to create a leading C&I renewable energy
utility in the SADC region. The proposed JV will provide NESA with
potential access to institutional capital to meet funding
requirements to scale fast, and we are already seeing attractive
investment appetite from our capital raising process for the JVCo.
With an expanded regional focus, there will be greater
opportunities to grow and diversify the C&I asset portfolio
whilst also reducing exposure to country specific risks, such as
local currency risk, with additional US$ denominated cash flows. We
look forward to finalising terms of the transaction."
Whilst a period of exclusivity has been granted, there remains
significant work to be completed before definitive documentation
can be agreed with either NESA and/or NIH, including agreement of
detailed commercial terms, completion of the due diligence and
arranging transaction funding. Discussions are ongoing and there is
no certainty that the JV will proceed and if it does, the
commercial terms on which it will proceed and similarly if the NIH
Portfolio will be acquired and if it is, on what terms. Further
announcements will be made when required by market rules.
About NESA
NESA comprises Nesa Capital, an independent impact investment
manager, and Nesa Engineering, an EPC engineering firm (formerly
Creovision (Pty) Ltd). NESA provides turnkey renewable energy
solutions and services to clients including project procurement,
design, engineering, financing, O&M and monitoring services for
renewable energy investments in the C&I renewable energy sector
in South Africa. Both companies are currently the appointed
managers for NIH, a section 12J venture capital company.
Nesa Capital and Nesa Engineering have a long track record of
operating together having jointly provided management services to
NIH and its portfolio of C&I investments since its inception in
2017.
To date, the NESA team has, for NIH, processed over 30MWp of
solar PV projects, of which 9.8MWp has been commissioned across 55
separate sites and 5.8MWp is currently under construction across 11
separate sites. Projects that meet NESA's criteria for investment
and construction are currently financed and owned by NIH, however
it is the intention that future projects will be funded and owned
by JVCo.
In the financial year ending February 28, 2021, NESA generated
unaudited proforma consolidated revenues of US$2. 4 m (R32.4m)
through its various renewable energy service offerings.
NESA currently has a C&I project pipeline with an estimated
generating capacity of 91.6MWp solar PV and 7.3MWh battery
storage.
NESA has a team of 14 professional staff and is currently 100%
owned by management.
Further information can be found at:
https://www.nesacapital.co.za/
https://www.nesa-energy.com
About the NIH Portfolio
The NIH Portfolio is managed through NIH, a section 12J venture
capital company, launched in February 2017 by NESA.
NIH has raised over US$14.5m (R198m) to date from retail
investors in South Africa for C&I investments, and owns over 66
C&I assets with a combined generation output of 15.5MWp Solar
PV plus 0.2MWh storage. It includes a diversified offtaker base
split between the retail, commercial, industrial and property
sectors.
The NIH Portfolio generated unaudited project EBITDA of US$818k
(R11.2m) in the year ending February 2021. It has scaled
significantly over the last 3 years with solar PV generating
capacity and project EBITDA growth of 21x and 12x respectively up
to February 2021 year end.
Project procurement, EPC, O&M, monitoring and asset
management services are provided to NIH by NESA.
NIH has entered into a binding option agreement granting NESA
and NGP exclusive rights to acquire a minimum 51% interest in the
NIH Portfolio before 30 November 2021 with a subsequent option to
acquire up to 100% within a 5 year period.
At 28 February 2021, the NIH Portfolio has offset 5,222t of CO2
emissions, produced over 13,321MWh green electricity and saved
clients US$1.1m (ZAR 15.6m) in energy costs since inception.
About the Ncondezi Green Power
NGP is a wholly owned subsidiary of Ncondezi which provides
solar PV & storage solutions for the African C&I sector to
replace existing off-grid (normally diesel) power supplies, or to
supplement on-grid connections.
NGP entered the C&I sector in 2019 and in October 2019
announced its first investment in a 400kWp fully off grid solar PV
plus 912kWh battery storage project. The project is believed to be
the first project of its type in Mozambique and is due to be
commissioned in June 2021.
NGP has also secured the right to fund a US$5.5m C&I project
development pipeline in Mozambique through a Relationship Agreement
with Captive Power Limited.
Enquiries
For further information please visit www.ncondezienergy.com or
contact:
Ncondezi Energy Hanno Pengilly +27 (0) 71 362 3566
Liberum Capital Limited Scott Mathieson, Edward Thomas, +44 (0) 20 3100
NOMAD & Joint Broker Kane Collings 2000
Novum Securities
Limited +44 (0) 20 7399
Joint Broker Colin Rowbury 9427
Pimlico Advisory
Ltd +44 (0) 777 56 55
Investor Relations Elizabeth Johnson 927
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014 which is part of UK law
by virtue of the European Union (Withdrawal) Act 2018. Upon
publication of this Announcement and such information is now
considered to be in the public domain. The person who arranged for
the release of this announcement on behalf of the Company was Hanno
Pengilly, CEO.
About Ncondezi Energy
Ncondezi is an African power development company with an
advanced staged, integrated 300MW thermal coal power plant and mine
project located in the Tete Province, Northern Mozambique.
The Company is focused on providing reliable, affordable and
accessible baseload energy to Mozambique and secure against the
effects of water drought and intermittency of new renewables. This
project supports Mozambique's energy strategy of universal
electricity access by 2030. According to the World Bank, only 30%
of the Mozambican population had access to energy in 2017. The
Ncondezi Project would provide 300MW of reliable and available
power helping to close the infrastructure gap of the region and
serving as a catalyst for economic development.
The power plant will be designed to be equipped with
state-of-the-art emissions controls technologies that will reduce
local air pollutants, minimizing the plant's impact on the
environment and ensuring its compliance with the most stringent
emission standards
In 2019, the Company entered the Commercial and Industrial
("C&I") renewable and battery storage sector and in October
2019 announced its first investment in an off grid solar battery
project. The Company has also secured the right to fund a US$5.5m
C&I project development pipeline in Mozambique through a
Relationship Agreement with a C&I developer. The move into the
C&I solar and battery storage sector offers a significant
opportunity for the Company to complement the existing large-scale
baseload power project and access near-term low-risk annuity income
streams which have significant growth potential.
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