Kibo signs MoU to buy 60pc of Mast Energy Developments

Africa focused energy company Kibo Energy has signed a memorandum of understanding (MoU) for the acquisition of a 60% equity interest in Mast Energy Developments (MED) - a private UK-registered company targeting the development and operation of flexible power plants to service the reserve power generation market - it announced on Wednesday.

The AIM-traded firm said that under the terms of the MoU, it could acquire a 60% shareholding in MED for a consideration of £0.3m payable to existing MED shareholders in new Kibo shares, and a share of future project revenue royalties, which would be reinvested in the company in the short term to an amount of £2.2m.

It said MED's business strategy was to acquire and develop a portfolio of small-scale power generation assets.

Various ‘shovel ready’ sites had reportedly already been identified in the UK, capable of sustaining gas-fired power generators and ancillary structures from 20MW upwards.

They had 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 said its initial review of MED's business plan indicated that its first asset under acquisition in the UK could be up and running within 12 months, thus potentially providing revenue streams to Kibo in the short term.

Similar lead time periods from site acquisition to generator installation and power generation were indicated for other projects of similar size in the UK, it claimed.

Financial modelling reportedly indicated projected internal rates of return of between 13% and 16%, and net present values of between £16m and £19m for the initial assets.

MED was said to be 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, the board said it was envisaged that both parties would 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 said its established portfolio of assets in southern Africa was focused on large scale energy projects, and with the addition of MED's product offering, it would also be able to access and exploit a different, “very lucrative” sector of the African power market.

The acquisition remained subject to the completion of a comprehensive due diligence by Kibo on MED, and all relevant and applicable regulatory and statutory approvals.

“This proposed acquisition provides Kibo with exposure to near-term revenue generating assets and enables us to combine our knowledge of the power generation market both in mature and emerging markets,” said Kibo chief executive officer Louis Coetzee.

“There is a distinct short-term revenue generating potential in the UK, which is positive for Kibo, and importantly all early stage royalties payable to the sellers will be reinvested in Kibo.

“This prospect of receipt of gradually increasing revenue streams in the short term as MED builds generating capacity and the reinvestment of royalties in the early stages of production will greatly assist the company's working capital requirements as it develops its rapidly expanding larger scale energy asset portfolio in Africa.”