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KIBO ENERGY PLC - Letter to Shareholders

Release Date: 25/03/2019 09:00
Code(s): KBO
 
Wrap Text
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


Dear Shareholder,


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 1, while
manufacturers lose an average of 56 days of production a year due to power shortages 2. 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 demand3. 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.

1
  RTI Interanational, November 20 2019, https://www.rti.org/announcements/rti-international-awarded-usaid-power-africa-
task-order-help-double-electricity-access
2
  African National Bank, https://www.cnbcafrica.com/insights/energy-environment/2017/05/09/africas-energy/
3
  World Bank, https://data.worldbank.org/indicator/eg.elc.accs.zs
Our strength lies in our diversity and we look forward to updating you on progress across our substantial portfolio
throughout the year.


Louis Coetzee


                                               **ENDS**


 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:


   Louis Coetzee             info@kibo.energy           Kibo Energy PLC            Chief Executive Officer
   Andreas Lianos            +27 (0) 83 4408365         River Group                Corporate and Designated
                                                                                   Adviser on JSE
   Ben Tadd /                +44 (0) 20 3700 0093       SVS Securities Limited     Joint Broker
   Tom Curran
                                                        First Equity Limited       Joint Broker
   Jason Robertson            +44 (0) 20 7374 2212

   Andrew Thomson            +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
   Gaby Jenner                                                                     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.


   Johannesburg
   25 March 2019
   Corporate and Designated Adviser
   River Group

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