(Sharecast News) - Ncondezi Energy announced the signing of a term sheet with binding exclusivity between its wholly-owned renewable energy subsidiary Ncondezi Green Power (NGP), and Nesa Capital and Nesa Engineering, collectively 'Nesa', on Monday.
The AIM-traded firm said the term sheet detailed the proposed formation of a new joint venture company to create a "leading regional southern Africa champion" in the commercial and industrial renewable energy and storage sector.
It said the agreement outlined the proposed structure, providing NGP and Nesa mutual exclusivity until 30 November to form the joint venture and raise capital for its activities.
The deal also outlined the plan for the joint venture to acquire a controlling stake in the NIH portfolio, which is currently under separate ownership by Nesa Investment Holdings.
Ncondezi said the joint venture would be a newly-incorporated company with assets from NGP and Nesa, including NGP's 400kWp solar photovoltaic and 0.9MWh battery storage project currently under construction, as well as its project pipeline in Mozambique.
The venture would also hold Nesa's commercial and industrial renewable energy management team, its engineering, procurement and construction business, and its pipeline in South Africa.
It said the term sheet provided that NGP would acquire a minimum 40% equity stake in the joint venture before new equity capital, with various options to increase its equity stake, subject to certain terms.
Following the proposed capital raise and transaction, the joint venture would have a combined operational portfolio of 15.9MWp solar photovoltaic and 1.1MWh battery storage across 67 sites in South Africa and Mozambique.
Projected carbon dioxide savings of the portfolio were up to 22,000 tonnes per annum, with contracted EBITDA estimated at $40m, with an average contract life of 17 years.
The current combined project pipeline of the joint venture, meanwhile, would lead to 94.5MWp solar photovoltaic and 13.5MWp battery storage across a further 47 potential sites, with potential carbon dioxide savings of up to 130,000 tonnes per annum.
Ncondezi's board said discussions regarding capital raising were already underway, targeting a fundraise directly into the joint venture for working capital purposes, and towards its acquisition and long term growth strategy.
Non-binding offers had been received from multiple parties to provide equity funding, the directors said, with term sheets received from debt providers to leverage the combined operational portfolio.
The capital structure of the joint venture was expected to be finalised in the third quarter.
"We are delighted to announce entering into the term sheet with Nesa to give the parties a period of exclusivity to negotiate an exciting joint venture," said chief executive officer Hanno Pengilly.
"The proposed joint venture 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 photovoltaic and 13.5MWp battery storage over the next three 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."
Pengilly said the proposed joint venture 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 commercial and industrial 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 commercial and industrial 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 commercial and industrial businesses are able to achieve their full value for shareholders."
At 1032 BST, shares in Ncondezi Energy were up 1.03% at 2.93p.
12 Jan 2015 11:35