(Alliance News) - Kibo Energy PLC said Wednesday it has signed a binding heads of terms agreement with Shumba Energy Ltd to reorganise arrangements for the Mabesekwa coal independent power project in Botswana.
The Africa-focused energy firm and Shumba - a Botswana-based energy developer - hold an 85% and 15% stake respectively in Kibo Energy Botswana Pty Ltd, which operates the project.
Under the terms, Kibo Energy will reduce its holding in KEB to between 35% to 40%, in return for consolidating the retained assets in an adjacent coal project, including a 761.1 million tonne mineral resource, and the right to a 303 million tonnes subset.
An additional joint venture will be formed between Kibo and Shumba to allow the operation of the project to continue, and both companies' to retain their holdings in the project.
In addition, Kibo and Shumba will expand their relationship to the joint management of a 300 megawatt power station, by forming a new company in which Kibo will hold up to a 40% stake.
The new power station will complement the existing Mabesekwa power plant, and is expected to provide power to a petrochemical plant, which will provide liquid and gas fuel to first Botswana, then the wider Southern African market.
It has been agreed that the coal resource from Mabesekwa will supply the petrochemical plant, the new power station and the existing Mabesekwa power plant, under several off-take agreements.
The transaction is subject to several conditions, including the signing of a definitive agreement within ten days, and of the off-take agreements. The arrangement has a long stop date of March, 20, 2020.
"This reorganization enables us to more fully leverage and de-risk the Mabesekwa resource by pursuing three different potential revenue streams, including a further 250 to 300 megawatt power plant in addition to the existing Mabesekwa 300MW plant currently being advanced and significant exposure to a large petrochemical plant to be planned for development and supported by two major Chinese conglomerates," said Chief Executive Officer Louis Coetzee.
By Dayo Laniyan; dayolaniyan@alliancenews.com
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Kibo Energy (KIBO)