IPSA.L Regulatory News (IPSA)

28 Nov 2007 14:55

IPSA Group PLC28 November 2007 28 November 2007 IPSA Group PLC ("IPSA" or the "Company") IPSA Joint Venture for Elitheni Clean Coal Plant The directors of independent power plant developers IPSA Group PLC ("IPSA" orthe "Company") announce that it has today sold a 50% interest in itswholly-owned subsidiary, Elitheni Clean Coal Holdings Limited ("ECC") to ExodusAfrica LLC ("Exodus") for a premium of US $5 million to IPSA's holding cost inECC. ECC is the project holding company established by IPSA to oversee thedevelopment of the 500 MW Elitheni Clean Coal project at Indwe in Eastern CapeProvince in South Africa. ECC has been assigned the benefit of the coal supplyframework agreement between Elitheni Coal (Pty) Limited (a subsidiary ofStrategic Natural Resources PLC) and IPSA. Earlier this year the owners of the Elitheni coal mine, Strategic NaturalResources PLC ("SNR") granted IPSA exclusive rights to develop a mine mouthcoal-fired power plant at Indwe using coal to be produced from one of SouthAfrica's oldest coal mines. Subsequently SNR has completed an initial drilling programme that has satisfiedboth IPSA and Exodus that the commercially exploitable coal reserves justify anon-site power plant of no less than 500 MW. The eventual size of the plant couldbe increased above this level if the overall SNR drilling programme confirms thecoal reserves to be greater than the 120 million tones originally estimated atIndwe. In recent weeks SNR has announced a resource of 40 million tones based ondrilling samples covering only 7% of the current mining licence area. Previous drilling reports prepared for former owners of the mine in the 1960sand 1980s had originally led IPSA to believe that a 400 MW was the mostappropriate size for an Indwe power plant. However both IPSA and Exodus nowagree that a flexible approach to the mine mouth power project could lead to aneventual increase in the total power produced on site. Accordingly IPSA and Exodus are now resolved to develop the first 250 MW ofpower plant capacity at Indwe on a "fast track" basis with flexibility to addadditional blocks of 250 MW each as the coal resource confirmation so justifies.This fast track approach also reflects the national need for South Africa tobring new power capacity on line as swiftly as possible as power shortages andload shedding continued this week across the country. Under the fast track plan for the first 250 MW, IPSA and Exodus are looking toacquire existing equipment for conversion to meet the precise coalspecifications at Elitheni Coal Mine - low sulphur, low volatile coal - while atthe same time qualifying as Clean Coal with the high efficiency, lower emissionsassociated with clean coal technology. This will involve combining high pressuresteam turbines with fluidised bed combustion boilers. IPSA is currently innegotiations to take options over equipment suitable for the first Clean Coalblock at Indwe. The consideration to be paid by Exodus as a result of the transaction announcedtoday will in effect be payable in two parts: 52% of the principal plus interestupon introduction of a black economic empowerment investor; and the balance onthe earlier of ECCH securing funding for the project or 365 days. Interest onthe consideration is payable at LIBOR plus 2%. Exodus Africa LLC is a U.S.-based, privately held integrated energycompany.Headquartered in greater Houston, Texas, the company is focused ondeveloping, acquiring and operating energy assets in Africa. A number of seniormembers of its management team were previously with Enron. Exodus has committedto place half of its 50% stake in ECC with qualifying broadly based BlackEconomic Empowerment (BEE) investment funds in South Africa in order to allowthe project to conform with South Africa's norms. IPSA completed its own BEE initiative earlier this year following the placing of15% of its shares in August 2007 with Metropolitan Life on behalf of IMARA, aspecialist BEE energy consortium. "We are very pleased to work together with the IPSA team to make the ElitheniClean Coal Power Project a reality in the very near future," said Sean Long,President, Exodus Africa LLC. "The Elitheni Clean Coal Power Project willprovide the eastern and western cape region with much needed additionalelectricity using modern environmentally friendly equipment. In addition, theproject will offer a practical, long-term local market for Elitheni coal whichin turn will create new jobs in the region. Exodus is also looking forward tobringing in a highly respected BEE group under its 50% ownership. We believestrongly in the importance of strengthening local businesses. It's just simplegood business to help to strengthen the economies where we do business byhelping local companies grow." Peter Earl, CEO of IPSA added, "This is a very important step for IPSA inbringing partners to South Africa for what will be a world scale clean coaldevelopment. We need to build all the power capacity we can to alleviate SouthAfrica's power shortages. Exodus will help us to accelerate our developmentdrive in the Eastern Cape." IPSA's business is developing independent power generation projects in southernAfrica. IPSA is well positioned to ease South Africa's deepening energy crisis,and is currently developing a 1,600 MW combined cycle gas turbine plant at PortElizabeth. In 2007 it completed an 18MW combined heat and power plant atNewcastle, KwaZulu Natal, South Africa's first gas-fired independent powerproject. For further information contact: Peter Earl, CEO, IPSA: +44 20 7793 7676 Liz Shaw, COO, IPSA: +44 20 7793 7676 John Llewellyn-Lloyd, Noble & Company Limited +44 20 7763 2200 Allan Piper, First City Financial Public Relations: +44 20 7436 7486 This information is provided by RNS The company news service from the London Stock Exchange