The multi-asset Africa-focused energy and resource company, Kibo Mining has signed a Joint Venture Agreement (the Benga Power JV) with Mozambique energy company Termoeléctrica de Benga S.A. (Termoeléctrica) to construct and operate a 150-300MW coal-fired power station.
The JV will participate in the further assessment and potential development of the Benga Independent Power Project (BIPP).
Kibo Mining and Termoeléctrica shall hold initial participation interests in the unincorporated joint venture of 65% and 35% respectively.
The Benga Power JV is another step in advancing Kibo’s strategy to position the company as a leading regional energy player.
Subject to the successful outcomes of further and more detailed studies on the BIPP, the company envisages being able to develop the BIPP in an expedited manner alongside its Mbeya Coal to Power Project (MCPP) in Tanzania and the recently acquired Mabesekwa Coal Independent Power Project (Mabesekwa) in Botswana. Read more: Kibo Mining acquires 85% stake in Botswana power project
The Benga Power JV will utilise Kibo’s experience in the advancement and development of power projects in the East African region and its strategic relationships with international development partners such as Sepco III and General Electric.
As the BIPP has similarities with the MCPP and Mabesekwa, it is envisaged that considerable benefits could be realised in any potential power station development, including economies of scale in equipment, execution and project finance.
Principal terms of the JV
- The assets the subject of the JV will be transferred unencumbered and unfunded into a clean, “sole purpose” vehicle (Newco) in which Kibo Mining and Termoeléctrica shall hold initial interests of 65% and 35% respectively;
- Kibo will be granted an initial 65% participation interest in the Benga Power JV to exploit the assets of Newco for no upfront consideration, and must maintain this interest by funding a maximum amount of £1 million towards the completion of a Definitive Feasibility Study (DFS);
- Pursuant to a positive outcome of the DFS and the construction of a coal-fired power plant, both Kibo and Termoeléctrica will contribute to the project cost on a pro-rata basis;
- In the event that the JV is terminated before Kibo meets its earn-in threshold, Kibo will be entitled to become a creditor of Newco for an amount of between 50% and 175% of its JV expenses contribution, payable within 30 days of financial close in respect of project financing for construction of the BIPP;
- In the event that the JV is terminated after Kibo meets its earn-in threshold, Kibo shall retain a residual interest in the project calculated as a percentage relative to total project expenditure by Kibo, and subject to a minimum retained interest of 15%;
- Typical joint venture dilution clauses and formulas apply to each party allowing one party to dilute the other’s participation interest should it not be able to contribute to an agreed sum within the set time period, and subject to a minimum retained interest of 15%;
- Upon delivering a positive DFS in respect of the BIPP, Kibo Mining will have the option, for a period of 365 days from the delivery of the DFS, to increase its interest in the project up to 85%, at a price determined by an independent third party (and payable within 30 days of such determination);
- Kibo will have majority representation on the JV management committee, including the ability to appoint the chair of the management committee;
- Kibo and Termoeléctrica to refrain from participating, to the exclusion of each other, in any new project (subject to agreed exclusions) involving the generation of coal-fired electricity in the Republic of Mozambique until the earlier of:
- the fifth anniversary of the signature date of the JV; or
- financial close
- Reciprocal right of first refusals over disposal of either party’s participation Interest in whole or part on terms typical of such an agreement;
- Typical termination clauses, including but not limited to, lack of commercial viability, material breach, and mutual consent; and
- The JV is inter alia conditional upon both parties obtaining all approvals in their relevant jurisdictions to enter into the JV Summary of the BIPP.