9th Oct 2006 08:00
IPSA Group PLC09 October 2006 9 October 2006 IPSA GROUP PLC ("IPSA" or "the Company") Conditional Placing & Update on proposed listing on Altx IPSA is pleased to announce that it has made an application to the JSE to grantformal approval for the listing of IPSA ordinary shares of 2p each on Altx, theAlternative Exchange of the Johannesburg Stock Exchange ("JSE"). The listing issubject to the granting of formal approval by the JSE and the granting ofexchange control approval by the South African Reserve Bank. IPSA has also received irrevocable commitments to subscribe for 5,499,839ordinary shares in IPSA for a subscription price of South African Rand 5.62 perordinary share ("the placing shares") from selected institutional investorsconditional upon the listing taking place, thereby raising SAR 30,909,095. Oncethe approvals are received, IPSA will introduce the 54,629,630 ordinary sharescurrently listed on AIM and the 5,499,839 placing shares onto Altx. The placingshares will also be admitted for trading on AIM. A pre-listing statement will be issued in accordance with Section 6 of theListing Requirements of the JSE, once the approvals of the JSE and the SouthAfrican Reserve Bank have been obtained and just prior to listing. An abridged pre-listing statement relating to the listing is provided below. Peter Earl, CEO of IPSA, comments: "We are looking forward to our Altx listing as it is important for IPSA to havethe backing of South African institutions in helping to achieve our aim tobecome South Africa's leading independent power provider." For further information please contact: Peter Earl, CEO, IPSA Group Plc 020 7793 7676Liz Shaw, COO, IPSA Group Plc 020 7793 7676 John Llewellyn-Lloyd, Noble & Company Limited 020 7763 2200 Sean Lunn, Hichens, Harrison & Company Plc 020 7382 7790 Allan Piper, First City Financial 07736 064982 020 7436 7486 Abridged Pre-Listing Statement 1. Introduction IPSA was established to develop, own and manage power generation plants insouthern Africa. Currently listed on the AIM market of the London Stock Exchange("AIM") in the United Kingdom, IPSA will be dual listed on the AlternativeExchange ("Altx") of the JSE Limited by way of an introduction and placing ("thelisting"), subject to the granting of formal approval by the JSE and thegranting of exchange control approval by the South African Reserve Bank ("theapprovals"). The listing will facilitate the provision of capital, particularlyin respect of southern African projects, and to provide a channel through whichSouth African investors may invest in IPSA. Prior to the publication of this abridged pre-listing statement, irrevocablecommitments to subscribe for 5 499 839 ordinary shares in IPSA for asubscription price of R5.62 per ordinary share ("the placing shares") wereobtained from selected institutional investors conditional upon the listingtaking place, thereby raising R30 909 095. Once the approvals are received,IPSA will introduce 54 629 630 ordinary shares currently listed on AIM andsimultaneously place the placing shares ("the placing"). 2. Rationale for the listing The directors of IPSA recognise that the success of its development and tradingstrategy and its plans for expansion depend upon its ability to raise additionalcapital and that the listing will provide greater access to South African fundsto support its plans for expansion. The directors believe that the listing on Altx will bring the followingbenefits: 2.1 Access to South African capital markets IPSA expects to raise furtherequity capital in South Africa as well as the United Kingdom in the future todevelop its business, to fund the cash element of any additional acquisitionsand generally to supplement its working capital requirements. The directorsbelieve that capital for publicly traded companies carries a lower cost and ismore freely available than for private companies. Given that the IPSA'sactivities are focused in southern Africa, the directors believe that a listingin South Africa is appropriate to facilitate the participation of South Africaninvestors in the growth of IPSA. 2.2 Acquisition currency in South Africa The issue of publicly traded shares as consideration for target companies and/orassets may be more attractive to vendors than the issue of non-publicly tradedshares (and may be accepted in whole or in part instead of cash). 2.3 Localisation of shareholder base The presence of South African shareholders on the IPSA share register willstrengthen the profile of the Company as an Anglo-South African owner andoperator of power generation facilities. 2.4 Facilitation of black equity ownership The listing will assist IPSA to introduce black economic empowerment investorsas shareholders in the Company. 3. History and nature of business IPSA has two principal business objectives, being: 3.1 the development and ownership of power generation facilities in southernAfrica in order to sell electricity and/or heat or steam to companies andcommunities on commercial terms; and 3.2 in due course, the purchase, refurbishment and operation of existing powerplants in southern Africa. IPSA was incorporated on 1 July 2005. On 12 September 2005, IPSA acquired theentire issued share capital of Blazeway Engineering Limited ("Blazeway") inreturn for the issue of 24 999 900 new ordinary shares of GBP 0.02 in thecapital of IPSA. IPSA listed on AIM on 20 September 2005 immediately followinga private placement of 29 629 630 new ordinary shares of GBP 0.02 in the capitalof IPSA, which private placement was conditional on such AIM listing. In May 2005, Blazeway had acquired Newcastle Cogeneration Company (Proprietary)Limited ("NEWCOG"), formerly the southern African power development business ofThe Independent Power Corporation PLC, for a total consideration of £875 000. Asa result of it's acquisition of Blazeway, IPSA also acquired NEWCOG, both ofwhich are subsidiaries of IPSA. IPSA, Blazeway and NEWCOG are collectivelyreferred to as "the Group". The Group has initially targeted specific projects in South Africa and Swazilandand has various projects under varying stages of development as detailed inparagraphs 7 and 8 below. 4. Strategy The Group's strategy is to create a portfolio of power generation assets insouthern Africa by way of the establishment of subsidiary companies which willdevelop and manage power generation assets. However, where the directors believeit would be advantageous, the Group will act in conjunction with projectpartners. The directors' initial target projects are based on developing "inside the fence" combined heat and power ("CHP") plants with a nominal capacity of up to 100megawatts of electrical output ("MWe") for industrial companies seeking toobtain pricing predictability for their energy costs and secure a dedicatedsupply of electricity and steam. It is intended that these plants, subject tofuel supply and commercial considerations, will primarily be gas-fired andproduce both heat/steam and electricity. When located close to a major powerdemand centre, such plants may also be able to contribute to the localtransmission system and provide ancillary services (such as emergency power andvoltage and frequency stabilisation) to the grid operator. IPSA is in theprocess of constructing its first gas-fired power station in South Africa. In due course, the directors intend to extend the business to participate inlarger scale electricity generation projects as opportunities arise. 5. Market overview and opportunity Power generation in South Africa is currently dominated by the State-ownedelectricity generator and supplier, Eskom, which currently generates around 95per cent of the country's electricity. Eskom has over 40,000 MWe of nominalgenerating capacity, primarily coal-fired but also including nuclear,liquid fuel and hydroelectric power plants. The balance of current generation issplit between various municipalities, a small amount of self-generation owned bylarge industrials, such as those in the mining industry, and three licensedindependent power producers ("IPPs"). Eskom also imports power from the CahoraBassa hydroelectric power station in Mozambique and exports power to Botswana,Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe. (Source: www.eia.doe.gov) Approximately 32 per cent of South Africans do not have access to electricity athome, while peak demand for electricity in South Africa is forecast to exceedexisting power capacity by the end of 2006. The Government of South Africa ("Government") recognises the need for competition and for a more rational useof resources. As a result, it is now Government policy that 30 per cent of SouthAfrica's power capacity should be in private ownership by 2010 and that at least30 per cent of all new capacity constructed over the next five years should bemet by IPPs. In order to facilitate this, Government has embarked on a programmeof structural reform in the regulation of the power industry and announced on 11April 2005 a tender for new power capacity with an in-service date by the end of2008. Of particular relevance to IPSA is that Government is seeking to attract foreigndevelopers and investors with experience in the power sector. (Source:www.eia.doe.gov) 6. Competitive position The directors believe that, with the forecast shortfall in generating capacityin South Africa in the near future and Government's policy regarding privatesector involvement in the power sector, there will be further opportunities todevelop power plants in South Africa as well as opportunities to developcapacity in neighbouring countries (such as Botswana, Lesotho, Mozambique,Namibia and Swaziland) that have traditionally relied upon South African exportsof electricity. The directors further believe that the Group is well positioned to takeadvantage of these opportunities given management's experience in the powergeneration industry and the Group's existing presence and contacts in southernAfrica. 7. Current projects 7.1 Newcastle Project, South Africa Through its acquisition of NEWCOG, IPSA has obtained the right to construct agas-fired 18 MWe CHP plant to provide up to 95 tonnes per hour of process steamto the Karbochem site at Newcastle and has secured sufficient land to permitsuch construction. Construction commenced in January 2006 and is nowapproximately 70 per cent complete. Karbochem is a synthetic rubbermanufacturer. NEWCOG has entered into the key agreements for the Newcastle Project, namelysteam offtake site lease and gas supply. An electricity offtake agreement iscurrently under negotiation with Eskom. 7.2 Coega Project, Port Elizabeth A memorandum of understanding was signed in February 2006 for the lease of a 20hectare site at Coega Development Corporation's Industrial Development Zone ("IDZ") at Port Elizabeth, South Africa, with the intention of developing a fasttrack combined cycle gas turbine ("CCGT") project of 800 MWe. Since signing its original agreement with the IDZ, IPSA has been in discussionwith Eskom and the DME to consider increasing the size of its proposed CoegaProject in order to meet growing demand for electricity in the Eastern Cape andWestern Cape regions. It is estimated that the revised Coega project will require capital expenditurein the region of US$540 million to US$600 million. IPSA is in discussions witha number of South African financial institutions regarding raising the requiredproject finance and has also taken steps to procure Liquified Natural Gas ("LNG") from Latin America for the combined cycle phase at the Coega Project. 7.3 Elitheni Project, Eastern Cape In February 2006, IPSA entered into a Memorandum of Intent to develop a cleancoal technology plant of up to 400 MWe capacity using coal from the deposit atElitheni, Eastern Cape. IPSA is also in discussions to provide a 7 MWe CHP forDa Gama Textiles in the Eastern Cape using coal from the mine at Elitheni. IPSA is now proceeding to the environmental impact assessment phase of theElitheni Project. IPSA has been informed that a formal application to theDepartment of Minerals and Energy for a mining licence at Elitheni is in theprocess of being submitted. IPSA and the mining company at Elitheni also intendto explore the possibility of using additional coal from the Elitheni reservesfor small CHP projects in Cape Town serving industrial users of power and steamwho have found themselves subject to power restrictions following the Cape Townpower cuts of 2006. Under the terms of the Memorandum of Intent, IPSA agreed to advance R1,000,000of its own funds in the form of a loan to the mining company at Elitheni to beutilised in the execution of a drilling programme. However, outside capital hasbeen secured and IPSA has not as yet been required to provide the loan. IPSA maychoose to increase the size of the plant at Elitheni above the planned 400 MWecapacity if the preliminary coal reserve reports are confirmed by the finalreports due later in the year. 8. Pipeline projects 8.1 CHP project at Prospecton Basin, near Durban, South Africa The Group is in discussions regarding a gas-?c=64257red CHP plant to belocated in the Prospecton Basin near Durban and has received indications ofinterest in offtake of steam and electricity from two parties. 8.2 Bagasse-fired CHP project for the Royal Swazi Sugar Corporation atSimunye, Swaziland The Group is in discussions regarding a project to construct, own and operate abagasse-fired CHP plant for the Royal Swazi Sugar Corporation ("RSSC").It is intended that the project will supply process steam for RSSC's operationsand electricity for sale to the Swazi Electricity Board under a long-termcontract. It is anticipated that the Group will finance the majority ofthe project, with a major shareholder of RSSC also participating and the balanceto be sourced from South African investors. 9. Further opportunities The initial program of investments to be carried out by the Group is focused onCHP projects selling heat/steam and electricity to industrial groups in southernAfrica. These will typically be projects with an installed capacity ofelectricity up to 100 MWe. IPSA is also currently considering emergency power, isolated generation or smallCHP projects serving large corporations or national governments in Botswana,Kenya, Madagascar, South Africa and Tanzania. The directors believe that, in the medium term, the following opportunitiesexists. 9.1 Sale of power to Eskom The Group is in discussions with Eskom with a view to entering into powerpurchase agreements for the sale of electricity capacity and energy to Eskom fordistribution nationally in South Africa from newly developed power plants. 9.2 Other South African industrial groups The Group is in discussions with a number of other industrial groups with a viewto the development of power "islands" serving large industrial consumers ofelectricity. 9.3 Acquisition of existing power plants The Group may bid for existing power plants offered for sale by localmunicipalities or Eskom as part of a privatisation process. 9.4 LNG-fired developments Certain members of the Group's management team have experience in LNG-basedpower generation. The directors anticipate that some of the new large-scalepower capacity to be installed in South Africa in the future will be fuelled byLNG sourced from overseas gas producers. 10. Revenue structure The Group will achieve long term earnings streams through the supply ofelectricity and/or heat/steam to its customers. In general, it is intended thatthe length of these supply contracts will range from 10 to 15 years under a "take or pay" arrangement, with an option to extend this for further periods.Pricing of the electricity and heat/steam for these supply contracts is agreedwith the prospective off-taker during the initial phases of the project'sdevelopment. The Group intends to identify and enter into projects that areforecast to achieve an internal rate of return ("IRR") of no less than 20 percent and, as such, the pricing for each project is derived as a function of thefuel supply price and the desired IRR for each project. 11. Audited financial information The consolidated balance sheet at 31 March 2006 is set out in the table below. 31 March 2006 £'000 Assets Non-current assets: Intangible 833 Property, plant and equipment 5 208 6 041 Current assets: Trade and other receivables 489 Cash and cash equivalents 1 539 2 028 Total assets 8 069 Equity and liabilities Equity attributable to equity holders of the parent: Share capital 1 093 Share premium account 6 640 Foreign currency reserve 3 Retained loss (144) Total equity 7 592 Current liabilities: Trade and other payables 477 Total equity and liabilities 8 069 12. Share capital, share premium and debenture capital The authorised and issued share capital of IPSA before and after the listing,assuming that all the placing shares are allotted and issued, is set out below. Before the placing £Authorised share capital150 000 000 ordinary shares of 2 pence each 3 000 000Total authorised share capital 3 000 000 Issued share capital54 629 630 ordinary shares of 2 pence each 1 092 592.60Share premiumOn 54 629 630 ordinary shares of 2 pence each 6 640 464.00Total issued share capital and share premium 7 733 056.60 After the placing £Authorised share capital150 000 000 ordinary shares of 2 pence each 3 000 000Total authorised share capital 3 000 000 Issued share capital60 129 469 ordinary shares of 2 pence each 1 202 589.38Share premiumOn 60 129 469 ordinary shares of 2 pence each 8 647 905.24Total issued share capital and share premium 9 850 494.62 13. Directors The full names, ages, qualifications, business address and occupations of thedirectors of IPSA are set out below. Directors of IPSA Executive Directors Peter Richard Stephen Earl (51) Chief Executive Officer Address 5th Floor, Prince Consort House, 27-29 Albert Embankment, London SE1 7TJ Experience Peter began his career at the Boston Consulting Group advising state-owned companies. He has advised ministries of finance and central banks in Abu Dhabi, Albania, Kuwait and Saudi Arabia. He was previously CEO of Tranwood PLC and The Carter Organisation in New York. In 1994 he acted on secondment to the World Bank and UNDP in Bolivia. He has advised governments on privatisations in Latin America and Eastern Europe having served as Deputy Chairman for the United Nations Economic Commission for Europe infrastructure finance group. He became a director of Fieldstone Private Capital Group in London in 1994, where he advised cross-border power sector acquisitions and bids totalling approximately US$6 billion, involving 5,000 MW of installed generating capacity. In 1995 he founded Independent Power Corporation PLC, and is also a founder and director of Rurelec. He is the author of a European textbook on cross-border takeovers. He is an Oxford University graduate and was a Kennedy Scholar at Harvard University. Elizabeth Ruth Shaw (45) Chief Operating Officer and Finance Director Address 5th Floor, Prince Consort House, 27-29 Albert Embankment, London SE1 7TJ Experience Elizabeth has been involved in the electricity sector since 1994 when she joined Fieldstone Private Capital Group. Between 1994 and 2000, as a director of Fieldstone, she advised on a number of mergers, acquisitions and disposals in the electricity industry, both in the UK and in developing markets. Prior to joining Fieldstone, Elizabeth was involved in the financing of small to medium sized companies in the UK, including raising equity for both listed and unlisted companies. She joined IPC as a director in 2000 where she is responsible for business development and finance. She is also the financial director and founder of Rurelec. Elizabeth is a graduate of Exeter University. Elizabeth is also an executive director of NEWCOG. John Michael Eyre (52) Technical Director Address 5th Floor, Prince Consort House, 27-29 Albert Embankment, London SE1 7TJ Experience Mike is both a Chartered and European Engineer and has extensive experience in project management and development in the power sector. As a Central Electricity Generating Board engineer, he spent part of his early career on secondment to Eskom of South Africa with responsibility for the maintenance of a portfolio of 26, mainly coal-fired, power plants. He subsequently became Head of Engineering Quality with National Power PLC in 1992, where he developed and implemented policy for risk management of its UK assets as well as leading the technical due diligence for international acquisitions of power plants. In 1996 he founded Lloyds' Register International Power Group, which advises developers on CHP and renewable energy projects. He is also a founder and director of Rurelec. He joined IPC in 2002 where he is currently leading two greenfield development projects for gas-fired plants. He was a member of the United Nations group which set the foundations of the United Nations emissions trading scheme. Independent Non-executive directors Stephen Thomas Hargrave (49) Chairman Address 47 Lamb's Conduit Street, London, WC1N 3NG, United Kingdom Experience Stephen has been chairman of a number of AIM-quoted companies and since 2000 has been chairman of Invox PLC, a provider of home gaming products and internet services quoted on AIM. After initially working in banking and investment management, he spent two years from 1987 as a financial journalist with the London Evening Standard before leaving in 1988 to join United Newspapers PLC as head of planning. He is also chairman of two unquoted companies, TP3 PLC and London Farmers' Markets Limited, and is a board member of Origin Housing Group, a registered social landlord. He was educated at Oxford University and the University of East Anglia. Neil Bryson (58) Director Address Overdale Sychnant Pass Road Conwy LL32 8RE Experience Neil graduated in Geology from the University of Durham and has spent over 35 years in the energy sector. Neil worked as an exploration manager and chief coal geologist in his early years before taking up a role as a technical coal specialist to the UK's Department of Energy advising on coal industry matters. In 1987 he acquired a 50% interest in Faldane Limited, owner of the largest private coal mine in Scotland, and became its Commercial Director. In 1988 he was one of the founder directors of Lakeland Power Limited, developer and owner of the first gas-fired independent power generation project in the UK. Since 1991 Neil has been running his own company, Balmyle Limited, which provides consultancy and interim management services, mainly to the power sector. James Glynn West (59) Director Address 5th Floor, Prince Consort House, 27-29 Albert Embankment, London SE1 7TJ Experience James is formerly a managing director of Globe Investment Trust PLC. Subsequent to this he joined Lazard Asset Management as Chief Executive in 1994. He was also a managing director of Lazard Brothers & Co Ltd, where he held full responsibility for the bank's investment operations. He currently holds a number of non-executive chairman roles, including Gartmore Fledgling Trust PLC, Jupiter Second Enhanced Income Trust PLC and Rurelec. He is also a non-executive director of a number of other companies including Candover Investments PLC, British Assets Trust PLC and Global Natural Energy PLC. 14. The listing IPSA has made an application to the JSE to grant formal approval for the listingof 60 129 469 IPSA ordinary shares on Altx. 15. Further announcement and documentation A pre-listing statement will be issued in accordance with Section 6 of theListing Requirements of the JSE, once the approvals have been obtained and justprior to listing. A further announcement in this regard will be made in duecourse. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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