5th Feb 2008 07:01
Kazakhmys PLC05 February 2008 5 February 2008 Kazakhmys PLC Announces Acquisition of Kazakhstan's Largest Power Plant and Accompanying Coal Field Kazakhmys PLC ("Kazakhmys") announces today that it has signed an agreement withAES Corporation ("AES") to acquire the Ekibastuz coal-fired power plant and theMaikuben West coal mine in Kazakhstan. Completion is subject to certainconditions, including obtaining the necessary regulatory approvals from theGovernment of Kazakhstan. • Ekibastuz is a strategic asset in the Central Asian power market: o It is the largest source of power in Kazakhstan, with nameplate capacity of 4,000MW, in a market increasingly short of power supply o Ekibastuz offers significant growth opportunities with capacity to double output over the next 5 years from current available capacity of 2,250 MW o The captive coal mine at Maikuben provides a secure base of raw material supply, with current output of 3.1 million tonnes of coal with estimated mine life of about 30 years based on A,B, C1 classification of reserves. o Considerable potential to create commercial opportunities, including strategic partnerships, and off take agreements • Total payments of up to US$1.5 billion, subject to adjustment under a closing mechanism. o Includes an initial cash consideration of US$1,100 million and a deferred cash consideration and other payments of up to US$381 million, payable under earnout provisions o Kazakhmys will retain AES on a management service contract up to 31 December 2010. o Kazakhmys will fund the transaction through a debt facility, which has been announced separately today. Oleg Novachuk, Chief Executive of Kazakhmys said "The acquisition of Ekibastuzand the captive coal mine at Maikuben West is consistent with our strategy ofdiversifying our portfolio and secures the future of an asset that is ofimportance to the development of Kazakhmys and the region. It offers considerable opportunities to develop commercial relationships through surplus power generation." For further information please contact: ------------------------------------------------John Smelt, Head of Corporate Communication Tel: +44 20 7901 7882 Mob: +44 787 964 2675Olga Nekrassova, Financial Analyst Tel: +44 20 7901 7814Kazakhmys PLC ------------------------------------------------David Simonson & Tom Randell (English language)Leonid Fink & Anastasia Ivanova (Russian language)Merlin Tel: +44 20 7653 6620 - ends - Background and Notes to Editors Information on the assets and transaction Ekibastuz, located in northeastern Kazakhstan's Pavlodar Oblast, is the largestpower plant in Kazakhstan with a nameplate capacity of 4,000 MW. Maikuben WestCoal mine, an open cast mine located 65 kilometres from the Ekibastuz powerplant, has an estimated mine life of about 30 years based on A, B, C1classification of reserves and supplies a sizeable portion, around 20% of thepower plant's fuel requirements, producing over 3.1 million tonnes of coal in2006. In 2007, the power plant produced 9,434 GWh of electricity. As at 1 January2008, the plant's current available capacity was 2,250 MW, which is expected tosignificantly increase in stages over the next five years to 4,000 MW. This inturn will allow Kazakhmys to capitalise on the expected growth in electricitydemand in Kazakhstan. For the year ended 31 December 2006, the revenues, profit before tax, and grossassets of the combined operations of Ekibastuz GRES-1 and Maikuben West wereUS$149 million, US$43 million, and US$222 million, respectively(1). The capex spend for the three years from 2008 to 2010 inclusive is estimated atUS $650 million. Under the terms of the agreement, Kazakhmys, through a wholly owned subsidiaryKazakhmys Power B.V., will make an initial cash payment, at closing, ofUS$1,100 million, subject to adjustments under a closing mechanism, based on anenterprise value of US$1,150 million. Closing is expected to take place in Q22008, subject to securing all necessary regulatory consents from the Governmentof Kazakhstan. In addition, AES has an entitlement to an additional deferredcash consideration and other payments of up to US$381 million between 2008 and2010, should certain profitability and performance targets be met. Kazakhmyswill retain AES on a management service contract up to 31 December 2010, withthe existing key management team of AES in Kazakhstan continuing to manage andoperate the power plant and the coal mine. This will assist Kazakhmys inensuring business continuity and the execution of the investment programme. Background The electricity market in Kazakhstan offers an attractive growth platform toKazakhmys given the momentum in the industrial sector in Kazakhstan and theresulting growth in demand for electricity. The power sector in Kazakhstan has favourable economic fundamentals and offersvalue-enhancing growth opportunities, in turn underlying the attractiveness ofthe Acquisition on a standalone basis. Since gaining independence on 16December 1991, the Kazakh Government has introduced a series of importantmeasures resulting in full restructuring of the country's electricity generationmarket. The Government introduced a new regulatory framework, privatisedgeneration assets and deregulated pricing of the wholesale/retail power market.Kazakhstan has experienced a rapid recovery of its economy, with a real CAGR inGDP of c.10% over 2001-2006. Economic recovery was the key driver for growth inthe electricity sector, with demand increasing by an average of 5.2% per annumover the same period. The growth momentum is expected to continue in the mediumterm. The demand for electricity is projected to exceed 6% per annum through2011 and 3% per annum in the long run, according to the forecast of the KazakhGovernment(2). Kazakhmys already participates in the power market in Kazakhstan by owning andoperating three power plants with total gross capacity of over 900 MW, whichsupply all of the Group's current power needs. Kazakhmys PLC Kazakhmys PLC is the largest copper producer in Kazakhstan and one of theleading copper producers in the world. Kazakhmys is a fully integrated copperproducer from mining ore through to the production of finished copper cathodeand rod. The Group produces significant volumes of other metals as by-products,including zinc, silver and gold. Existing operations include 20 open pit andunderground mines, 9 concentrators, two copper smelting and refining complexes,a copper rod plant, a zinc plant and a precious metals refinery. Production isbacked by a captive power supply and significant rail infrastructure. Kazakhmysalso owns MKM, a copper products fabrication company in Germany, and has Goldand Petroleum Divisions with assets in Kazakhstan and Central Asia. The Group'sstrategic aim is to diversify and participate in the development of thesignificant natural resource opportunities in Central Asia. AES Corporation AES is one of the world's largest global power companies, with 2006 revenues ofUS$11.6 billion. With operations in 28 countries on five continents, AES'sgeneration and distribution facilities have the capacity to serve 100 millionpeople worldwide. 13 utilities amass annual sales over 73,000 GWh and 117generation facilities have the capacity to generate approximately 44,000megawatts. The global workforce of 30,000 people is committed to operationalexcellence and meeting the world's growing power needs. To learn more about AES,please visit www.aes.com or contact AES media relations at [email protected] -------------------------- (1)Combined aggregated (unconsolidated) numbers based on the AES managementaccounts prepared in accordance with the US GAAP. (2) Ministry of Energy and Mineral Resources of Republic of Kazakhstan"Development Plan for the Electricity Industry of the Republic of Kazakhstan",2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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