24th Oct 2008 14:30
24 October 2008
IPSA Group PLC
Possible disposal of gas turbines
Highlights
Advanced discussions for sale of four gas turbines: significant potential profit
Option to acquire new turbines for Coega development under negotiation
IPSA Group PLC ("IPSA" or "the Company") announces that it is in advanced discussions for the sale of the four Fiat Avio 501 D gas turbines previously intended for its Coega project near Port Elizabeth, South Africa.
Having been approached by a number of potential buyers, IPSA is now in various stages of advanced negotiations with selected parties outside South Africa for the sale of the turbines at a price in excess of $100 million (£62 million). This compares with an all-in acquisition cost of approximately $60 million (£37 million). However, the Company wishes to emphasize that any such sale may not proceed to completion. Shareholders will be updated shortly on progress.
The turbines have hitherto been earmarked for the Coega project. In recent weeks, IPSA has been awaiting the outcome of certain constitutional changes affecting the Coega Development Corporation ("CDC"). These changes are considered necessary to enable CDC to grant leasehold rights for a new independent power plant to serve the baseload power and steam needs of industrial customers on the Coega site. No firm timetable has yet been established for bringing an independent combined cycle gas turbine ("CCGT") plant on line at Coega.
It is therefore apparent that the in-service date for the first 521 MW of open cycle gas turbine capacity, originally targeted for mid-2009, will not now be achieved. IPSA is, therefore, considering taking advantage of the strong worldwide demand for gas turbines by endeavouring to sell the four fully-refurbished Fiat Avio 501 D turbines acquired by the Company in March 2007 for the Coega Project.
In order to minimize the impact of selling the turbines on the earliest possible timing for the Coega Project, IPSA is negotiating an option to acquire new turbines with identical specifications, to be delivered on site at Coega directly from the manufacturer to meet the new in-service dates imposed by the delayed timetable resulting from the necessary constitutional changes at CDC. The Board of IPSA anticipates that new gas turbines to be acquired pursuant to any such option would cost approximately €128 million (£102 million) the cost of which will be reflected in the electricity tariff over the life of the plant. Further announcements on the option arrangement will be made in due course.
The overall plan for IPSA to develop, construct and own 1,600 MW of CCGT capacity at Coega remains unchanged. Furthermore, IPSA remains committed to developing new power capacity in southern Africa. On 9 September 2008 the Company announced that it has increased its planned coal-fired power plant capacity to be developed based on Elitheni coal in the Eastern Cape from 500 MW of mine mouth capacity to some 1,000 MW of capacity spread over a number of sites between Indwe, Port Elizabeth and East London. IPSA already owns and operates the first independent gas-fired cogeneration plant in South Africa, operating at Newcastle, KwaZulu Natal.
For further information contact:
Peter Earl, CEO, IPSA Group PLC: +44 (0)20 7793 5615
Elizabeth Shaw, COO, IPSA Group PLC: +44 (0)20 7793 5615
Nick Naylor / Jamie Boyd, Noble & Company Ltd: +44 (0)20 7763 2200
(Nominated Adviser and Joint Broker)
Sean Lunn, Hichens, Harrison (South Africa) Ltd: +27 21 950 2711
(Joint Broker)
Allan Piper, Tavistock Communications (UK PR Advisers): +44 (0)20 7920 3150
Dino Theodorou / Melissa Harris, PSG Capital (Pty.) Limited +27 11 797 8400
(South African Sponsors)
Jacques de Bie, College Hill (South African PR Advisers) +27 11 447 3030
Or visit IPSA's website: www.ipsagroup.co.uk
Related Shares:
IPSA.L