SA firm, AEP, shells out Sh6.2b to acquire IberAfrica

Clean energy company AEP Energy Africa has entered into a sale and purchase agreement with First Independent Power (Kenya) Limited  and Global Power Generation Sociedad Anónima, as the guarantor, to acquire 100% of the issued share capital of IberAfrica Power (East Africa) Limited , together with all shareholders’ claims against IberAfrica, for a maximum aggregate purchase consideration of Ksh 6.2 billion (US$61, 569, 066).

IberAfrica, a Moi-era company, owns and operates the 103.57MW diesel-fired Nairobi South Power Plant comprising two units with power generating capacity of 51.07MW and 52.50MW respectively and  accounts for approximately 5% of the total installed electricity generation capacity in Kenya.

AEP’s vision is to significantly increase access to, and use of, a variety of clean energy products by African countries, their industries and their citizens.

The company intends to achieve this by owning and operating a network of energy assets such as
power plants, fuel terminals and distribution logistics which produce, transport, store or handle for profit, under long-term supply contracts, products such as electricity, steam, biomass and natural gas.

The transaction, if implemented, presents an opportunity for AEP to convert the currently diesel-fired
engines to run on Liquefied Natural Gas, thereby enhancing long-term return on investment whilst taking a first step towards entering the LNG value chain, in line with its strategy. The Transaction and related costs will be funded from a 12-month loan facility with Barak Fund SPC, access to which is conditional on, inter alia, the transaction going unconditional.

It is anticipated that the Barak facility is to be repaid from the proceeds of a specific issue of shares for
cash, authority for which is to be sought at the general meeting of shareholders convened to approve
the Transaction. In terms of the specific issue, the board will seek authority to issue new AEP shares for the purposes of raising up to the South African Rand equivalent of Ksh 10 billion (US$100 million). Further details in respect of the specific issue will be announced in due course. The proceeds of the specific issue will partly be used to repay the Barak facility, with the balance earmarked to part-fund further acquisitions, as and when identified, in furtherance of AEP’s stated strategy.

AEP has received support from the Public Investment Corporation SOC Limited, which holds
approximately 49% of the AEP shares in issue, in respect of a shareholder vote in favour of the requisite resolutions to give effect to the transaction and  the proposed equity issue to repay the bridge financing facility. The Transaction remains subject to fulfilment and/or, where applicable, waiver, of the certain conditions precedent, including, inter alia written approval for the implementation of the transaction from the Competition Authority of Kenya; written consent for the implementation of the transaction from the Energy Regulatory Commission; written consent for the implementation of the transaction from Kenya Power in terms of the lease agreement with IberAfrica; submission by the seller of a request to the Government of Kenya to issue a letter of support in favour of IberAfrica as an independent power producer; approval of the transaction by the Financial Surveillance Department of South African Reserve Bank; and approval of the transaction by AEP shareholders at a general meeting to be convened by AEP.

AEP, the Seller and Guarantor have committed to engage with the relevant authorities and other
stakeholders in order to ensure the conditions are fulfilled as soon as possible.

The effective date of the transaction will be the first business day that is 15 business days after the
date on which all conditions precedent to the Transaction are fulfilled and/or, where applicable, waived.

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AEP shall be entitled to retain Ksh 158 million ($1, 569, 066) of the purchase consideration from the seller, to be held in escrow for a maximum period of 24 months from the effective date, as security for any amounts which may become payable by the Seller to AEP as a result of any breaches by the seller of its warranties and indemnities.