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> September 19, 2005 |
IPSA Joint Venture for Elitheni Clean Coal Plant The directors of independent power plant developers IPSA Group PLC (“IPSA” or the “Company”) announce that it has today sold a 50% interest in its wholly-owned subsidiary, Elitheni Clean Coal Holdings Limited ("ECC") to Exodus Africa LLC ("Exodus") for a premium of US $5 million to IPSA's holding cost in ECC. ECC is the project holding company established by IPSA to oversee the development of the 500 MW Elitheni Clean Coal project at Indwe in Eastern Cape Province in South Africa. ECC has been assigned the benefit of the coal supply framework agreement between Elitheni Coal (Pty) Limited (a subsidiary of Strategic Natural Resources PLC) and IPSA. Earlier this year the owners of the Elitheni coal mine, Strategic Natural Resources PLC (“SNR”) granted IPSA exclusive rights to develop a mine mouth coal-fired power plant at Indwe using coal to be produced from one of South Africa’s oldest coal mines. Subsequently SNR has completed an initial drilling programme that has satisfied both IPSA and Exodus that the commercially exploitable coal reserves justify an on-site power plant of no less than 500 MW. The eventual size of the plant could be increased above this level if the overall SNR drilling programme confirms the coal reserves to be greater than the 120 million tones originally estimated at Indwe. In recent weeks SNR has announced a resource of 40 million tones based on drilling samples covering only 7% of the current mining licence area. Previous drilling reports prepared for former owners of the mine in the 1960s and 1980s had originally led IPSA to believe that a 400 MW was the most appropriate size for an Indwe power plant. However both IPSA and Exodus now agree that a flexible approach to the mine mouth power project could lead to an eventual increase in the total power produced on site. Accordingly IPSA and Exodus are now resolved to develop the first 250 MW of power plant capacity at Indwe on a “fast track” basis with flexibility to add additional blocks of 250 MW each as the coal resource confirmation so justifies. This fast track approach also reflects the national need for South Africa to bring new power capacity on line as swiftly as possible as power shortages and load shedding continued this week across the country. Under the fast track plan for the first 250 MW, IPSA and Exodus are looking to acquire existing equipment for conversion to meet the precise coal specifications at Elitheni Coal Mine – low sulphur, low volatile coal - while at the same time qualifying as Clean Coal with the high efficiency, lower emissions associated with clean coal technology. This will involve combining high pressure steam turbines with fluidised bed combustion boilers. IPSA is currently in negotiations to take options over equipment suitable for the first Clean Coal block at Indwe. The consideration to be paid by Exodus as a result of the transaction announced today will in effect be payable in two parts: 52% of the principal plus interest upon introduction of a black economic empowerment investor; and the balance on the earlier of ECCH securing funding for the project or 365 days. Interest on the consideration is payable at LIBOR plus 2%. Exodus Africa LLC is a U.S.-based, privately held integrated energy company.Headquartered in greater Houston, Texas, the company is focused on developing, acquiring and operating energy assets in Africa. A number of senior members of its management team were previously with Enron. Exodus has committed to place half of its 50% stake in ECC with qualifying broadly based Black Economic Empowerment (BEE) investment funds in South Africa in order to allow the project to conform with South Africa’s norms. IPSA completed its own BEE initiative earlier this year following the placing of 15% of its shares in August 2007 with Metropolitan Life on behalf of IMARA, a specialist BEE energy consortium. “We are very pleased to work together with the IPSA team to make the Elitheni Clean Coal Power Project a reality in the very near future,” said Sean Long, President, Exodus Africa LLC. “The Elitheni Clean Coal Power Project will provide the eastern and western cape region with much needed additional electricity using modern environmentally friendly equipment. In addition, the project will offer a practical, long-term local market for Elitheni coal which in turn will create new jobs in the region. Exodus is also looking forward to bringing in a highly respected BEE group under its 50% ownership. We believe strongly in the importance of strengthening local businesses. It’s just simple good business to help to strengthen the economies where we do business by helping local companies grow.” Peter Earl, CEO of IPSA added, “This is a very important step for IPSA in bringing partners to South Africa for what will be a world scale clean coal development. We need to build all the power capacity we can to alleviate South Africa’s power shortages. Exodus will help us to accelerate our development drive in the Eastern Cape.” IPSA’s business is developing independent power generation projects in southern Africa. IPSA is well positioned to ease South Africa’s deepening energy crisis, and is currently developing a 1,600 MW combined cycle gas turbine plant at Port Elizabeth. In 2007 it completed an 18MW combined heat and power plant at Newcastle, KwaZulu Natal, South Africa’s first gas-fired independent power project. For further information contact: Peter Earl, CEO, IPSA: +44 20 7793 7676
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