Energy News Today

Kinetiko Energy Ltd moving to 100% stake in South Africa’s Afro Energy

The Perth-based energy stock originally held a 49% interest in Afro, which holds the South African exploration rights and production approvals tied to Kinetiko’s assets.

Kinetiko Energy Ltd (ASX:KKO) will officially move to a 100% stake in South Africa’s Afro Energy (Pty) Ltd after executing formal, binding legal agreements.

The Perth-based energy stock originally held a 49% interest in Afro, which holds the South African exploration rights and production approvals tied to Kinetiko’s assets.

By buying the remaining 51% stake from joint venture partner Badimo Gas (Pty) Ltd, Kinetiko will deliver a net contingent resource of 4.9 trillion cubic feet and bolster its market capitalisation in a move that will make it more attractive for institutional investors.

As consideration for its remaining stake in Afro, Badimo will receive roughly 598 million KKO shares.

A decade in the making

Speaking on the proposed acquisition, KKO executive chairman Adam Sierakowski said: “This union between the historic joint venture partners represents the achievement of a major milestone for the de-risking of the development of what is potentially the largest onshore gas project in South Africa.

“Years of significant cooperation between the Badimo and Kinetiko teams have enabled this acquisition to be realised and will result in delivering substantial shareholder value.”

Also commenting on the proposed acquisition, Badimo Gas executive chairman Don Ncube said: “We have worked for over a decade to explore and develop a significant onshore non-fracking gas project in the Mpumalanga, Orange Free State and Kwazulu-Natal regions of South Africa.

“The creation of a project which delivers abundant clean energy will greatly assist South Africans whose economy faces an energy crisis.

“This merged entity will now be able to raise capital for accelerated exploration, production and downstream development in international markets.

“Such foreign direct investment was previously not available to Badimo and this merger facilitates and reinforces the foreign direct investment initiative of our president.

“It will provide new employment opportunities and development of technical skills in the regions where such gas production is established.

“It will also contribute to the reduction of harmful polluting carbon dioxide emissions.”

The fine print

KKO and Badimo have been joint venture partners since just before Kinetiko’s IPO in July 2010 and shareholders in Afro Energy since April 2015.

Under both relationships, the parties were obligated to contribute various amounts toward the operational activities being agreed and approved in South Africa.

But Kinetiko claims this mechanism has, at times, been inefficient and caused delays in exploration and development programs.

Moving ahead, the acquisition will eradicate these inefficiencies and expedite all South African operational activities.

With binding, legal agreements signed, KKO will now issue roughly 598 million consideration shares.

Since the inception of Afro Energy, Kinetiko has been paying the majority of the exploration costs incurred by Afro Energy.

As a result, Kinetiko has loan amounts owing to it which will be satisfied through the reduction of the consideration shares being issued.

On or before completion of the merger, KKO shall facilitate the sale of $6.5 million worth of consideration shares to third-party investors at a 30-day volume-weighted average price discount to the KKO share price.

Once the acquisition is complete, and subject to the price paid for the consideration cash, the beneficial shareholders of Badimo will own roughly 46% of the post-merger issued share capital of KKO.

Kinetiko also plans to engage an independent expert to determine whether the move is fair and reasonable.

Once the merger is complete, Badimo has the right to nominate Johannesburg resident Donald Ncube and chartered accountant Robert Bulder to the KKO board.

Kinetiko’s indicative capital structure post-acquisition is tabled below:

Read More: Kinetiko Energy Ltd moving to 100% stake in South Africa’s Afro Energy

2021-12-23 18:31:00

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

Privacy & Cookies Policy
%d bloggers like this: