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IPSA
IPSA - Abridged pre-listing statement regarding the listing of IPSA on Altx
IPSA Group Plc
Incorporated and registered in England and Wales
Registration number: 5496202
AIM Share Code: IPSA & ISIN: GB00B0CJ3F01
JSE Share Code: IPS & ISIN: GB00B0CJ3F01
("IPSA" or "the Company")
1. Introduction
Currently listed on the AIM market of the London Stock Exchange ("AIM")
in the United Kingdom, IPSA will be dual listed on the Alternative
Exchange ("Altx") of the JSE Limited by way of an introduction and
placing ("the listing") on 19 October 2006. The listing will facilitate
the provision of capital, particularly in respect of southern African
projects, and to provide a channel through which South African
investors may invest in IPSA.
Prior to the publication of this abridged pre-listing statement,
irrevocable commitments to subscribe for 5 499 839 ordinary shares in
IPSA for a subscription price of R5.62 per ordinary share ("the
placing shares") were obtained from selected institutional investors
conditional upon the listing taking place, thereby raising R30 909 095.
IPSA will introduce 54 629 630 ordinary shares currently listed on AIM
and simultaneously place the placing shares ("the placing").
2. Rationale for the listing
IPSA was established to develop, own and manage power generation plants
in southern Africa. The directors of IPSA recognise that the success of
its development and trading strategy and its plans for expansion depend
upon its ability to raise additional capital and that the listing will
provide greater access to South African funds to support its plans for
expansion.
The directors believe that the listing on ALTx will bring the following
benefits:
2.1 Access to South African capital markets
IPSA expects to raise further equity capital in South Africa as
well as the United Kingdom in the future to develop its business,
to fund the cash element of any additional acquisitions and
generally to supplement its working capital requirements. The
directors believe that capital for publicly traded companies
carries a lower cost and is more freely available than for private
companies. Given that the IPSA"s activities are focused in
southern Africa, the directors believe that a listing in South
Africa is appropriate to facilitate the participation of South
African investors in the growth of IPSA.
2.2 Acquisition currency in South Africa
The issue of publicly traded shares as consideration for target
companies and/or assets may be more attractive to vendors than the
issue of non-publicly traded shares (and may be accepted in whole
or in part instead of cash).
2.3 Localisation of shareholder base
The presence of South African shareholders on the IPSA share
register will strengthen the profile of the Company as an Anglo-
South African owner and operator of power generation facilities.
2.4 Facilitation of black equity ownership
The listing will assist IPSA to introduce black economic
empowerment investors as shareholders in the Company.
3. History and nature of business
IPSA has two principal business objectives, being:
3.1 the development and ownership of power generation facilities in
southern Africa in order to sell electricity and/or heat or steam
to companies and communities on commercial terms; and
3.2 in due course, the purchase, refurbishment and operation of
existing power plants in southern Africa.
IPSA was incorporated on 1 July 2005. On 12 September 2005, IPSA
acquired the entire issued share capital of Blazeway Engineering
Limited ("Blazeway") in return for the issue of 24 999 900 new ordinary
shares of GBP 0.02 in the capital of IPSA. IPSA listed on AIM on 20
September 2005 immediately following a private placement of 29 629 630
new ordinary shares of GBP 0.02 in the capital of IPSA, which private
placement was conditional on such AIM listing.
In May 2005, Blazeway had acquired Newcastle Cogeneration Company
(Proprietary) Limited ("NEWCOG"), formerly the southern African power
development business of The Independent Power Corporation PLC, for a
total consideration of GPB875 000. As a result of it"s acquisition of
Blazeway, IPSA also acquired NEWCOG, both of which are subsidiaries of
IPSA.
IPSA, Blazeway and NEWCOG are collectively referred to as "the Group".
The Group has initially targeted specific projects in South Africa and
Swaziland and has various projects under varying stages of development
as detailed in paragraphs 7 and 8 below.
4. Strategy
The Group"s strategy is to create a portfolio of power generation
assets in southern Africa by way of the establishment of subsidiary
companies which will develop and manage power generation assets.
However, where the directors believe it would be advantageous, the
Group will act in conjunction with project partners.
The directors" initial target projects are based on developing "inside
the fence" combined heat and power ("CHP") plants with a nominal
capacity of up to 100 megawatts of electrical output ("MWe") for
industrial companies seeking to obtain pricing predictability for their
energy costs and secure a dedicated supply of electricity and steam. It
is intended that these plants, subject to fuel supply and commercial
considerations, will primarily be gas-fired and produce both heat/steam
and electricity. When located close to a major power demand centre,
such plants may also be able to contribute to the local transmission
system and provide ancillary services (such as emergency power and
voltage and frequency stabilisation) to the grid operator. IPSA is in
the process of constructing its first gas-fired power station in South
Africa.
In due course, the directors intend to extend the business to
participate in larger scale electricity generation projects as
opportunities arise.
5. Market overview and opportunity
Power generation in South Africa is currently dominated by the State-
owned electricity generator and supplier, Eskom, which currently
generates around 95 per cent of the country"s electricity. Eskom has
over 40,000 MWe of nominal generating capacity, primarily coal-?red but
also including nuclear, liquid fuel and hydroelectric power plants. The
balance of current generation is split between various municipalities,
a small amount of self-generation owned by large industrials, such as
those in the mining industry, and three licensed independent power
producers ("IPPs"). Eskom also imports power from the Cahora Bassa
hydroelectric power station in Mozambique and exports power to
Botswana, Lesotho, Mozambique, Namibia, Swaziland and Zimbabwe.
(Source: www.eia.doe.gov)
Approximately 32 per cent of South Africans do not have access to
electricity at home, while peak demand for electricity in South Africa
is forecast to exceed existing power capacity by the end of 2006. The
Government of South Africa ("Government") recognises the need for
competition and for a more rational use of resources. As a result, it
is now Government policy that 30 per cent of South Africa"s power
capacity should be in private ownership by 2010 and that at least 30
per cent of all new capacity constructed over the next five years
should be met by IPPs. In order to facilitate this, Government has
embarked on a programme of structural reform in the regulation of the
power industry and announced on 11 April 2005 a tender for new power
capacity with an in-service date by the end of 2008.
Of particular relevance to IPSA is that Government is seeking to
attract foreign developers and investors with experience in the power
sector. (Source: www.eia.doe.gov)
6. Competitive position
The directors believe that, with the forecast shortfall in generating
capacity in South Africa in the near future and Government"s policy
regarding private sector involvement in the power sector, there will be
further opportunities to develop power plants in South Africa as well
as opportunities to develop capacity in neighbouring countries (such as
Botswana, Lesotho, Mozambique, Namibia and Swaziland) that have
traditionally relied upon South African exports of electricity.
The directors further believe that the Group is well positioned to take
advantage of these opportunities given management"s experience in the
power generation industry and the Group"s existing presence and
contacts in southern Africa.
7. Current projects
7.1 Newcastle Project, South Africa
Through its acquisition of NEWCOG, IPSA has obtained the right to
construct a gas-?red 18 MWe CHP plant to provide up to 95 tonnes
per hour of process steam to the Karbochem site at Newcastle and
has secured sufficient land to permit such construction.
Construction commenced in January 2006 and is now approximately 70
per cent complete. Karbochem is a synthetic rubber manufacturer.
NEWCOG has entered into the key agreements for the Newcastle
Project, namely steam offtake site lease and gas supply. An
electricity offtake agreement is currently under negotiation with
Eskom.
7.2 Coega Project, Port Elizabeth
A memorandum of understanding was signed in February 2006 for the
lease of a 20 hectare site at Coega Development Corporation"s
Industrial Development Zone ("IDZ") at Port Elizabeth, South
Africa, with the intention of developing a fast track combined
cycle gas turbine ("CCGT") project of 800 MWe.
Since signing its original agreement with the IDZ, IPSA has been
in discussion with Eskom and the DME to consider increasing the
size of its proposed Coega Project in order to meet growing demand
for electricity in the Eastern Cape and Western Cape regions.
It is estimated that the revised Coega project will require
capital expenditure in the region of US$540 million to US$600
million. IPSA is in discussions with a number of South African
financial institutions regarding raising the required project
finance and has also taken steps to procure Liquified Natural Gas
("LNG") from Latin America for the combined cycle phase at the
Coega Project.
7.3 Elitheni Project, Eastern Cape
In February 2006, IPSA entered into a Memorandum of Intent to
develop a clean coal technology plant of up to 400 MWe capacity
using coal from the deposit at Elitheni, Eastern Cape. IPSA is
also in discussions to provide a 7 MWe CHP for Da Gama Textiles in
the Eastern Cape using coal from the mine at Elitheni.
IPSA is now proceeding to the environmental impact assessment
phase of the Elitheni Project. IPSA has been informed that a
formal application to the Department of Minerals and Energy for a
mining licence at Elitheni is in the process of being submitted.
IPSA and the mining company at Elitheni also intend to explore the
possibility of using additional coal from the Elitheni reserves
for small CHP projects in Cape Town serving industrial users of
power and steam who have found themselves subject to power
restrictions following the Cape Town power cuts of 2006.
Under the terms of the Memorandum of Intent, IPSA agreed to
advance R1,000,000 of its own funds in the form of a loan to the
mining company at Elitheni to be utilised in the execution of a
drilling programme. However, outside capital has been secured and
IPSA has not as yet been required to provide the loan. IPSA may
choose to increase the size of the plant at Elitheni above the
planned 400 MWe capacity if the preliminary coal reserve reports
are confirmed by the final reports due later in the year.
8. Pipeline projects
8.1 CHP project at Prospecton Basin, near Durban, South Africa.
The Group is in discussions regarding a gas-?red CHP plant to be
located in the Prospecton Basin near Durban and has received
indications of interest in offtake of steam and electricity from
two parties.
8.2 Bagasse-?red CHP project for the Royal Swazi Sugar Corporation at
Simunye, Swaziland
The Group is in discussions regarding a project to construct, own
and operate a bagasse-?red CHP plant for the Royal Swazi Sugar
Corporation ("RSSC"). It is intended that the project will supply
process steam for RSSC"s operations and electricity for sale to
the Swazi Electricity Board under a long-term contract. It is
anticipated that the Group will ?nance the majority of the
project, with a major shareholder of RSSC also participating and
the balance to be sourced from South African investors.
9. Further opportunities
The initial program of investments to be carried out by the Group is
focused on CHP projects selling heat/steam and electricity to
industrial groups in southern Africa. These will typically be projects
with an installed capacity of electricity up to 100 MWe.
IPSA is also currently considering emergency power, isolated generation
or small CHP projects serving large corporations or national
governments in Botswana, Kenya, Madagascar, South Africa and Tanzania.
The directors believe that, in the medium term, the following
opportunities exists.
9.1 Sale of power to Eskom
The Group is in discussions with Eskom with a view to entering
into power purchase agreements for the sale of electricity
capacity and energy to Eskom for distribution nationally in South
Africa from newly developed power plants.
9.2 Other South African industrial groups
The Group is in discussions with a number of other industrial
groups with a view to the development of power "islands" serving
large industrial consumers of electricity.
9.3 Acquisition of existing power plants
The Group may bid for existing power plants offered for sale by
local municipalities or Eskom as part of a privatisation process.
9.4 LNG-?red developments
Certain members of the Group"s management team have experience in
LNG-based power generation. The directors anticipate that some of
the new large-scale power capacity to be installed in South Africa
in the future will be fuelled by LNG sourced from overseas gas
producers.
10. Revenue structure
The Group will achieve long term earnings streams through the supply of
electricity and/or heat/steam to its customers. In general, it is
intended that the length of these supply contracts will range from 10
to 15 years under a "take or pay" arrangement, with an option to extend
this for further periods. Pricing of the electricity and heat/steam for
these supply contracts is agreed with the prospective off-taker during
the initial phases of the project"s development. The Group intends to
identify and enter into projects that are forecast to achieve an
internal rate of return ("IRR") of no less than 20 per cent and, as
such, the pricing for each project is derived as a function of the fuel
supply price and the desired IRR for each project.
11. Audited financial information
The consolidated balance sheet at 31 March 2006 is set out in the table
below.
31 March 2006
GPB"000
Assets
Non-current assets:
Intangible 833
Property, plant and equipment 5 208
6 041
Current assets:
Trade and other receivables 489
Cash and cash equivalents 1 539
2 028
Total assets 8 069
Equity and liabilities
Equity attributable to
equity holders of the parent:
Share capital 1 093
Share premium account 6 640
Foreign currency reserve 3
Retained loss (144)
Total equity 7 592
Current liabilities:
Trade and other payables 477
Total equity and liabilities 8 069
12. Share capital, share premium and debenture capital
The authorised and issued share capital of IPSA before and after the
listing, assuming that all the placing shares are allotted and issued,
is set out below.
Before the placing
GPB
Authorised share capital
150 000 000 ordinary shares of 2 pence each 3 000 000
Total authorised share capital 3 000 000
Issued share capital
54 629 630 ordinary shares of 2 pence each 1 092 592.60
Share premium
On 54 629 630 ordinary shares of 2 pence each 6 640 464.00
Total issued share capital and share premium 7 733 056.60
After the placing GPB
Authorised share capital
150 000 000 ordinary shares of 2 pence each 3 000 000
Total authorised share capital 3 000 000
Issued share capital
60 129 469 ordinary shares of 2 pence each 1 202 589.38
Share premium
On 60 129 469 ordinary shares of 2 pence each 8 647 905.24
Total issued share capital and share premium 9 850 494.62
13. Directors
The full names, ages, qualifications, business address and occupations
of the directors of IPSA are set out below.
Directors of IPSA
Executive Directors
Peter Richard Chief Executive Officer
Stephen Earl (51)
Address 5th Floor, Prince Consort House, 27-29 Albert
Embankment, London SE1 7TJ
Experience Peter began his career at the Boston Consulting
Group advising state-owned companies. He has
advised ministries of ?nance and central banks
in Abu Dhabi, Albania, Kuwait and Saudi Arabia.
He was previously CEO of Tranwood PLC and The
Carter Organisation in New York. In 1994 he
acted on secondment to the World Bank and UNDP
in Bolivia. He has advised governments on
privatisations in Latin America and Eastern
Europe having served as Deputy Chairman for the
United Nations Economic Commission for Europe
infrastructure ?nance group. He became a
director of Fieldstone Private Capital Group in
London in 1994, where he advised cross-border
power sector acquisitions and bids totalling
approximately US$6 billion, involving 5,000 MW
of installed generating capacity. In 1995 he
founded Independent Power Corporation PLC, and
is also a founder and director of Rurelec. He
is the author of a European textbook on cross-
border takeovers. He is an Oxford University
graduate and was a Kennedy Scholar at Harvard
University.
Elizabeth Ruth Shaw Chief Operating Officer and Finance Director
(45)
Address 5th Floor, Prince Consort House, 27-29 Albert
Embankment, London SE1 7TJ
Experience Elizabeth has been involved in the electricity
sector since 1994 when she joined Fieldstone
Private Capital Group. Between 1994 and 2000,
as a director of Fieldstone, she advised on a
number of mergers, acquisitions and disposals
in the electricity industry, both in the UK and
in developing markets. Prior to joining
Fieldstone, Elizabeth was involved in the
?nancing of small to medium sized companies in
the UK, including raising equity for both
listed and unlisted companies. She joined IPC
as a director in 2000 where she is responsible
for business development and ?nance. She is
also the financial director and founder of
Rurelec. Elizabeth is a graduate of Exeter
University. Elizabeth is also an executive
director of NEWCOG.
John Michael Eyre Technical Director
(52)
Address 5th Floor, Prince Consort House, 27-29 Albert
Embankment, London SE1 7TJ
Experience Mike is both a Chartered and European Engineer
and has extensive experience in project
management and development in the power sector.
As a Central Electricity Generating Board
engineer, he spent part of his early career on
secondment to Eskom of South Africa with
responsibility for the maintenance of a
portfolio of 26, mainly coal-?red, power
plants. He subsequently became Head of
Engineering Quality with National Power PLC in
1992, where he developed and implemented policy
for risk management of its UK assets as well as
leading the technical due diligence for
international acquisitions of power plants. In
1996 he founded Lloyds" Register International
Power Group, which advises developers on CHP
and renewable energy projects. He is also a
founder and director of Rurelec. He joined IPC
in 2002 where he is currently leading two
green?eld development projects for gas-?red
plants. He was a member of the United Nations
group which set the foundations of the United
Nations emissions trading scheme.
Independent Non-executive directors
Stephen Thomas Chairman
Hargrave (49)
Address 47 Lamb"s Conduit Street, London, WC1N 3NG,
United Kingdom
Experience Stephen has been chairman of a number of AIM-
quoted companies and since 2000 has been
chairman of Invox PLC, a provider of home
gaming products and internet services quoted on
AIM. After initially working in banking and
investment management, he spent two years from
1987 as a ?nancial journalist with the London
Evening Standard before leaving in 1988 to join
United Newspapers PLC as head of planning. He
is also chairman of two unquoted companies, TP3
PLC and London Farmers" Markets Limited, and is
a board member of Origin Housing Group, a
registered social landlord. He was educated at
Oxford University and the University of East
Anglia.
Neil Bryson (58) Director
Address Overdale
Sychnant Pass Road
Conwy
LL32 8RE
Experience Neil graduated in Geology from the University
of Durham and has spent over 35 years in the
energy sector. Neil worked as an exploration
manager and chief coal geologist in his early
years before taking up a role as a technical
coal specialist to the UK"s Department of
Energy advising on coal industry matters. In
1987 he acquired a 50% interest in Faldane
Limited, owner of the largest private coal mine
in Scotland, and became its Commercial
Director. In 1988 he was one of the founder
directors of Lakeland Power Limited, developer
and owner of the first gas-fired independent
power generation project in the UK. Since 1991
Neil has been running his own company, Balmyle
Limited, which provides consultancy and interim
management services, mainly to the power
sector.
James Glynn West Director
(59)
Address 5th Floor, Prince Consort House, 27-29 Albert
Embankment, London SE1 7TJ
Experience James is formerly a managing director of Globe
Investment Trust PLC. Subsequent to this he
joined Lazard Asset Management as Chief
Executive in 1994. He was also a managing
director of Lazard Brothers & Co Ltd, where he
held full responsibility for the bank"s
investment operations. He currently holds a
number of non-executive chairman roles,
including Gartmore Fledgling Trust PLC, Jupiter
Second Enhanced Income Trust PLC and Rurelec.
He is also a non-executive director of a number
of other companies including Candover
Investments PLC, British Assets Trust PLC and
Global Natural Energy PLC.
14. The listing
The JSE has granted formal approval for the listing of 60 129 469 IPSA
ordinary shares on Altx on 19 October 2006.
15. Documentation
A pre-listing statement will be issued today, 18 October 2006, in
accordance with Section 6 of the Listing Requirements of the JSE. The
pre-listing statement is available in English. Copies may be obtained
from the registered offices of IPSA at Prince Consort House, 27-29
Albert Embankment, London SE1 7TJ, and from the transfer secretaries,
Computershare Investor Services 2004 (Proprietary) Limited, 70 Marshall
Street, Johannesburg, 2001.
18 October 2006
Investment bank and sponsor
STANDARD BANK
Corporate law advisers
WEBBER WENTZEL BOWENS
Auditors and reporting accountants
GRANT THORNTON UK LLP
AIM nominated advisor
NOBLE & COMPANY LIMITED
Broker to the private placing
HICHENS, HARRISON & CO PLC
Date: 18/10/2006 09:06:43 AM Produced by the JSE SENS Department
