CDC Globeleq completes acquisition of controlling stake in the Songas project, Tanzania
6 May 2003
CDC Globeleq, the emerging markets power company, has finalised the acquisition of a controlling stake in the Songas power project in Tanzania. This transaction marks another important step in CDC Globeleq’s strategy to becoming the leading emerging markets power company.
CDC Globeleq is increasing its existing minority share in Songas Ltd to a controlling interest. The goal of the Songas project is to develop Tanzania’s gas and electricity industries by extracting local natural gas and converting it to a clean, reliable source of power. Upon completion, targeted for May 2004, Songas will meet 20% of Tanzania’s electricity demand, supplying power to Dar es Salaam and the Tanzanian national grid.
The Songas project comprises the construction of a gas processing plant on Songo Songo Island; the laying of a 225 km pipeline from the island to Dar es Salaam; and the acquisition and conversion, from oil to gas, of Ubungo power station, a 110 MW power plant in Dar es Salaam. CDC Globeleq will assume responsibility for completing the project and operating the power plant, which will supply the national utility, Tanzania Electric Supply Company (Tanesco), under a twenty-year agreement. It is intended that the pipeline will also supply gas directly to industrial and commercial customers.
CDC Globeleq has worked closely on the transaction with the Tanzanian Government and the principal project lenders, the World Bank and the European Investment Bank (EIB). The other shareholders in Songas are Tanzanian Development Finance Limited, the Tanzanian Petroleum Development Corporation and Tanesco. CDC Globeleq will also investigate the possibility of selling a share of its interest to local institutional investors, since it believes this can prove an attractive long term holding for domestic savers.
This acquisition combined with its purchase of Kelvin Power Ltd (a 600 MW coal-fired power station serving the city of Johannesburg) completes its purchase of two major African electricity generation assets, totalling 710 MW, with a transaction value of US$ 337 million.
Commenting on the transactions, Bob Hart, CEO of CDC Globeleq, said: “These transactions represent an important milestone for our business. We are pleased to have secured the support of the Government of Tanzania, World Bank and EIB in our acquisition of Songas, and look forward to continuing an excellent relationship with the Tanzanian authorities to achieve mutually beneficial outcomes. Songas and Kelvin are good quality assets, and we are excited about completing the development programmes and bringing these power stations to their full potential. We are delighted to have retained all of the excellent workforce of these two companies, as they move into our ownership”.
On behalf of the Government of Tanzania, Daniel Yona (MP), Minister for Energy and Minerals said, “The Government is very excited about CDC Globeleq’s involvement and long term commitment to the Tanzanian Power Sector. We look forward to the successful completion of the Songas project, a crucial part of the Government’s energy strategy, and welcome CDC Globeleq’s proposed initiative to attract local institutional investors into the project.”
NOTES TO EDITORS
CDC Globeleq - Background Information
CDC Globeleq is positioning itself as the leading emerging markets power company, creating value for its shareholder and co investors; serving the power needs of people and industry in the emerging markets; and helping to solve a critical constraint to economic development.
CDC Globeleq is actively engaged in acquiring and operating generation assets which are in or close to production. It will also invest in a wider range of projects, including greenfield developments, and will work in partnership with relevant Government authorities to develop strategies for efficient ways of bringing badly needed power to consumers.
CDC Globeleq currently holds investments in 22 power assets in 17 developing countries, with a total gross generating capacity of 8399 MW, of which 1800MW is owned on an equity megawatt basis.
Over the past several months, CDC Globeleq has emerged as an active international power company in the developing world. Earlier this year, CDC Globeleq announced its purchase of two state-of-the-art power plants in Bangladesh, having a total generating capacity of 810 MW. This past March, CDC Globeleq acquired a 95 per cent economic interest in Kelvin, a 600 MW coal-fired power station serving the city of Johannesburg, South Africa.
CDC Globeleq is vigorously pursuing new investments in the emerging markets, when virtually all other international power companies are seeking to exit. In addition to making further acquisitions, CDC Globeleq will work to mobilise third party capital at the project, regional and global level.
The management team is headed by Bob Hart, who has invested in, developed and operated power projects throughout the world over the last quarter of a century. In the last few months, the company has tripled its professional staff, recruiting from the outstanding pool of international experts currently available, and retaining the experienced teams working in the companies and assets it acquires.
CDC Globeleq - East Africa and South Africa Interests
The Songas and Kelvin projects form part of CDC Globeleq’s Africa strategy to acquire controlling stakes in strategic emerging market assets
The Songas project offers the potential for CDC Globeleq to achieve synergies in meeting the need for electricity in the wider East Africa region. The company already owns a stake in the Tsavo Power Company in Kenya. CDC Globeleq is also in advanced discussions with the Ugandan Government about the privatisation of its electricity distribution company.
The acquisition of the 95% economic interest in Kelvin power plant in South Africa was completed on March 27, 2003. The other 5% economic interest is held by Global African Power, a black empowerment partner. The electricity sector in South Africa is currently in the process of being restructured and the Kelvin plant is the first significant independent power project in the country. Thus, CDC Globeleq is in an excellent position to expand its business in South Africa, as more generation assets move into the private sector.
