Renergen ready to tap into energy opportunities across Africa
MORE firms are cashing in on Africa’s nascent alternative energy sector and a special purpose acquisition company heads to AltX on Tuesday to yoke investor appetite for energy projects. Business Times asked Renergen CEO Stefano Marani . . .
What’s the significance of being a special purpose acquisition company?
The primary purpose is to list a cash shell that can then go out and make acquisitions as per its mandate. The advantage of doing this, as opposed to finding an acquisition and then raising money after the fact, is that you save a lot of time and you’ve got a better negotiating stance because you know that you already have the capital behind you.
On AltX you need much less cash than if you were going to the main board of the JSE. But wouldn’t it be better to have more than just the R74million you’ll have in the kitty when you go public?
Raising R500-million [the minimum for a special purpose acquisitions company on the main bourse] when you’re the first of anything is going to be more difficult. Investors like to dip their toes in before they dive in head first. Going out and raising R500-million now would mean a lot more cash sitting on the balance sheet that’s lying idle. So from our perspective we’ve got the foot in the door, we’ve got the initial cash and as and when we find the right acquisition, we’ve got supportive investors. I don’t think that R74million is any limitation on our
business plan whatsoever.
Mazi Capital is the biggest shareholder with 67.8%. It is an independent, blackowned fund-management firm. Would this be a big benefit to Renergen in the future, having strong BEE credentials?
You’ve got to look at Renergen’s bigger picture. Yes, energy is generally a regulated industry and to the extent that having a major black shareholder is an advantage, if the right opportunity presents itself we will make use of it — we’d be silly not to. But the bigger picture for Renergen is delivering energy across the continent, where BEE is not necessarily any benefit.
Right now, we need to go about doing our job in identifying assets, putting the right package together and making the first acquisition.
The freefloat will be very small when you list – 86.4% is held by Mazi, Sanlam Investment Management, BCI, yourself and chief financial officer Clive Angel. Are there plans to increase that in time?
We will definitely increase the freefloat. Subsequent to the press coverage we’ve been getting on the back of the Sens announcement this week there have been a lot of inquiries. So it seems that this has piqued a lot of interest and as and when we’re ready to make the first acquisition, we will definitely entertain the idea of increasing the freefloat.
What kind of projects are you going to invest in?
There are two that are a little bit closer in the pipeline than others. We’ve got two years to make the first investment. This is a key factor behind a special purpose acquisition company: if after two years we haven’t made an investment that the shareholders have approved, the money has to be returned. One is a natural gas asset that is a little bit closer to home . . . it’s very close to production, the busi- ness plan looks very appealing. Other assets are a little further from home. There is a hydroelectric opportunity, and the other assets are a little bit further away, so we as management need to do a little bit more due diligence before we start to make any noises as to what those assets look like.
Is solar on the cards?
We’ll never say no to any opportunity that is profitable. In the context of the continent there are a number of countries where the power tariffs justify solar completely . . . and in those jurisdictions solar makes a lot of sense. There hasn’t been anything [in South Africa] at this stage that has come across our radars that has piqued our curiosity. We’re not overly interested in completely greenfields projects — we are looking for businesses that are either in production or very close to production.
You’re the CEO of an oil and gas exploration company, Molopo. How are you going to manage to head both?
That was presented to the JSE and it was cleared. From a time perspective, the directors of the special purpose acquisition company operate on the basis that there is a cash pool behind them, but none of the directors draws a salary. We identify opportunities, we work on these opportunities and once the first acquisition has been made, then it becomes a case of the company [being] restructured and it would become a full-time role.
What figures have you used in your models as to the value of the projects into which you would invest?
Those are in the business plan, but it is a little too early to speculate as to the market cap — a lot of it is going to be driven on the back of the first acquisition.
But what about the size of the market — the deal pipeline out there for you?
One of the key features of the special purpose acquisition company is that it may not have actually discussed or entered into any negotiations with regards to valuations on its pipeline. As a result, we are not yet at liberty to disclose the valuations or kinds of figures we’re looking at for acquisitions at this stage.
But that makes it a tricky proposition for a retail investor?
That is the very nature of a special purpose acquisition company. You are backing a team, you’re giving them some collateral and on the back of that they will be going out, sourcing opportunities, and then you have the right to either put in additional capital, or choose to exit your stock.
Who is on the team?
We have Russell Broadhead — the independent nonexecutive [who has] over 25 years of experience executing projects on the continent. We have Eddie Cooke, who is one of the foremost natural gas experts in the country, a serial entrepreneur. We’ve got Mbali Swana, our chairman, a lot of experience in executing very large-scale projects both in South Africa and abroad. Then Clive Angel — seconded from Integrated Capital, he’s got a background in private equity. And then I headed up the African fixed-income division for Morgan Stanley for several years and I’ve been doing business in Africa since well before 2005.