Kibo Energy LON:KIBO, the AIM-listed, Dublin-headquartered company focussed on the development of renewable energy projects in Southern and Eastern Africa and the UK has had a busy year.
Kibo started life in 2008 as a mining company, involved in gold exploration and then moved into coal both in the extractive side as well as the power generation side. It spent the first decade of its existence developing three thermal coal power plants in Mozambique, Botswana and Tanzania.
Its focus – and flagship project – was the Mbeya coal mine in Tanzania, a 130 million tonne asset. It also had the Rukwa coal project, which it operated in joint venture with Mzuri Energy. The project had a JORC-compliant resource of 135 million tonnes of thermal coal and was being developed into a coal-to-energy project.
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Kibo was also involved in uranium, through its Mbeya project which boasted a 1.2 million tonne resource.
However, management had an almost Pauline conversion to the other side of the debate last year and took the decision to exit the coal industry completely and pursue a cleaner, greener future in renewable energy. The writing was on the wall to some extent when the company changed its name from Kibo Resources in 2018 to Kibo Energy to reflect its evolution from a mining company to an energy provider in sub-Saharan Africa and started signalling the benefits of sustainable energy solutions in Africa.
Unpopular choice for Kibo Energy shareholders
To say the exit from coal was an unpopular decision with some of Kibo’s shareholders is an understatement. Many smaller shareholders thought Kibo’s sale of its coal asset was a disaster as they held potential for significant future revenues. The AIM-listed, multi-asset green energy development company also had difficulty shifting its assets – despite being in coal, coal was the bête noir of the energy industry, with even the oil and gas sector looking down with a sneer at the pollution coal-burning produced.
The Johannesburg dual-listed energy company found it a hard sell, due to the value in the assets being appending the mines with modular coal-fired power stations, and in the current financial climate, there wasn’t a lot of appetite from lenders and investors to finance the construction of new coal-fired power stations. Kibo’s thermal coal (as far as coal is concerned) was good stuff – however the mines were all remotely located, so to develop them an investor would either have to put in significant electricity transmission infrastructure to evacuate any power generated, or build new road and rail networks to export the coal – the governments in that part of the world also had limited funds, so the onus of infrastructure development falls on the private, not public sector.
The USD30m price tag that Kibo’s management have put on their coal assets represents fair value according to management, but to date little progress has been made mainly for the same rationale why Kibo exited coal in the first place – namely that the global demand for coal is declining as countries transition to renewable energy; the cost of developing new coal mines is high and the risks are significant, and; the environmental impact of coal mining is a major concern.
Although Kibo seem to have grasped the zeitgeist of the prevailing transition from hydrocarbons to renewables and is pivoting towards a more sustainable future, the company is still left with a series of USD30m holes in the ground in remote parts of Africa, which it had for years sunk shareholders money into, and has made little progress in getting a return from.
Forging a new path with renewables
But moving on from the huge African elephant in the room, Kibo has been busy forging a new path, with investments into waste-to-energy, biomass, and still retains a hand in mining. The company seems to be all-in on the renewable story. One principal area it is developing is to build a network of reserve power projects in the UK. If it has success with the UK, it hopes to replicate the development of a reserve power network in South Africa.
These projects will provide backup power for the UK grid during periods of high demand, or when there is a disruption to the supply of electricity. The company is also looking a getting into the battery storage game in the UK and using anaerobic digestion to convert organic waste to bio-methane, which it will export and generate power from at its site in Merseyside.
The company is also exploring opportunities for waste-to-energy in South Africa converting end-of-life plastic waste into heat and energy through pyrolysis and having spent a considerable time of its existence in Tanzania, is now prospecting for battery minerals in the country. Tanzania has significant energy issues – a large-part due to the creaking, colonial-era transmission and distribution system. Although the country (like many in Africa) has huge potential, it is stymied by irregular and unreliable power distribution, to wit Kibo is developing a microgrid in the country to serve arterial areas with economic potential with reliable power.
Diversified revenue
The firm’s mining heritage has led it down the route of reprocessing tailings from existing and historical mines in gold-rich South Africa, which the company hopes can produce a low-cost, diversified stream of revenue.
Kibo Energy today is a different company to what it was pre-Covid-19. It has energetically entered a number of new markets in several countries which it really doesn’t have a huge amount of experience in. However, it has switched horses and is now (tenuously) on a new mount galloping forward in the right direction, as opposed to goading a nag that was on its way to the knacker’s yard,It is truly a brave move by management, but it will take a while to work out whether the gamble has paid off. If it doesn’t, the company may still have a shedload of coal in its portfolio. The company’s management are confident that the new course it has set will see Kibo have a long and sustainable future, and academically you can’t argue against that. Whether the company has the ability and luck to make it happen practically is another question, and as such Kibo is a very speculative investment.
Kibo opened trading at 0.055p today (13th June) and has offered a -53.7% year-to-date return with a -60.7% one-year return. Shares have ranged between 0.05p and 0.22p over a 52-week period. Five years ago, Kibo shares were being traded at 4.775p and back in November 2010 Kibo Resources was trading at 63.75p. The company has a market capitalisation of GBP2.2m.
