iGAS Energy and CMG exercise rights to up stake in Mozambique pipeline company ROMPCO

MOZAMBIQUE – Onshore oil and gas exploration iGAS Energy Plc. in partnership with Companhia Mocambiçana de Gasoduto (CMG) declared that they have exercised their pre-emptive rights to acquire a 30% equity stake in the Republic of Mozambique Pipeline Company (ROMPCO) pipeline valued at US$293 million.

ROMPCO is a joint venture between Sasol South Africa (50%), CMG (25%) and South African Gas Development Company (SOC) Limited (iGAS) (25%).

The joint venture owns the 865-kilometre gas transmission pipeline from Mozambique to South Africa

This decision is the culmination of a public statement issued by Sasol on14 May 2021 that it had concluded a sale and purchase agreement (SPA), to sell a 30% equity interest in the ROMPCO, subject to pre-emptive rights held by iGas and CMG as other shareholders.

iGas is a subsidiary of the Central Energy Fund (CEF) while CMG is a subsidiary of the Empresa Nacional de Hidrocarbonetos, EP (ENH).

The successful conclusion of the SPA will position iGAS and CMG as majority shareholders, as their equity shares will increase from 25% each to 40%, respectively, with Sasol holding a 20% minority shareholding. The transaction will be fully funded from past and future dividends generated by ROMPCO itself.

Commenting on the decision to exercise iGAS pre-emptive right, the CEF Group CEO, Dr Ishmael Poolo said: “There was a concerted effort to fast track the acquisition of these shares, which is a hallmark of the group’s investment strategy in the energy value chain geared to reignite the South African economy and create much-needed jobs. It also furthers the mandate held by iGAS for the development of gas and gas infrastructure in Southern Africa.”

He added that: “The acquisition of these shares also heralds a new era in fostering partnerships as well as laying a solid foundation to address the challenges that lie ahead in the security of South Africa’s energy future.”

The Chairman and Chief Executive Officer of ENH, Estevão Pale, said that besides the foreseen economic impact, CMG and IGas joint decision to exercise the pre-emptive right represents a new chapter for ROMPCO, “as it is an enabler for a much wider scope of cooperation between ENH and CEF.”

The ENH CEO further clarified that having both governments as majority shareholders of the cross-border pipeline is strategic, since the pipeline is the single source of gas to the South African market, and gas is the immediate alternative supplier of cleaner energy.  

The chairperson of the Central Energy Fund, Ayanda Noah added: “The IRP 2019 identifies closer co-operation between governments in the region as a critical step in unlocking the flexibility that gas introduces into South Africa’s energy mix. A greater participation in this asset will be an important step in realising that co-operation objective, as well as bolstering the region’s transition to a low carbon economy.”

South Africa depends on coal to generate most of its electricity and ranks as the world’s 12th-biggest producer of greenhouse gases and the nation’s energy plans include the procurement of power from sources including renewable technologies and natural gas.

The sale will aid Sasol’s ongoing debt reduction efforts as the group had previously indicated that it intended to raise US$400 million to US$500 million with asset sales by year-end.

Sasol’s debt predicament during the early stages of the outbreak of the Covid-19 pandemic had briefly raised the possibility of the group raising as much as US$2billion in a rights issue, which has since been shelved after a stronger-than-anticipated performance in the six months to end-December 2020.

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