Sasol agrees to sell 30% interest in ROMPCO to an acquisition vehicle

MOZAMBIQUE- Energy and chemical company Sasol South Africa (SSA), a subsidiary of Sasol, has concluded a sale and purchase agreement (SPA), to sell a 30% equity interest in the Republic of Mozambique Pipeline Company (ROMPCO), subject to pre-emptive rights by other shareholders.

In a statement, Sasol said ROMPCO is a joint venture between SSA (50%), Companhia Mocambiçana de Gasoduto S.A. S.A.R.L (CMG) (25%) and South African Gas Development Company (SOC) Limited (iGas) (25%).

The joint venture owns the 865km gas transmission pipeline from Mozambique to South Africa.

The company said it has agreed to sell the 30% interest in ROMPCO to an acquisition vehicle beneficially owned by a consortium comprising Reatile Group Proprietary Limited and the IDEAS Fund, managed by African Infrastructure Investment Managers Proprietary Limited (AIIM).

The proposed transaction is subject to the waiver or exercise of pre-emptive rights held by iGas and CMG, as the other shareholders in ROMPCO.

The proposed deal is expected to become effective during the second half of the calendar year 2021.

Sasol group chief financial officer Paul Victor said: “The Sale Shares will, subject to certain adjustments, be sold for a consideration comprising an initial amount of US$2.93 billion and a deferred payment of up to US$70.8 million payable if certain agreed milestones are achieved by June 30, 2024”.

Victor added that Sasol remains fully committed to its operations in Mozambique, which continue to be integral to its gas strategy.

According to Sasol, it will retain a 20% shareholding in ROMPCO and will continue to operate and maintain the pipeline in terms of the commercial agreement between the two entities, which is independent of the proposed transaction.

Sasol’s agreements with ROMPCO to transport gas to Secunda are unaffected, and the tariffs remain as per the said agreements, which were approved by the National Energy Regulator of South Africa (NERSA),” it said.

“The Sale Shares will, subject to certain adjustments, be sold for a consideration comprising an initial amount of US$2.93 billion and a deferred payment of up to US$70.8 million payable if certain agreed milestones are achieved by June 30, 2024”

Sasol added that the proposed transaction would also be subject to the fulfillment of customary conditions precedent, including, among others, competition/anti-trust approvals in the relevant jurisdictions and all necessary consents of third parties, including government authorities.

The Industrial Gas Users Association of Southern Africa estimates a 50% supply deficit of natural gas in South Africa for industrial uses.

Natural gas makes up 24% of global energy consumption, growing at a rate of approximately 5% per annum.

In contrast, natural gas in South Africa is the smallest contributor to South Africa’s primary energy mix, constituting only 3%, having experienced zero growth over the last seven years.

Gas can be used in electricity generation with materially lower carbon emissions, toxic emissions and environmental impacts when compared to coal.

New sources of gas supply transported through the ROMPCO pipeline could be key to relieving the pressure currently faced by Eskom, and replacing capacity lost through the decommissioning of ageing coal plants in and around Mpumalanga.

The proposed transaction paves the way for further capital raising and investment in the ROMPCO pipeline to facilitate the crucial expansion of imports.

This will serve to unlock these opportunities for industrialization and the furtherment of cleaner power generation.

The investment in ROMPCO also marks a significant milestone for Black Economic Empowerment, with the Reatile-AIIM Consortium having black ownership of more than 60%.

The deal will also see Reatile grow its already substantial presence in the energy and petrochemical sectors, in line with the ambitions of the Department of Trade and Industry’s Black Industrialist Policy.

Liked this article? Subscribe to DealStreet Africa News, our regular email newsletter with the latest news, deals and insights from Africa’s business, economy and more. SUBSCRIBE HERE

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.