Copperbelt Energy Corp., which supplies power in Zambia to Glencore Xstrata Plc (GLEN) and Vedanta Resources Plc (VED), plans to raise as much as $150 million through loans and equity to expand and refinance existing debt.
Loans of as much as $100 million from German and Dutch development-finance institutions will be completed in three months and will probably have 10-year maturities, Michael Tarney, corporate development managing director at the Lusaka-based company, said in an interview on July 26.
“We still think that is the safest form of lending at the moment,” he said in Lusaka, capital of Africa’s biggest copper producer, on July 26. “The terms you get from the development-finance institutions are still better than bonds.”
Copperbelt Energy, known as CEC, will also try and raise about $50 million in a rights offer this year as it seeks to become the biggest privately owned power company in sub-Saharan Africa, where only about one in four people have access to electricity, according to the World Bank. U.S. President Barack Obama on July 1 unveiled a $7 billion plan to double access to power in some countries in the region.
CEC tested the market for a bond sale two to three months ago, and concluded that a debt sale would be more expensive than development-finance loans and its maturity would also be shorter, Tarney said. Bonds may be sold at a later date, he said.
The debt funding deals are with FMO, the Dutch development bank, and Deutsche Investitions- und Entwicklungsgesellschaft, said Tarney. Some of the proceeds will go to refinancing a bridge loan CEC has with South Africa’s Standard Bank Group Ltd. (SBK)
The financing will probably have an interest rate of the London Interbank Offered Rate, or Libor, plus 5 percent to 6 percent, Tarney said. The rate that London-based banks would pay for three-month loans in pounds was 0.509 percent on July 26, according to the British Bankers Association.
CEC owns power plants and distribution lines in Zambia, and was named as the preferred bidder for electricity assets in Abuja, Nigeria, in February. Through CEC Africa Investments Ltd., a unit set up to invest in projects outside Zambia, the company plans to complete a deal to invest in Sierra Leone’s electricity system this year.
Copperbelt Energy is in talks with “long-term infrastructure funds” from South Africa, the U.S. and the U.K. about the sale of stakes in its CEC Africa unit, said Tarney. The company plans to sell shares to the public in the unit in about five years, he said. The company may end up owning a minority stake in CEC Africa after bringing in additional investors, Tarney said.
Shares of Copperbelt Energy closed trade at 0.74 kwacha on the Lusaka Stock Exchange today, according to the bourse’s Website.
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