San Leon has announced a conditional investment of US$2 million as well as an option to conditionally invest a further US$6.5 million in the equity of Energy Link Infrastructure (Malta) Limited (ELI), the company which owns the Alternative Crude Oil Evacuation System (ACOES) project. The equity being conditionally purchased and the equity that may be purchased via the option are existing equity interests in ELI owned by Walstrand (Malta) Limited, ELI’s largest shareholder.
As previously announced, the ACOES is being constructed to provide a dedicated oil export route from OML 18, comprising a new pipeline from OML 18 and a floating storage and offloading vessel (“FSO”). Once commissioned, which is expected to be during the second half of 2021, the system is expected by Eroton to reduce the downtime and allocated pipeline losses currently associated with the Nembe Creek Trunk Line (NCTL), to below 10%.
The conditional investment will comprise of the Company investing US$2 million for 1.323% of ELI, with San Leon simultaneously receiving an option to conditionally purchase a further 4.302% of ELI for US$6.5 million (together the “Further Investment”). The total consideration payable should the Option be exercised in full will therefore be US$8.5 million and will be payable by the Company in cash. Any investment pursuant to the Further Investment will be conditional on obtaining the consent of Guaranty Trust Bank PLC (GTBank) who currently hold a pledge over the shares held by Walstrand (Malta) Limited in ELI. The exercise of the Option will be at the sole discretion of the Company, although such exercise will be subject to the consent of GTBank.
As previously announced, the Company currently holds a 10% equity interest in ELI. Following the completion of the Further Investment, San Leon will own a maximum of 15.625% of ELI, assuming that the Option is exercised in full. San Leon has also previously made shareholder loans to ELI totaling US$15.0 million which bear a coupon of 14% per annum.
Under the terms of ELI’s senior debt facility with GTBank, the lender has a charge over all of ELI’s assets and, as further security, each shareholder in ELI (including San Leon in relation to its current shareholding in ELI) has pledged their shares in ELI to the lender. The terms of the pledge are that the shares in ELI cannot be transferred or otherwise utilised without the lender’s consent. All shares in ELI that will be acquired pursuant to the Further Investment will be returned to this pledge.