AIM-listed ADM Energy has entered into a non-binding memorandum of understanding (‘MOU’) with Trafigura, a market leader in the global commodities industry whose core business is the physical trading of oil and petroleum products and metals and minerals, to develop investment opportunities in the African energy sector.
Under the terms of the MOU, it is the intention of ADM and Trafigura (together, the “Parties”) to create a strategic alliance where ADM will act as the sponsor for investment opportunities in the African energy sector (“Projects”) which will be presented to Trafigura for consideration as a trading counterparty, or financing provider.
ADM, as principal, will be responsible for originating, analysing, developing, structuring and negotiating the Projects with counterparties and presenting the Projects to Trafigura for further evaluation. Subject to a Project being approved by Trafigura (“Approved Project”), the Parties will negotiate a definitive agreement for each Approved Project.
Trafigura will be entitled to provide ADM with conditional pre-financing of up to US$100 million for the acquisition or development of Approved Projects. It is anticipated that Trafigura may subscribe for up to US$20 million in convertible loan notes in ADM as definitive agreements and project funding for Approved Projects are agreed.
Subject to any financing provided, Trafigura will have the exclusive rights to market the crude oil produced by the Approved Project on market terms and for an agreed period. In addition, ADM and Trafigura will cooperate to structure and arrange complementary debt and equity funding for approved projects as may be required to supplement any financial support provided by Trafigura.
The MOU, which has a term of 12 months unless terminated earlier by mutual agreement, constitutes a statement of current intentions and is not legally binding on ADM or Trafigura. There is no certainty that projects originated by ADM will be approved by Trafigura for financing and, as ADM is currently an Investing Company pursuant to the AIM Rules, the obligations it may be required to perform under any eventual agreement, if entered into, may trigger a reverse takeover pursuant to Rule 14 of the AIM Rules.
Osamede Okhomina, CEO of ADM, said:
‘I have enjoyed a long relationship with Trafigura and this Memorandum of Understanding is an endorsement of the Company’s strategy, signalling a new stage of development for ADM. We have identified a number of excellent investment opportunities in Nigeria and West Africa. With our extensive network, and the potential access to capital this MOU gives to ADM, we believe the Company is well positioned to capture future opportunities.’
James Josling, Head of Africa Energy Trading for Trafigura, said:
‘Trafigura has been active in Africa for more than 20 years, helping African producers and refiners of oil, metals and minerals finance their operations, manage their exports and ultimately connect with their end customers around the world. Today’s signing shows our intention to work with an upstream investing company that has strong roots in Nigeria and West Africa, and is well placed to develop its potential while being committed to practicing good corporate governance as evidenced by ADM’s London quotation.’