Africa New Energies uses new technology in a frontier area with a management team from a renewable energies background. This means that it would be out of mandate for traditional sources of funding such as private equity, a listing or institutional risk investment. The company has needed to be innovative in finding the funding it needs.
Africa has responded in this challenge in three ways
By using alternate funding techniques, innovative technology and local knowledge, Africa New Energies is showing that the oil and gas sector is not closed
Working with the local community and using their inherent knowledge of the land
By working with the local community and creating a public private partnership with the Namibian government, it was ensured that both Africa New Energies and the community would benefit. For Africa New Energies it meant avoiding high upfront commitments of initial exploration.
South African Venture Capital Companies
One of the main challenges to the economic growth of small and medium-sized businesses and junior mining exploration is access to equity finance. To assist these sectors in terms of equity finance, the South African government has implemented a tax incentive for investors in these enterprises through a venture capital company (VCC) regime.
ANE’s team have marketable skills and have used these on a tactical basis to help cover overheads. These projects have included VAT recovery consulting services and IT development.
ANE’s shareholders were funded for the initial pre-feasibility study into its universal electricity access strategy, on which the company’s strategy was built, by the Zurich-based African Innovation Foundation, where ANE was the first recipient of the African Innovation Foundation Award.
ANE is now applying for a number of other funding concessions, particularly in South Africa.
One of the biggest risks a pre-revenue exploration company faces is that it runs out of time. Time is an explorer’s greatest asset.
Competition for acreage puts pressure on fiscal terms and spending commitments
ANE’s technology enables it to target ultra-frontier unexplored onshore acreage at a tiny fraction of the cost of the competition, who would not be interested in such unfashionable and unknown targets
Listed companies face impatient shareholders many of whom are day trades who thrive on volatility
ANE solves this problem by not being listed and the tax breaks encourages patience as the generous tax breaks are only available to investors if they stay in the investment for three years
Governments demand expensive drilling programs within a narrow time window
The Namibian government, ANE and its community stakeholders solved this by offering a modest exploration program in the first four-year term of the project – no wells to be drilled. It was also the first time in history that no seismic program had been promised on such a large concession. The program was completed within 15 months of the license being awarded
Avoiding onerous 3rd party supplier commitments
ANE employs a technique called trigger point project management