Savannah Energy PLC, the British independent energy company focused around the delivery of Projects that Matter, is pleased to announce its audited results for the year ended 31 December 2022.
The Notice of the Annual General Meeting ('AGM' or 'Meeting') is available to download from the Company's website (www.savannah-energy.com). A copy of the 2022 Annual Report and Accounts ('Annual Report') will be available to download from the Company's website later today. The Notice of the AGM has been posted to those shareholders who have elected to receive postal copies.
Andrew Knott, CEO of Savannah Energy, said: '2022 was another year of significant progress and growth for our company. Our Total Revenues1 grew by 26% to US$290m, our Adjusted EBITDA2 rose by 27% to US$222m. To put these numbers into context, since the announcement of our decision to acquire our Nigerian business in 2017, it has delivered six consecutive years of Total Revenues1 growth at a compound annual growth rate of 21%. This growth has seen us more than double the number of customers the business serves and increase the share of Nigeria's thermal power generation capacity that it supplies from 10% to 24%. Our performance against key industry sustainability metrics relating to HSE performance, carbon intensity, senior management gender diversity and local employee ratios remain industry leading.
Looking forward to the rest of 2023, I am confident in where we are as a business. Key projects we are focused on completing include: (1) the closing of our proposed acquisition of PETRONAS' assets in South Sudan in Q3; (2) at least one further hydrocarbon asset deal; (3) reaching our target of having up to 1GW+ of renewable energy projects in motion by end of year; (4) the flow testing of our R3 East development in Q4 and (5) the refinancing our Nigerian debt.
I would urge shareholders to spend time reading through my CEO Letter to Shareholders and the 'Why we do what we do' section of the Annual Report which discuss our corporate purpose and associated core beliefs which serve to underpin our hydrocarbons AND renewables strategy and business model. They are essential reading for anyone trying to understand what Savannah is, where we are going and why.
I would like to express my gratitude to all of those who contributed to our success in 2022 - my incredibly dedicated and passionate colleagues, our host governments, communities, local authorities and regulators, our shareholders and lenders, and our customers, suppliers and partners. Thank you all.'
Post-year End Operational Update
Following the signing of two new renewable energy agreements post-year end, Savannah currently has up to 525 MW of hydroelectric, solar photovoltaic and wind projects in motion in Cameroon and Niger:
On 20 April 2023, Savannah announced the signing of an agreement for the development of the 75 MW Bini a Warak Hydroelectric Project located in the northern Adamawa Region of Cameroon. Project sanction is expected in 2024 and first power targeted in the 2027 to 2028 window.
On 11 May 2023, Savannah announced the signing of an agreement with the Government of Niger for the development of two proposed solar photovoltaic power plants, with the combined installed power generation capacity of up to 200 MW. The project is expected to receive project sanction in 2024, with first power targeted in the 2025 to 2026 window.
Following Savannah's acquisition of a 41.06% indirect equity interest in the Cameroon Oil Transportation Company ('COTCo') from ExxonMobil on 9 December 2022, post-year end on 20 April 2023 Savannah's wholly owned subsidiary, Savannah Midstream Investment Limited ('SMIL'), signed a share purchase agreement with the national oil company of Cameroon, Societe Nationale Des Hydrocarbures ('SNH'), relating to the sale by SMIL and purchase by SNH of 10% of the issued share capital in COTCo.
For the five months to end May 2023, COTCo transported an average of 136.9 Kbopd of crude oil with a total of 21 liftings conducted on behalf of its customers. Each lifting saw the safe and successful transfer of approximately 1 MMbbls of crude oil from the FSO to ocean going vessels by COTCo on behalf of its customers.
2022 was another year of substantial achievements for our company as we continued to develop and invest in Projects that Matter in Africa. Our Nigerian business recorded yet another year of double-digit revenue growth, our Niger R3 East project benefited from the strong progress made towards the construction of the Niger-Benin pipeline and our Renewable Energy division established a pipeline of utility projects which we hope to develop through to first power over the course of the coming years. We also announced our intended acquisition of PETRONAS' assets in South Sudan, which produced an average gross 153.2 Kbopd in 2021. You will be able to read about all of this and much more in this year's Annual Report.
As we have grown, our commitment to the highest governance standards has remained a priority. In this regard, we continue to use the 2018 Quoted Companies Alliance Corporate Governance Code (the 'QCA Code') as the basis of the Group's governance framework and the Corporate Governance Report on page 108 of the 2022 Annual Report explains how we applied the principles of the QCA Code in 2022.
In June 2022, I announced my decision to step down from my role as Chair of the Board at the 2023 AGM, while remaining a Non-Executive Director of the Company. It has been an honour to Chair the Board from Savannah's initial listing to today. I would like to welcome our new Chair Designate, Joseph Pagop Noupoue, who was announced as my successor in April 2023. I believe Joseph's leadership skills, deep knowledge of the African business environment and extensive business, financial and legal expertise will serve Savannah well over the course of his Chairmanship. Aside from Joseph, we have announced the appointment of three new Non-Executive Directors over the course of the past 18 months - Sarah Clark, Dr. Djamila Ferdjani and Sylvie Rucar - who collectively bring a wealth of talent and experience to the Board. Nick Beattie was also appointed Savannah's permanent Chief Financial Officer in June 2022, having served in an interim capacity for the previous 10-month period. I would also like to take this opportunity to thank David Jamison, who retired from the Board in June 2022, for his dedicated service to the Company over the previous eight years. We are delighted that David agreed to assume the role of Honorary President of Savannah, ensuring we continue to benefit from his considerable wisdom and experience.
The Board continues to place great emphasis on engagement with all our stakeholder groups and more information on this is provided in Section 172 Statement on page 40 of the 2022 Annual Report.
Outlook
Savannah has the ambition and focus to be the leading African Energy company. As I pass on the role of Chair to Joseph, I believe that we are exceptionally well-positioned to achieve this and that we should all look forward to the future with great confidence.
I would like to welcome you to our ninth Annual Report as a listed company. This year's letter follows a similar format to those of recent years. The first section discusses our Company's continued industry-leading financial, operational and sustainability performance. The second discusses our key focus areas for 2022 and 2023. The third discusses the 'how' and the 'why' we see the African energy transition evolving and discusses the relevance of our hydrocarbon AND renewables business model.
Before turning to the first section, I would like to draw your attention to three key articles in this year's Annual Report. The first article describes 'Why we do what we do', where we discuss our corporate purpose and the associated core beliefs which serve to underpin our strategy and business model. I really believe that this section is essential reading for anyone seeking to understand our Company. The second, authored by Dr. Richard Norris, a global energy policy specialist and a Fellow of the Canadian Global Affairs Institute, discusses the equity of the global energy transition and the importance of poverty alleviation. The third article, from NJ Ayuk, Executive Chairman of the African Energy Chamber, focuses on the critical role the private sector will be required to play in the African energy transition. We are extremely grateful to our guest authors for their contributions.
2022 in review
For the first time in almost 40 years10 the rich world faced the challenges of operating in a high inflation, rising interest rate environment with, for example, the IMF's advanced economy average consumer price index rising 9% year-on-year, a level 2.5x the 10-year average11, and benchmark US$ interest rates rising to 5.5% at year end, a level 4.4x the 10-year average12. The supply chain impacts of the Russia-Ukraine war, particularly in the energy and food sectors, were the principal drivers, with, for example, oil, Liquified Natural Gas and European electricity prices rising 42%13, 64%14 and 53%15 respectively and food an estimated 14%16, year-on-year. However, rich world interest and inflation rates remained much lower than those of Sub-Saharan Africa which ended the year at 12.0%17 and 17.7%18 respectively.
Boosted by the strength of the macro energy complex, the seven energy supermajors reported a record US$200 billion of profit in 2022 (+100% year-on-year), despite a 1.3% aggregate reduction in production volumes. Savannah too performed strongly, but for very different reasons. Our Total Revenues1rose by 26% year-on-year to US$290 million with our Adjusted EBITDA2rising by 27% to US$222 million. At the Nigerian business unit level, we recorded Adjusted EBITDA2 of US$244 million. Our 20% production volume growth in Nigeria (versus the supermajors' -1.3% noted above) was primarily driven by the operationalisation of four new gas sales agreements ('GSAs'). 89% of our 2022 revenue stream was derived from fixed price GSAs with no cyclical exposure to oil or international gas prices.
Our Nigerian business has now delivered six consecutive years of Total Revenues1 growth at a compound annual growth rate ('CAGR') of 21%. This Total Revenues1 growth compares favourably to the long-term trend CAGR of the wider UK stock market constituents of 3.1%19,20. Further, since the announcement of our decision to acquire our Nigerian business in 2017, we have more than doubled the number of customers. We are now contracted to supply gas to 24% of Nigeria's thermal power generation capacity (up from 10% at the time of acquisition) as well as key petrochemical and cement factories21. We are clearly performing a critical service to the Nigerian economy. Over the same period our operational performance has been equally robust, with an estimated 99% uptime across our asset base.
The US$22 million difference between our Group and Nigerian business Adjusted EBITDA2 numbers largely reflects the central costs of running our business and the investments we have made to build the corporate infrastructure that will enable our future organic and inorganic growth plans. On a pro forma basis we increased our headcount by 21% year-on-year and training hours per employee by 74%. In the coming years we intend to continue to invest in our people and infrastructure as we continue to pursue our goal of potentially quadrupling the scale of our business over the course of the coming years.
In Niger, we are looking forward to conducting a comprehensive flow testing programme in late 2023 of the main oil fields included in our c. 35 MMstb R3 East field development plan (the 'FDP'). This flow testing programme is expected to enable us to fine tune and optimise the FDP, ahead of expected first commercial oil production in 2024. The key decision we made around R3 East in 2022 was to move towards an export sales-driven development solution via the new Niger-Benin pipeline, as opposed to our previously intended initial development solution of selling crude to the domestic Zinder refinery. This decision followed the strong progress that China National Petroleum Corporation has made in constructing the Niger-Benin pipeline, which is now over 75% complete and expected to commence commercial oil transportation in the fourth quarter of 2023. The operationalisation of the Niger-Benin pipeline is expected to be transformational for Niger, with exported oil sales forecast to increase GDP by approximately 24% and exports by 68% in 202522.
In March 2022 we signed an agreement for our up to 250 MW Parc Eolien de la Tarka wind farm project, located in the Tahoua region of Southern Niger. At the time of writing all key studies required to achieve project sanction have either been completed or are in progress. The project's initial on-site wind speed data measurements have proven to be highly encouraging, and we expect to sanction the project in 2024 with first power delivery in 2026. Post-year end, this project has been supplemented with the signing of an agreement for the development of two solar photovoltaic power plants in the areas around the cities of Zinder and Maradi, also in southern Niger, with a combined installed power generation capacity of up to 200 MW. These projects are expected to be developed on a similar timeline to Parc Eolien de la Tarka: project sanction is targeted for 2024 and first power delivery in 2026. In aggregate, therefore, we are expecting to generate up to 450 MW of new clean and affordable power for Niger, which would equate to an up to 60% increase in overall on-grid electricity availability.
From a business development perspective, three major events occurred in 2022: Announcement of our proposed acquisition of the South Sudan Assets35. In December, we announced our proposed acquisition of PETRONAS' assets in South Sudan for a total consideration of up to US$1.25 billion. The transaction is expected to complete in the third quarter of 2023, alongside the publication of a new Admission Document23.
Completion of our US$407 million acquisition of ExxonMobil's assets in Cameroon and Chad. In Cameroon we acquired a 41.06% interest COTCo, which owns and operates the 903 km Cameroon section of the Chad-Cameroon pipeline and related infrastructure. During 2022, COTCo transported an average of 124 Kbopd of crude oil, valued at an estimated US$4.6 billion at the Brent crude oil prices prevailing during the year. Post-year end we agreed to sell a 10% interest in COTCo to the national oil company of Cameroon, Societe Nationale Des Hydrocarbures, for consideration of US$44.9 million plus accrued dividends. In Chad we acquired a 40% interest in the Doba Oil PSC which produced 28 Kbopd in 2022. Post-year end these assets were impacted by external events24. We see our interest in COTCo acting as a potential catalyst for further growth in Cameroon over the course of the coming years. Post-year end we entered into an agreement in relation to the up to 75 MW Bini a Warak Hydroelectric Project in the north-east of the country.
Growth of our renewable energy business. 2022 saw the first full year of activity for our Renewable Energy Division. During the year, we made significant investments in the people side of the business as well as generating a pipeline of high quality solar, wind and hydro power projects. At the time of writing this amounted to up to 525 MW of publicly announced projects in motion. Internally, we believe we have strong visibility on a range of other projects, which we expect to enable us to meet our target of delivering up to 1 GW+ of renewable energy projects in motion by year-end 2023. I am, therefore, confident that Savannah will become one of the largest renewable energy development companies in Africa over the course of the next two years.
As always, we maintained our strong focus around safe operational delivery. In 2022 we recorded a Lost Time Injury Rate ('LTIR') of 0.34 and a Total Recordable Incident Rate ('TRIR') of 0.68 per 200,000 working hours. Our performance against key sustainability metrics remained equally industry leading. Our carbon emission intensity fell 13% year-on-year to 9.7 kg CO2e/boe (48% lower than the industry average of 18.7 kg CO2e/boe). Our senior management female gender diversity was 32%, while our local employee ratios in our countries of operation was over 95%.
Key focus areas for 2023 and 2024
Over the course of the next two years, I expect there to be several key focus areas for the business. These include:
The refinancing of our US$359 million Accugas debt facilities. Our intention remains to redenominate the current US dollar-denominated facility to a multi-tranche Naira-denominated facility, extending the average maturity to beyond 2030 and reducing the facility cost in dollar equivalent terms;
Progressing the R3 East Development project. As noted previously, we intend to commence a flow testing programme on the key R3 East area fields in the fourth quarter of 2023 with first commercial oil production anticipated by end 2024;
Further hydrocarbon acquisitions. The major energy companies are estimated to have in excess of US$100 billion25 of upstream oil and gas assets in Africa and most have significant upstream asset divestment programmes. Savannah is strongly positioned to successfully participate in these divestment programmes, given our operating capabilities, regional reputation and access to capital. Post-deal we would expect to act as strong asset stewards delivering better underlying operational performance and improvements in unit carbon intensity (within the limitations of the underlying assets) compared to the previous asset owners;
Delivery of our renewable energy projects. We have an aspiration to have our first project(s) fully sanctioned by end 2024 and first power from our project portfolio in 2026 and Expansion of our renewable energy business. Savannah believes the African renewable energy market represents a potentially vast target market of over 242 GW by 203026, requiring an investment of over US$40 billion in the 2026-2030 window, and that the Group's hydrocarbon asset operational management skills are directly transferable to this space. In the near term we are hoping to have up to 1 GW+ of renewable energy projects in motion by end of 2023 and up to 2 GW+ of projects in motion by end 2024.
As can be seen from the above list, we remain unequivocally an 'AND' company. We are seeking to deliver strong performance, both for the short AND long-term, across multiple fronts. We are pursuing growth opportunities in both the hydrocarbon AND renewable energy areas. This approach permeates our entire business and how we have built, and will continue to build, our corporate infrastructure.
How we see the African Energy Transition
As in previous years' shareholder letters, I have chosen to discuss how we see the African Energy transition. Before turning to discuss this, I feel it is important to emphasise that this is only one of several important contributing beliefs driving what Savannah does as a company. On pages 8 to 17 of the 2022 Annual Report we have outlined in detail 'Why we do what we do'. In that section we discuss our corporate purpose and associated core beliefs which serve to underpin our hydrocarbons AND renewables strategy and business model. In simple terms, the section explains why energy poverty in Africa is the principal problem our company is seeking to help solve and why we believe this problem is one of the most urgent and important problems facing the world today. I would urge any reader interested in really understanding our company to read this section, especially if they are from a rich world background and perhaps less intuitively understand the realities of the everyday challenges facing the 600 million people in Sub-Saharan Africa who are defined by the World Bank as living in extreme poverty (i.e. have incomes of less than US$2.15/day)27.
Energy is critical to enabling and sustaining people's quality of lives. People without access to energy are dramatically poorer than those with access to energy. For example, Niger is ranked 189 out of 191 on the UN Human Development Index28 ('UN HDI') with a GDP per capita of US$58429 and power consumption per capita of 449 kWh30. The United States of America on the other hand is ranked 21 out of 191 on the UN HDI with GDP per capita of US$76,348 and power consumption per capita of 79,480 kWh, 12,983% and 17,614% higher respectively. A similar pattern emerges when we look at the relationship between power consumption and other key quality of life barometers such as life expectancy and lifetime health outcomes.
Over 80% of today's global energy mix is provided by hydrocarbons with 54% of this provided by oil and gas31. The scale of investment required to sustain the 'status quo' global quality of life is immense. Global non-financial capital expenditures for the energy sector amount to 42% of all global capex32. The world clearly, therefore, requires oil and gas today, and is prepared to pay vast amounts of money to enable this. The extent to which the world requires oil and gas in the future will depend on the absolute and relative rate of renewable energy and carbon mitigation technological improvements, and the absolute and relative rate of adoption of these improvements. In this regard, the quote by John Kerry (The US Climate Change Envoy), which I have cited in my last two shareholder letters, remains pertinent - 'I am told by scientists that 50% of the reductions we have to make by 2050 or 2045 are going to come from technologies we don't have yet.'
While the pace of technological evolution and adoption may be argued to be generally faster today than in earlier periods, I believe that it is important to recognise that the global energy transition is likely to take a relatively long time. Previous energy transitions have taken fifty plus years, and the modern renewable transition only began around 2015. Further, full displacement of the previous energy sources has not occurred in previous transitions (i.e. coal still provides approximately 26% of the global energy mix).
In this regard, when we look at the forecast future energy mix, there is currently a big difference between the trend case (i.e. what forecasters are suggesting will actually happen) versus the Net Zero 2050 case. Essentially the world appears to be on track to have around 50%33 of its energy mix in 2050 to be provided by oil and gas, which, given likely energy demand growth over the course of the next 28 years, suggests that actual oil and gas demand is currently not on trend to fall significantly over the period.
The foregoing contrasts dramatically with the many Net Zero forecasts which generally see the total share of fossil fuel supply falling to just over 20% of the global energy mix by 205034. Further, it is likely that lower income countries, where the ability to pay for renewable energy infrastructure is lowest and the need for low priced energy to deliver life changing economic growth is highest, will see hydrocarbons form a much greater part of their energy mix in 2050 than in the developed world. On average, only 56% of Africa's entire population has access to on-grid electricity (falling to 49% if South Africa, Egypt and Algeria are excluded), with the electricity access rate in our countries of active operations estimated at 65% for Cameroon, 19% for Niger and 55% for Nigeria. For much of Africa, the primary issue is around people being given access to reliable and affordable power, period.
From a Savannah perspective, our primary focus is on participating in Projects that Matter in Africa. We expect to continue to acquire hydrocarbon businesses and to re-invest the cash flows we generate in both hydrocarbon AND renewable energy projects. We firmly believe that Africa needs both if it is to be given the opportunity to grow and lift ever more of her citizens out of energy poverty.
Closing thoughts
I would hope that having read through this letter my reasons for being optimistic around the future of our business are clear. We are a purposeful organisation, doing societally essential work. The opportunities associated with the African energy transition (hydrocarbon acquisitions from Big oil sellers and the build-out of our renewable energy business) represent a once in a generation opportunity, which we at Savannah are strongly positioned to take advantage of. We have made significant investments in our people, infrastructure, capabilities and have well-developed regional and financial stakeholder relationships and credibility. We have a strong track record of 'getting things done'. I believe that Savannah will achieve great things over the course of the coming years and look forward to continuing this journey with you, my fellow shareholders.
Lastly, I would like to express my gratitude to all those who contributed to our successes in 2022 - my incredibly dedicated and passionate colleagues, our host governments, communities, local authorities and regulators, our shareholders and lenders, and our customers, suppliers and partners. Thank you all.
South Sudan Acquisition Update
Further to the Company's 13 April 2023 Q1 2023 financial and operational update, the Company continues to advance the various workstreams required to complete the reverse takeover of PETRONAS International Corporation Limited's ('PETRONAS') entire oil and gas business in South Sudan and intends to publish an AIM Admission Document by 28 July 2023, following which point the Company would seek restoration to trading on AIM of its ordinary shares. Further updates will be provided as and when appropriate.
Chad Assets Nationalisation
As previously announced, on 31 March 2023, the Government of Chad passed a law confirming the nationalisation of Savannah Chad Inc's ('SCI') upstream production assets and also providing for the nationalisation of SMIL's c.40% interest in Tchad Oil Transportation Company ('TOTCo'), the owner and operator of the Chad section of the ETS.
The actions of the Republic of Chad are in direct breach of the upstream conventions to which SCI and the Republic of Chad are, amongst others, party, together with a direct breach of the convention between TOTCo and the Government of Chad. Disputes under the upstream conventions are subject to the jurisdiction of an ICC arbitral tribunal, seated in Paris. The Company has commenced ICC arbitral proceedings against the Government of Chad to seek full recompense for the loss that it has and will suffer as a result of the nationalisation of SCI's assets.
As a direct result of the nationalisation, the Company has not been able to fully access all the underlying information, nor have access to the relevant Chad-based employees of the impacted entities in order to prepare the financial information for audit purposes; it has not therefore been possible to complete an audit of SCI or SMIL. Despite the acquisition of the Chad assets only having completed approximately three weeks prior to the year end, the Chad and Cameroon Assets36 were material to the Group in 2022 and the limitations on having access to information and people has led to the Group's external auditors issuing a disclaimer of opinion. With respect to the opinion of the Group's external auditors, the Company does not anticipate that there will be any disclaimer opinion required for 2023 - this has only arisen for 2022 due to the specific and exceptional set of circumstances discussed above. For further information and background, please refer to the Company's 2022 Annual Report.
Board and Board Committee Changes
On 7 June 2022, it was announced that Nick Beattie, Group Chief Financial Officer and Company Secretary, had been appointed to the Board of Directors. At the same time, it was announced that David Jamison would retire as a Non-Executive Director of the Board at the 2022 AGM, which became effective 30 June 2022. Also on 7 June 2022, Steve Jenkins, announced his decision to step down from his role as Chair of the Board at the 2023 AGM, having completed eight years in the role, but that he would continue to serve as a Non-Executive Director of the Company. Post-year end, on 21 April 2023, Joseph Pagop Noupoue was appointed a Non-Executive Director of the Board and Chair Designate.
The Board was expanded in 2022 with the appointment of Sarah Clark and Dr. Djamila Ferdjani as Non-Executive Directors of the Company on 9 December 2022. Additionally, post-year end on 1 February 2023, Sylvie Rucar was appointed as a Non-Executive Director of the Company. The Board, therefore, now comprises 10 Directors, which includes the Non-Executive Chair, the Non-Executive Vice Chair, six Non-Executive Directors and two Executive Directors (the CEO and the CFO).
AGM
The AGM will be held at 11.00 a.m. on Friday, 30 June 2023 at 40 Bank Street, London, E14 5NR. Details on how to submit your proxy vote are set out in the section of the Notice of AGM headed 'Voting Arrangements - Action to be taken'. The Notice of the AGM is available to download from the Company's website (www.savannah-energy.com). For those shareholders who have elected to receive postal copies, the Notice of the AGM has been posted to them today.
Contact:
Tel: +44 (0) 20 3817 9844
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ('MAR').
About Savannah Energy
Savannah Energy PLC is an AIM quoted British independent energy company focused around the delivery of Projects that Matter, active in Cameroon, Niger and Nigeria. Further information on Savannah Energy PLC can be found on the Company's website: www.savannah-energy.com.
SAVANNAH ENERGY PLC 
