Housing in Southern Africa September 2016

Infrastructure & Mixed Use

Aveng disposes of infrastructure investment Leading infrastructure firm, Aveng, recently announced a headline loss of earnings between 45% and 55%. The company will dispose of its entire equity interest in four major infrastructure investments to Royal Bafokeng Holding for R860 million.

A veng plans to sell its 70% stake in its Steeledale busi- ness to black women-owned investment group, Kutana, for ap- proximately R252 million, of which between R93million andR123million will be paid in cash and the balance paid on a deferred basis. The result is a material improve- ment on the prior year and is under- pinned by: an improved financial performance from Aveng Grinaker- LTA on completion of loss-making and non-contributing contracts; an improvement in the ratio of contracts operatingat tenderedmargins; strong performance in the building business; and the resolution of some major commercial claims and a further re- duction in fixed operating expenses. The company reported that contract cancellations, difficult trading condi- tion, under performance on certain contracts, restructuring expenses to ‘right size’ the group’s overhead structure had proved challenging. The final figure includes the profit on sale of the South African property portfolio of R577 million in the first half of the year, which partially offset the impairment of certain steel assets in the second half of the year. Aveng has entered into a bind- ing agreement with Royal Bafokeng Holdings, who will acquire Aveng’s equity interests and loan in the fol- lowing investments: the 138 MW Gouda wind farm, one of the largest wind farms in the Western Cape has 46 wind turbines. Imvelo Concession Company, which is the holder of a 27-year concession to build, oper- ate and maintain the Department of Environmental Affairs office campus in Tshwane. The N3 Toll Concessions includes a 30-year concession agree- ment to design, construct, finance, operate andmaintain the N3 toll road between the Cedara Interchange in KwaZulu-Natal to the Heidelberg South interchange in Gauteng. The 74MWSishenSolar PhotovoltaicPlant located in the municipality of Dibeng in the Northern Cape. These sales are subject to terms and conditions and the effective date is estimated to be on October 31, 2016. Kobus Verster, Aveng CEO, said: “These investments have reached an appropriate maturity where we can transfer them to a strong investment company and realise value for the group. Aveng Capital Partners will

Kobus Verster and Albertinah Kekana

Kobus Verster and Thoko Mokgosi-Mwantembe

continue to pursue project develop- ment opportunities for the Group as our investment and structured financing arm.” AlbertinahKekana, Royal Bafokeng Holdings CEO, commented: “The proposed agreement and its focus on renewable energy, property and road infrastructure is in line with our diversification strategy. As a long term investor, we are pleased to be part- nering with Aveng Capital Partners. It has a very credible track record in originating, developing, structuring and investing in general infrastruc- ture, power and real estate projects in South Africa. This proposed deal represents our long term investment approach and our commitment to the South African growth story.” Aveng has reached an agree- ment with Kutana, to acquire its steel reinforcing and mesh business (Steeledale) in terms of a phased exit strategy. The effective trans- action date is estimated to be on

November 1, 2016. Kutanawill acquire 70%of the Steeledalebusiness. Aveng can elect to sell the remaining 30% after three years. “The sale of 70% of Aveng Steele- dale is in line with our medium term strategy to divest from steel and im- prove the group’s returns. Kutanawill improve market access and position the Steeledale business for growth in a difficult and competitive market environment,” said Verster. Thoko Mokgosi-Mwantembe, CEO of Kutana, commented: “The Steele- dale acquisition forms a cornerstone of our steel and constructionbusiness strategy. With our experience and focus, we are uniquely positioned to drive the growth of the business in South Africa and we look forward to creating significant value for all our stakeholders. Empowerment of the people of South Africa, in particular the communities in which we oper- ate, is at the heart of the Kutana philosophy.” ■

September 2016