Revego IPO: The good, the bad and the ugly

On the Biznews Power Hour, CEO of JSE-bound Revego Africa, Reyburn Hendricks, shared his insights on the prospects of the renewable energy fund that currently has assets solely in South Africa. The timing of the IPO seems opportunistic with general market sentiment euphoric and renewable energy being a thematic trend that has emerged and gained traction in recent years. The business model seems great in theory with the firm planning to distribute earnings to shareholders in the form of dividends, however, a number of risks exist. Firstly, investors need to realise that further dilution is inevitable in order to fund growth. The quantum of dilution is the scary part. Secondly, execution risk in deal-making, especially projects in Sub-Saharan Africa, which has historically been notoriously difficult for JSE-listed firms to get right. Lastly, the IPO was pulled hours before the prospective listing. – Justin Rowe-Roberts

Reyburn Hendricks on Revego Energy business model: 

As an investment vehicle, it’s a limited partner in a fund which will invest predominately in equity stakes in renewable energy projects in Sub-Saharan Africa as a yield-focused vehicle. We’re looking to play our part in the green revolution going forward, as well as to be an attractive investment vehicle for investors out there in market.

On Revego Energy as yield-focused investment vehicle: 

It’s designed to give investors stable and predictable cash flows very much like a real-estate investment trust in some instances. We are looking to pass through all the cash flows which are received from the underlying projects to shareholders on a semi-annual basis.

On funding new growth opportunities: 

We’ll look to place additional shares in the market, either through a book-build or a rights issue. So that’s the primary instrument mechanism by which we’ll look to grow, by placing additional shares out there in the market.

On the difficulties of doing business in Sub-Saharan Africa: 

It’s a good point. The reason we mention that there is an electricity revolution going on in the world and definitely on the continent. We are looking to participate in that sector in Sub-Saharan Africa. The reason why we think it’ll be different is that we’ll always be looking to deal with creditworthy counter-parties, so to the extent that is not fulfilled, we won’t be doing those investments.

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