Carbon Energy (ASX: CNX) has announced that, after a period of extensive due diligence, Pacific Road Capital has agreed to acquire 10% of the company from CSIRO in an off market trade.
Pacific Road Capital may elect to transfer some of this position to an investor or investors in its funds.
Pacific Road is a private equity manager which invests in the global mining industry. It manages and advises the US$320 million Pacific Road Resources Fund 1 which invests in mining projects, related infrastructure and services businesses, either as a direct investor or joint venture partner.
Pacific Road’s investment philosophy is one of active management, based on close collaboration with senior management of their investee companies.
It invests in projects and companies that can provide superior rates of return and applies its extensive resources industry operating experience, financial skills and broad network of contacts to help investee companies achieve this.
Carbon Energy’s Managing Director, Andrew Dash commented that “Pacific Road’s investment in Carbon Energy follows a six month comprehensive due diligence process, and is a strong third party endorsement of the company’s strategy and its UCG technology."
"We are particularly pleased to have Pacific Road as an investor as they bring to the table valuable business expertise as well as their access to networks and resources," he added.
Louis Rozman, Investment Director of Pacific Road Capital, will be invited to join the Board of CNX as a non-executive Director.
“We are pleased to welcome Louis Rozman to the Board of Carbon Energy where his knowledge and skills will complement the existing Board members. Of particular relevance is his experience as CEO and Managing Director of listed coal seam gas company CH4 Gas Limited from the feasibility, financing, construction, and stable production stages of the Moranbah Gas Project until CH4's merger with Arrow Energy in mid 2006."
"Louis has extensive experience in project development and operations, including power generation, on a number of resource projects around the world,” Dash said.
Pacific Road currently has investments in projects in the Americas (including two projects in Chile), Australia, Pacific and Africa with its primary focus on investment opportunities in resource rich regions where country risk is manageable.
Commenting on the transaction, Rozman said “We are very pleased to be acquiring a significant stake in Carbon Energy at this exciting stage of the company’s development. We believe that Underground Coal Gasification will play a significant role in the energy mix not just in Australia but around the world."
"Carbon Energy has world leading UCG technology and a sound business plan which has seen it take a leadership position in the commercial development of UCG in Australia and internationally.”
CSIRO’s original shareholding in CNX arose from the sale in November 2007 of its 50% interest in a joint venture company created to develop its intellectual property rights to UCG.
As a result of this transaction CSIRO acquired an 18.6% interest in the Company on 30 June 2008. CSIRO’s interest has since declined to 14.8% through a combination of dilution arising from subsequent share issues and the sale of 4 million shares on 15 June 2009.
Carbon Energy owns or has exclusive rights to all the intellectual property rights to CSIRO's UCG technology and will continue to work closely with CSIRO whose working relationship with Carbon Energy is not connected, formally or otherwise, with the status of its shareholding in the company.
Following the transaction Carbon Energy’s major shareholders will be: Incitec Pivot Limited, 11.3%; Pacific Road Resources Fund: 10.0% and CSIRO: 4.8%.
Carbon Energy’s other cornerstone investor and largest shareholder Incitec Pivot Limited (ASX: IPL), currently has board representation.
Disclosure: The author holds no positions in the company