Canadian-based Cuban specialist investment company LGC Capital (LGC) has been active in an astonishing variety of investments in Cuba.
LGC’s objective is to acquire stakes in one or more listed or unlisted projects, businesses, joint ventures, production agreements or companies (in whole or in part), creating a platform for possible further acquisitions in sectors where the opportunity exists to create value for LGC’s shareholders.
According to the company, “It is intended that LGC will invest and acquire an appropriate percentage holding, possibly including management of a company or companies and businesses with part or whole connections or relationships to Cuba’s oil and gas, agribusiness, manufacturing, industrial, transport and logistics, biotech, construction, utilities, business services, support services, retail and/or tourism sectors.”
In July 2016, Leni Gas Cuba Limited and Knowlton Capital Inc. announced a reverse take-over of Knowlton by Leni Gas Cuba.
In connection with the reverse take over, Knowlton’s corporate name was changed to LGC Capital Ltd. (LGC), so as to reflect the transaction with Leni Gas Cuba Limited, and LGC consolidated its 46,575,500 issued and outstanding common shares on the basis of one common share for every 1.27795529 shares issued and outstanding.
At the closing of the reverse take over, LGC Capital issued an aggregate of 197,599,996 common shares to the shareholders of Leni Gas Cuba Limited in exchange for their shares, on the basis of one LGC share for every 2.5 shares of Leni Gas Cuba. As a result, LGC Capital now owns 100% of the shares of Leni Gas Cuba and there are 234,045,310 common shares of the LGC Capital issued and outstanding, of which 84.43% are held by the former shareholders of Leni Gas Cuba Limited.
LGC, trading under the symbol “GBA” on the TSX Venture Exchange as a Tier 2 investment company, has a market cap of approximately $2 million.
As of September 2016, LGC’s Canadian joint venture partner Groombridge Trading Corp. has signed a letter of intent with Cuba’s Empresa Agro Industrial Victoria de Giron (EAIVG), part of the Cuban Ministry of Agriculture. The joint venture has plans to develop and regenerate the largest citrus producer in Cuba.
EAIVG is located 130 kilometres east of Havana and the overall project covers about 120 square kilometres with 35,000 hectares under production.
It is the largest agricultural enterprise in Cuba.
EAIVG is seeking new investment to increase the amount of citrus and juice produced for the domestic market and export under its own brand. New investment is required to increase planting, install irrigation systems, to import required inputs, and update the industrial production of fruit juice and packing plants.
The 50/50 GTC/LGC Capital joint venture will work with and assist EAIVG access to new investment financing and bring assistance to improve operational aspects such as growing and processing technology, marketing and exports.
Investments as of June 2016
LGC reported holdings of four investments, two joint ventures and an a strategic alliance as follows:
(a) Petro Australis Limited LGC owns approximately 15.14% of the outstanding shares of Petro Australis, an unlisted public company incorporated in Australia. Petro Australis’ principal activity is sourcing oil and gas opportunities in the Americas with a focus on Latin America (including Cuba). Petro Australis holds a conditional 40% back-in option to the onshore oil block, Block 9 PSC in Cuba.
(b) MEO Australia Limited In February 2016, LGC made a strategic investment in Cuban oil explorer MEO Australia Limited (MEO), a company incorporated under the laws of Australia and listed on the Australian Securities Exchange (ASX), as a result of which LGC became the single largest shareholder of MEO, with a 15.8% interest. MEO is pre-qualified as a foreign onshore and shallow water operator in Cuba and was awarded a 100% interest in the 2,380 km2 onshore oil block, Block 9 PSC in Cuba, in September 2015. As LGC also holds a 15.14% interest in Petro Australis, as noted above, which holds a conditional 40% back-in option to Block 9 PSC, the investment by LGC in MEO significantly increased LGC’s underlying interest in Block 9 PSC. Under the placement agreement, MEO issued 140,716,573 shares to LGC at an issue price of AUD$0.01 per share, payable in cash, totalling AUD$1.4 million (£730,000), to be used for Block 9 oil exploration and assessment.
(c) Travelwelcome and the InCloud9 Group In September 2015, LGC acquired 40% of the issued share capital of Travelwelcome, a private company incorporated in England and Wales. Through its representative office in Havana, Travelwelcome provides the services of a specialist Cuban ground handler which works with other specialist travel companies around the world to assist with tailormade trips to Cuba for their clients. This includes booking local hotels, transport, local tours and guides as well as other specialist activities such as art tours, horse riding, deep sea fishing, fly fishing and scuba diving. In addition, Travelwelcome has the capacity to assist with the organization of special events such as conferences, weddings and group activities around Cuban festivals such as the Cigar Festival and Film Festival. In November 2015, LGC announced that it had finalized arrangements for Travelwelcome to combine with the Cuban music, TV and film industry specialist InCloud9 group of companies in Havana. LGC’s interest in the combined Travelwelcome and InCloud9 group remains at 40%.
(d) Cuba Professional Inc. In March 2016, LGC secured a 49% equity interest in Cuba Professionals Inc. (Cuba Professionals) to be paid in staged installments totaling EUR180,000 over a nine-month period. Cuba Professionals is a company operating in Cuba that specializes in providing human resources, mainly in the field of culture, and also consulting services. Established in 2009, Panama-registered Cuba Professionals has offices in Havana and Spain. The funding provided by LGC will enable Cuba Professionals to grow significantly by assisting in establishing larger offices in Havana and employing more specialized management staff in the entertainment and consultancy sectors. Cuba Professionals (www.cubaprofessionals.com) contracts Cuban artists in the field of music, dance, circus and fully-choreographed productions to clients around the world, and provides logistical support and production services for visiting companies and individuals, as well as consultancy services and business analysis to foreign entities exploring the possibility of investing and conducting business within Cuba. 17
(e) Joint Venture with Groombridge Trading Corp. In November 2015, LGC entered into an agreement with Cuban-centric trading company Groombridge Trading Corp. (GTC) to form a 50/50 joint venture (the GTC JV) designed to expand GTC’s existing business of supplying products, machinery and equipment to the fast-growing Cuban tourism sector and exporting agricultural products from Cuba. GTC, established in 2013, is a Canadian corporation that is approved to trade in Cuba by the Cuban Ministry of Foreign Trade and Investment and the Ministry of Agriculture and is further authorized to trade with other Cuban Government entities. The GTC JV assists GTC with its existing order book of imports for the hotel and tourism sector and will become a financial partner in new business moving forward. The GTC JV has an exclusive, first right of refusal to participate on a deal-by-deal 50/50 basis in any current and new transactions originated and operated by GTC. In addition to growing GTC’s current trading activities, the GTC JV also works with GTC to develop a number of agricultural projects and initiatives currently under negotiation in Cuba and assist with new export orders of agricultural products to Europe and Canada.
(f) Joint Venture with Commercial Funded Solar Limited In May 2016 LGC entered into an agreement with Commercial Funded Solar Ltd (CFS), a UK solar power and storage specialist, designed to assess the potential for installing and operating renewable energy and hybrid power solutions (solar power, energy storage and integrated power management systems) in Cuba. CFS is a multi-national company with operations in the UK, Africa and South America specializing in the installation of medium sized, commercially funded renewable power and storage systems of between 30kw and 1MW each. CFS is currently focused on delivering a large number of investor funded commercial systems to academy and school groups in the UK public and private education sector as well as providing a commercially funded model for investors wanting a higher return, short term investment (1-3 years) in countries with supportive governments with immediate requirements to replace diesel generation, such as Cuba. CFS and LGC intend to lead the development and construction of each project with the funding coming from external investors. Under the terms of the agreement, CFS and LGC will share on a 50/50 basis the development, funding and construction revenues for each renewable power plant built, and share on a 75/25 basis the 10-20 year operational contracts for all the systems.
Strategic Alliance with Rushmans Limited
LGC has formed a strategic alliance with Rushmans, a company incorporated in England and Wales, to provide in-country consultancy advice. Rushmans will provide a wide range of services to assist LGC with identifying investment and acquisition opportunities in Cuba’s fast developing energy, agribusiness, manufacturing, commercial and tourism sectors. Rushmans has significant experience in Cuba and will service the strategic alliance through senior personnel that have been based in Havana for more than 20 years.
In April 2016, LGC announced that it and Rushmans had formalized a 50/50 joint venture (the Rushmans JV) to explore the opportunities available for international entities to participate in the development funding for Cuban sport. Under the terms of the Joint Venture Agreement, Rushmans will grant the Rushmans JV an exclusive licence to use the Rushmans’ brand and intellectual property in respect to Cuban sporting opportunities, in consideration for LGC paying £100,000.
LGC will fund the Rushmans JV projects accepted by LGC, as well as provide an initial £40,000 in working capital for the Rushmans JV, with the funding by LGC first deducted from the Rushmans JV revenue and repaid to LGC before any pro-rata distributions to the Rushmans JV parties.