NCCL Signs Power Framework Agreement w Mozambique

RNS Number : 1742D

Ncondezi Coal Company Limited

25 April 2013

 



News Release

Ncondezi Signs Power Framework Agreement with Mozambique Government

Highlights

·    Power Framework Agreement successfully concluded with Government of Mozambique

·    Formal Mozambican Government endorsement of Ncondezi Power Project

·    Key milestone reached on implementing Ncondezi Power Project

·    Agreement provides an exclusive platform from which to negotiate key commercial, financial, legal and local participation parameters of the project

·    Formally agreed contractual framework for cooperation between Ncondezi and Mozambican Government for delivery of key Government and Developer Milestones required for development phase of the Ncondezi Power Project, prior to financial close

·    Government undertakes to facilitate grant of all permitting required from the responsible Government authorities for the power project

·    Ncondezi will initiate formal off-take negotiations with potential power off-taker(s) on an exclusive basis

25 April 2013: Ncondezi Coal Company Limited ("Ncondezi" or the "Company") (AIM: NCCL) is pleased to announce that it has successfully concluded a Power Framework Agreement ("PFA" or the "Agreement") with the Government of Mozambique ("GoM") in respect of the Ncondezi Power Project in the Tete Province, northern Mozambique.

Purpose

The PFA governs the relationship between Ncondezi and the GoM during the Development Phase of the Ncondezi Power Project and sets out the agreed pathway and requisite Government and Developer Milestones that need to be reached prior to Project Financial Close for Ncondezi to become eligible for the award of a formal Power Concession.

Significance

The PFA is, amongst others, a legal pre-requisite to the initiation of exclusive power off-take discussions with potential off-takers, including Electricidade de Mozambique ("EdM"), the state owned power utility company, for the conclusion of a power purchase agreement ("PPA"). Mozambique is one of the largest generators and exporters of electricity in sub-Saharan Africa and is strategically well positioned, with existing transmission infrastructure, to meet the shortfalls in energy supply domestically and in the broader Southern African Power Pool, especially South Africa, Zimbabwe, Botswana, Malawi and Namibia.

The Ncondezi Power Project is targeting power generation in 2017 and through the conclusion of the PFA the GoM has formally undertaken to support Ncondezi as a potential integral contributor to power production in Mozambique and the broader region.

Scope

The PFA covers the first two phases of the Ncondezi project up to 600MW and stipulates that Ncondezi and the GoM shall negotiate in good faith terms and conditions that are mutually acceptable to both parties for any subsequent phases of the Ncondezi Power Project from 600MW up to 1800MW

Conditions Precedent

The PFA will become effective upon the fulfilment, or waiver by Ncondezi in its discretion, of a number of conditions precedent ("CPs") within 365 days of the PFA's signature. The CPs include: (i) the conclusion of heads of terms with credible off-takers for all or part the Project's power generation; (ii) the conclusion of heads of terms with the GoM and applicable government bodies on the local and foreign strategic shareholding in the project; (iii) a commercially bankable tax incentive structure and (iv) transmission arrangements. Ncondezi anticipates meeting all these conditions precedent within the agreed timeframe.  

Commenting on the announcement, Paul Venter, Acting CEO, said "We are very pleased to have successfully concluded the Power Framework Agreement with the Mozambican Government as this now allows us to commence, on an exclusive basis, formal negotiations on the key commercial contracts, such as the PPA, coal supply and transmission, in order to move the Project forward towards funding and financial close. We are targeting to have the Heads of Terms on the key commercial contracts by Q4 2013."

The PFA formally confirms the Mozambican government's commitment to supporting the development of the Ncondezi Project and underlines the importance of the Project as part of the government's overall strategy to encourage direct long-term foreign investment in independent power generation and capitalise on Mozambique's potential as a net exporter of electricity to other countries within the Southern African Development Community."

Ncondezi and the GoM will now constitute a Liaison Committee to assist with the implementation of the PFA. The committee will initially comprise one member from Ncondezi, one member from the GoM and one member from EdM.

Enquiries:

For further information please visit www.ncondezicoal.com or contact:

Ncondezi Services (UK) Limited:	Hanno Pengilly Alex Buck	[phone]
Liberum Capital Limited: NOMAD & Broker	Michael Rawlinson Chris Bowman Christopher Kololian	[phone]
finnCap: Joint Broker	Matthew Robinson Elizabeth Johnson Joanna Weaving	[phone]
Pelham Bell Pottinger:	Daniel Thöle Weston Macklem	[phone]

Ncondezi Coal Company owns 100% of the Ncondezi Project which is strategically located in the power generating hub of the country, the Tete Province in northern Mozambique. The Company is developing an integrated thermal coal mine and power plant in phases of 300MW phases, up to 1,800MW and first production is planned for 2017. The first 300MW phase is targeting domestic consumption in Mozambique using existing transmission capacity to meet current demand.

 

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