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Ncondezi signs joint development agreement with CMEC and GE

Published by
World Coal,


Ncondezi Energy Limited has signed a joint development agreement (JDA) with China Machinery Engineering Corporation (CMEC) and General Electric Switzerland GmbH (GE) to co-develop and construct the integrated Ncondezi 300 MW coal-fired power project and coal mine in Tete, Mozambique. This is a region which is not connected to the national grid and with low levels of electrification today.

Highlights

  • The JDA formalises certain of the key terms on which the project will be co-developed and, constructed by Ncondezi, CMEC and GE (together the ‘parties’).
  • The JDA was executed by senior representatives at a Beijing signing ceremony, including CMEC President Han Xiaojun, GE Steam Power President & CEO Michael Keroulle, and Ncondezi Chairman Michael Haworth.
  • JDA signing follows the project’s recent inclusion by Chinese and Mozambique governments on the list of key infrastructure projects at the 2nd China-Mozambique International Cooperation Summit held in the first half of 2019.
  • Ncondezi is expected to hold a 40% equity interest in the project.
  • Project steering committee to be setup with representatives from each party to manage the development process to financial close, the point at which first funds are drawn for project construction.
  • CMEC will be the main engineering, procurement and construction (EPC) and operations and maintenance (O&M) contractor for the project.
  • GE will be the exclusive subcontractor for the power project core technology, including the boiler, steam turbine, generator and air quality control solutions, which will ensure the plant meets the emission standards established by the World Bank. GE will also supply the required parts and serve as a field advisor for the power plant maintenance.
  • The JDA is the key outstanding milestone to formally engage with the Mozambican government and state power utility, Electricidade de Mocambique (EDM), on the electricity tariff and key project commercial agreements such as the power purchase agreement (PPA) and power concession agreement (PCA).
  • Parties to initially focus on finalising a set of development co-funding investment conditions which include finalisation of the electricity tariff and PPA with EDM. Ncondezi to be responsible for any agreed additional third party development costs during this phase other than the EPC and O&M tendering related costs, which will be the responsibility of CMEC and GE.
  • Ncondezi responsible for 40% of development costs to financial close based on an agreed budget once the development co-funding investment conditions have been satisfied or waived.
  • A subscription price and terms for the 60% share in the project to be agreed once the electricity tariff with EDM has been confirmed, utilising an accredited asset valuation firm to be appointed by the parties, and it is expected to be paid at an agreed date when the project transaction agreements, internal and government approvals are obtained.

Ncondezi Non-Executive Chairman Michael Haworth said: “The Board welcomes CMEC and GE to the project as partners and co-developers and looks forward to working with two world class companies who will bring complimentary skills, resources and experience to deliver the project.

“The JDA signing formally starts the co-development process with CMEC and GE on the US$1 billion Ncondezi integrated power project in Tete, Mozambique. This is a significant milestone that should materially enhance the credibility of the project in Mozambique and with international financiers, helping to unlock key development processes including the finalisation of the electricity tariff and PPA with EDM as well as initiating project financing discussions with banks and the China Export and Import Credit Insurance Company (Sinosure).

“The JDA signing comes after the recent project inclusion as a key infrastructure project at the 2nd ChinaMozambique International Cooperation Summit held earlier this year. Further strengthening the platform of support for the project at the Mozambican and Chinese government level.

“The parties will now finalise and agree the joint development programme to financial close, with a focus on achieving the development co-funding conditions starting with the submission of an updated electricity tariff to EDM and opening up tariff negotiations over the next six months. The tariff and PPA process is expected to leverage off existing development work completed and not require material external cost to the company.

“Whilst key milestones are still to come, the JDA is an important step towards the goal of generating power in 2023.”

Read the article online at: https://www.worldcoal.com/coal/02082019/ncondezi-signs-joint-development-agreement-with-cmec-and-ge/

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