Ncondezi plans to develop Mozambique’s first coal fired power plant on the Ncondezi Project area in the Tete Province. This follows the conclusion of both a Mine and Power DFS which confirmed that a large scale, long life, open pit thermal coal mine and integrated power plant is technically and economically viable.
This large scale project will be developed in phases, starting with a 300MW integrated mine and power plant (“300MW Project”), expanding ultimately to an 1800MW power plant. The Power DFS was conducted by Parsons Brinckerhoff and independently reviewed by STEAG, one of Germany’s largest electricity producers, from an operator’s perspective.
The 300MW Project, the first phase of Ncondezi Project, will see the development of an open pit mining producing 1.2 million tonnes per annum of coal for consumption by a 300MW base load thermal coal fired power plant, which will be adjacent to the mine. The power plant will use a modern and proven Circulating Fluidised Bed (“CFB”) technology, which has low emissions and will comply with the Government of Mozambique’s requirements for air quality.
The power plant will be located about 90kms away from the local transmission network. The cost of the project is estimated between US$500 – US$600 million. Construction is planned for 2014, with the power plant generating electricity in 2017.
Ncondezi’s power project has a unique advantage over other potential power projects in the region because it is entirely focused on supplying Mozambique’s growing energy demands over the short to medium term, it can be delivered in a reasonably short time frame and the power plant can be scaled up in 300MW units.
The 300MW Project is closely aligned to the Mozambican Government’s stated objective of accelerating the electrification of the country and expanding access to electricity. Mozambique is the largest exporter of power to South Africa and yet only 20% of the country is currently electrified. The power plant will help Mozambique maximise the potential of its resources in country and will be an important contributor to Mozambique’s future development.
Ncondezi has submitted its application for a Mining Concession to the Ministry of Mineral Resources of the Republic of Mozambique (“MIREM”).
Power Framework Agreement
Ncondezi has signed a Power Framework Agreement ("PFA") with the Government of Mozambique. The PFA governs the relationship between Ncondezi and the Government 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.
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 Government has formally undertaken to support Ncondezi as a potential integral contributor to power production in Mozambique and the broader region.
The PFA covers the first two phases of the Ncondezi project up to 600MW and stipulates that Ncondezi and the Government 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.
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.
Roadmap to Implementation
Ncondezi is now proceeding with the implementation of its roadmap to construction and ultimately production in 2017. All work streams are being accelerated with a view to signing a power purchase agreement and commencing project financing in 2014.