London-listed Ncondezi Energy was one step closer to securing a binding power purchase agreement (PPA) with Mozambique State-owned power utility Electricidade de Mozambique (EDM) after signing the nonbinding heads of terms on Monday.

The nonbinding power purchase and transmission agreement heads of terms was a precursor to negotiating a full and binding PPA.

Ncondezi said negotiations were expected to start “imminently” and conclude with a final agreement in the first quarter of 2014.

“The signing of the PPA heads of terms significantly accelerates the project momentum built over the past five months, as it confirms EDM as the main offtaker for the first 300 MW generated [from the Ncondezi project],” CEO Paul Venter said.

Ncondezi Energy expected to commission the first 300 MW, of the planned 1 800 MW, of its 100%-owned Ncondezi project, in Tete province, in northern Mozambique, in 2017, followed by commercial operations during the first half of 2018.

The first 300 MW phase would supply domestic consumers in Mozambique using reinforced existing transmission capacity to meet current demand.

EDM would be the exclusive buyer of the electricity generated by the first phase of the integrated thermal coal mine and power plant project for a 25-year period.

The PPA’s heads of terms stipulated that Ncondezi would be responsible for the design, construction, commissioning, ownership, operation and maintenance of the power plant, as well as make available the entire capacity of the power plant and net electrical output to EDM on an exclusive basis, besides others.

The design, construction and commissioning of a transmission line would be transferred to EDM for operation and maintenance once commissioned.

Ncondezi also concluded the heads of terms for a coal supply agreement with the Ncondezi coal mine, with a final agreement expected in the first half of 2014.

In addition to buying the electricity from the plant, EDM would be required to pay tariffs; ensure ongoing operation and maintenance of the transmission connection; and provide assistance to enable the power plant to undertake its testing and commissioning procedures.

“We are now targeting completion of the remaining conditions precedent during the quarter in order to make the power framework agreement effective by year end, which will allow us to begin power concession agreement negotiations, a key component of the PPA,” concluded Venter.