JOHANNESBURG (miningweekly.com) – Aim-listed Ncondezi Coal has concluded a power framework agreement with the Mozambique government in relation to its proposed 1 800 MW Ncondezi power project in the Tete province.

The agreement would govern the relationship between Ncondezi and the government during the development phase of the power project and set out the agreed pathway and requisite milestones that needed to be reached prior to financial close of the project so that Ncondezi could become eligible to be awarded a formal power concession.

Ncondezi stated that the agreement was, besides others, a legal prerequisite to the initiation of exclusive discussions with potential power offtakers, including State-owned utility Electricidade de Moçambique (EDM), for the conclusion of a power purchase agreement.

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.

The Ncondezi power project is targeting initial power generation of 300 MW in 2017 and through the conclusion of the agreement, the Mozambique government had formally undertaken to support Ncondezi as a potential integral contributor to power production in Mozambique and the broader region.

The agreement covers the first two phases of the Ncondezi project, which will have the capacity to generate up to 600 MW of power, and stipulates that Ncondezi and the government would negotiate in good faith and agree to conditions that are mutually acceptable to both parties for any subsequent phases of the Ncondezi power project to take its output up to 1 800 MW.

Further, Ncondezi and the Mozambique government would constitute a liaison committee to assist with the implementation of the agreement. The committee would initially comprise one member from Ncondezi, one member from government and one member from EDM.

"We are very pleased to have successfully concluded the power framework agreement with the Mozambique government, as this now allows us to commence, on an exclusive basis, formal negotiations on the key commercial contracts, such as the power purchase agreement, coal supply and transmission, 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 the fourth quarter of 2013," Ncondezi acting CEO Paul Venter said.