Aim-listed Ncondezi Energy is steadily progressing the joint development agreement (JDA) with Shanghai Electric Power (SEP) for its 300 MW power plant project, located near Tete, in northern Mozambique.
The agreement, once effective, will see SEP inject $25.5-million to fund the balance of the power project development costs to financial close in return for a 60% shareholding in the subsidiary, Ncondezi Power Holding 2, which will own and operate the project.
The JDA will become effective upon completion or waiver of all the SEP investment conditions and the issue of a Ministerial Decree from the Mozambique government approving the award of the power concession agreement (PCA), both of which are targeted for completion in the first quarter of 2018.
SEP, Electricidade de Mozambique (EDM) and Ncondezi are making good progress on both the power purchase agreement and PCA, which are expected to be completed by the fourth quarter of this year.
“Ncondezi is currently in advanced negotiations with SEP to finalise a development funding agreement pursuant to which SEP will provide up to $3-million to fund a development programme and budget to obtain the decree and finalise the investment agreements over the next 12 months,” the company said in a statement on Thursday.
The funding is intended as a pre-investment to funding under the JDA and will form part of the total investment under the JDA.
Ncondezi further noted that the conclusion of the JDA would be followed by the last development phase of the power project development programme to finalise funding from lenders and achieve financial close in the third quarter of 2018.
Meanwhile, Ncondezi assured shareholders that it had adequate cash resources to fund its activities until May 10 – the date on which the shareholder loan becomes repayable – owing to careful working capital management.
The company has an existing $2.32-million shareholder loan that is repayable at a 1.5 times return rate if paid before May 10, after which the loan becomes repayable at two times the return.