LONDON (Alliance News) - Ncondezi Energy Ltd said Wednesday that it has agreed a 25-year commercial deal with Electricidade de Mozambique on the sale of electricity from the Ncondezi Power Project.
Ncondezi Energy is a near-term integrated thermal coal and power generation company focused on the phased development of its project located in Northern Mozambique.
The agreed commercial deal includes the range for the starting electricity tariff to be paid by EdM, said Ncondezi, which will then be subject to adjustments throughout the 25-year operational life of the project.
The agreement is subject to a number of conditions, including the introduction of a strategic investor acceptable to EdM, confirmation of the availability of political and commercial risk cover, bankable EPC contracts, and agreeing a timetable for the substantial completion of all key project agreements involving EdM, said Ncondezi.
The company said the agreement comes after six months of negotiations between the companies and the Mozambique Department of Energy over critical aspects of the project's viability, such as the structure and content of key project agreements, the power purchase agreement tariff (level, structure and indexation) and the terms of credit support to be provided for the project.
"The EdM Board of Directors has approved the commercial deal and conditions precedent and endorsed continued negotiations between the parties with a view to concluding the key project agreements by end of 2014," said Ncondezi in a statement.
"This is a very significant milestone for Ncondezi and is the culmination of all our hard work over the last 2 years," added Ncondezi CEO Paul Venter. "Financial Close [is] targeted for H1 2015 following which construction is expected to begin in H2 2015."
Ncondezi Energy owns 100% of the Ncondezi Project which is strategically located in the power generating hub of the country, the Tete Province in northern Mozambique. The company is developing an integrated thermal coal mine and power plant in phases of 300 megawatts up to 1,800 megawatts. The first 300 megawatt phase is targeting domestic consumption in Mozambique, using reinforced existing transmission capacity to meet current demand and commercial operations, is targeted for the first-half of 2018.
Shares in Ncondezi Energy were Wednesday trading 16.00% higher at 7.25 pence per share, the second highest gainer on AIM.
By Alice Attwood; aliceattwood@alliancenews.com; @AliceAtAlliance
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