LONDON (Alliance News) - Ncondezi Energy Ltd on Friday said it was in the final stages of securing a USD1.0 million shareholder loan as the date at which the joint development agreement with Shanghai Electric Power Co Ltd for a power plant becomes effective, and the date at which Shanghai Electric will start funding the project, has been pushed back to the third quarter of 2016.
The company said since it announced the joint development agreement with Shanghai Electric in January, it has agreed a work programme and budget for the development of the 300 megawatt power plant in Tete, Mozambique, and said it awaits both board's approval.
Ncondezi said the audit of its historic power plant development costs is "progressing well" and noted it was in the process of finalising the key terms of the shareholder agreement with Shanghai Electric which will govern the United Arab Emirates holding company for the power plant. Work to implement this holding company structure has started, Ncondezi added.
Ncondezi said that, once the joint development agreement is effective, Shanghai Electric will invest up to USD25.5 million into the holding company in return for a 60% equity interest in the power plant project, and said this will be paid in installments. The joint development agreement is expected to become effective once Chinese regulatory and parent company approvals are received, which has been pushed back to the third quarter of 2016.
Ncondezi said, as of Friday, it has cash resources available to it of less than USD50,000. In the absence of alternative funding, it is expected that this cash balance will provide sufficient funding until mid-May, Ncondezi added.
As such, the company said it final stages of agreeing a shareholder loan for a minimum of USD1.0 million, which is expected to provide sufficient funding to finalise the joint development agreement. Ncondezi said this was the most attractive funding option given there will be no equity dilution, but said, whilst it is confident these discussions will be successful, there are no binding agreements in place and there is no guarantee that an agreement will be reaches.
Shares in Ncondezi were down 23% at 4.63 pence on Friday.
By Hannah Boland; hannahboland@alliancenews.com; @Hannaheboland
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