Ncondezi Energy agrees historical costs with CMEC

Ncondezi Energy updated the market on historical development cost reimbursement negotiations with China Machinery Engineering Corporation (CMEC) for its integrated Ncondezi 300MW coal-fired power project and coal mine in Tete, Mozambique on Monday.

The AIM-traded firm said $26.7m (£19.5m) had been agreed in principle as the target project historical expenditure.

It said expenditure of $21m was audited by a third party, with the audit report accepted by CMEC in principle/

On top of that, a total of $5.7m relating to historical senior and project management costs were still under negotiation.

The board said CMEC and Ncondezi agreed to finalise historical development costs once the project’s power tariff was approved by Electricidade de Moçambique (EDM).

“Following an extensive third-party audit review of the company's historical costs over a 10-year period, and following successful negotiations with CMEC, Ncondezi has been able to demonstrate $26.7m of historical expenditure on the project,” said chief executive officer Hanno Pengilly.

“Of this amount, CMEC have agreed ‘in principle’ to $21.0m to be recognised for future reimbursement with the balance of costs, relating to senior and project management costs, still subject to further negotiation.

“The $21.0m represents a 24% premium to previously-agreed historical development costs.”

Pengilly said that, as the project’s power tariff was currently being negotiated with EDM, both parties had agreed to finalise the historical development costs once those negotiations were complete, as that would also have an impact on CMEC's subscription price to be agreed for the 60% share in the project and the project developers' fee.

“With this work now complete, the company can focus its resources on the tariff approval process with EDM and finalising the engineering, procurement and construction contracts with CMEC early in the new year.”

At 0854 GMT, shares in Ncondezi Energy were up 7.95% at 5.94p.