Ncondezi Energy pushes time frames for coal power project

Ncondezi Energy updated the market on developments at its integrated Ncondezi 300MW coal-fired power project and coal mine in Tete, Mozambique on Friday, following the formal submission of an updated power tariff on 31 March.

The AIM-traded firm said that, following meetings with EDM, additional work requirements had been agreed upon and an updated development programme submitted to EDM for approval.

It said an updated transmission integration study and Mozambican power market outlook study had been commissioned, and were targeted for completion in the third quarter.

Allowing for the completion of those independent studies, Ncondezi said finalisation of the tariff agreement was now expected to be during the second half.

A shareholders’ agreement term sheet was also expected to be ready for signature in the coming weeks, and an international audit firm had been appointed by CMEC to undertake the project’s historical cost audit.

Work on that had begun, with completion targeted for the third quarter, with engineering, procurement and construction contracts also targeted for signing in the third quarter.

“Since the submission of a formal tariff offer earlier this year, the company has worked closely with EDM to discuss and agree the pathway to progress the project,” said chief executive officer Hanno Pengilly.

“Discussions have highlighted that available technical and market assumptions critical to the project are out of date, particularly given the developments in Mozambique and the region over the last two years, including progress with transmission expansion initiatives, updated supply and demand forecasts and, most recently, the potential impact of Covid-19.

“With EDM's guidance, the company has agreed to update its transmission integration study as well as conduct an independant market study for energy supply and demand forecasts in Mozambique and potential export markets.”

Pengilly said the results of those studies should verify certain technical assumptions, and provide greater certainty around the business case for the project alongside the tariff proposal, facilitating negotiations on the project tariff.

The results were also expected to be a key requirement from potential project lenders and investors.

“The independent studies are expected to add at least two months to the project development programme, moving the tariff agreement into the second half of 2020.

“Based on this, the company has submitted an updated work programme to EDM for review and will provide a more detailed timetable update to investors at the appropriate time.”

Pengilly said that at the same time as the tariff process, the firm was making “good progress” on other project work streams, with the shareholders’ agreement term sheet expected to be completed in the coming weeks, and the historical cost audit and the finalisation of EPC contracts expected in the third quarter.

“The revised time frames provide contingency for the recent lockdown restrictions in China.”

At 0959 BST, shares in Ncondezi Energy were down 12.62% at 3.67p.