Ncondezi finalises relationship agreement with GridX

The AIM-traded firm said it had signed a binding relationship agreement, under which it had the right, but not the obligation, to fund a pipeline of GridX C&I solar and battery storage projects in Mozambique.

It said it had the right of first refusal to fund 100% - up from 50% - of the projects, up to a total of $5.5m.

The projects included a diversified portfolio of seven identified potential projects with a combined potential installed solar capacity of 2.8 MWp, and 4.5 MWh of battery storage.

Initial project investments into qualifying projects, subject to funding, represented an annuity revenue stream potential of more than $0.75m per annum.

Ncondezi said the projects would be funded on a project-by-project basis, and needed to meet strict minimum key performance indicators to be eligible for funding, including having a signed offtake agreement, the use of proven technology, the existence of all consents and permits to start construction, meeting minimum credit requirements, and the potential to generate an ungeared equity post-tax internal rate of return to Ncondezi of at least 10%.

GridX would be responsible for all costs incurred up to a project meeting those indicators, and Ncondezi exercising its right to invest.

The right of first refusal would be managed under the newly-formed subsidiary, Ncondezi Green Power.

Ncondezi said the initial projects were at an early stage of development, with the first funding requirement not expected until the fourth quarter of 2020 or the first quarter of 2021.

The relationship agreement replaced the term sheet signed with GridX, which was announced on 5 April 2019.

“We are pleased to have finalised the relationship agreement with GridX, and believe it provides an optimal structure for Ncondezi to build out its C&I solar and battery storage strategy, bringing a focused portfolio of potential projects in Mozambique, which we will have full control over, in a jurisdiction we know well,” said chief executive officer Hanno Pengilly.

“This structure provides the opportunity for a phased and low risk entry point into the sector, with GridX responsible for the development and delivery of construction ready projects for investment consideration and, over time, a diversified portfolio approach spreading investment risk across multiple projects.

“The initial project pipeline includes seven potential projects covering a diverse range of sectors from hospitality and tourism to food and drink manufacturing and retail centres, ensuring a wide range of potential offtakers and securing against any downturn in a single industry.”

Pengilly said those projects, along with its existing solar and energy storage facility currently under construction, represented a combined installation potential of 3.2 MWp of solar photovoltaic, and 5.5 MWh of storage, with potential revenues of more than $0.95m per annum.

“The initial projects are expected to be developed in a phased approach with no immediate funding requirements until the end of the year.

“This is an optimisation of the original proposed structure with GridX announced on 5 April 2019 and requires no additional fee payments from Ncondezi.”

Pengilly noted that all projects would be housed under the company's newly-formed renewable energy subsidiary, Ncondezi Green Power.

“We believe the C&I solar and battery sector continues to represent a significant opportunity for the company, and the relationship agreement allows us to develop our presence in the sector as we progress our flagship 300MW integrated coal to power project to financial close.”

At 1542 BST, shares in Ncondezi Energy were up 7.34% at 4.24p.