Name of the Project
Ncondezi coal-to-power project.

Location
Tete, Mozambique.

Client
Ncondezi Power Company (NPC).

Project Description
The 38 700 ha Ncondezi licence area is located in the coal-bearing Tete province, one of the largest undeveloped coal mining regions in the world.

The Joint Ore Reserves Committee-compliant coal resource amounts to 4.7-billion tons, permitting a large and long operation. The Phase 1 power plant will use Mozambique’s present transmission network, reinforced, to carry its output to consumers. Only about 20% of the country is currently electrified and the acceleration and expansion of electrification have become government policy.

The Ncondezi mine forms part of the integrated thermal coal mine and power plant project near Tete. The power station is expected to initially produce 300 MW, of which 60 MW will be used to operate the power plant and 240 MW will be supplied to the northern electricity grid of Mozambique for use by consumers across Tete province.

Being built in phases, the power plant project has been designed to be scalable up to a planned maximum capacity of 1 800 MW.

The Ncondezi mine will be will be the base for the project and the power plant will be located on the mining concession. The mine will be able to supply 1.1-million tons of coal a year, with an energy-producing capacity of 18.66 MJ/kg for 25 years.

The openpit mine will be 2 km away from the power plant and will have a lifetime capacity of 4.8-billion tons of coal. The coal from the mine – still at a lower quality than export-grade thermal coal – will have to be processed to achieve the desired grade of 18.66 MJ/kg before it can be used by the Ncondezi power plant.

Ncondezi Energy will consider exporting coal when the price of seabourne coal and access to rail and port infrastructure improve in the future.

Further, some of the other lower-quality coal from surrounding mines in Tete might also be used to bolster the power station’s coal supply.

Jobs Expected to be Created
During the construction of the Ncondezi power plant and mine, an estimated 2 000 jobs will be created. Once construction of the mine is completed, it will provide 50 permanent jobs, while the power plant will provide more than 200 permanent positions

Net Present Value/Internal Rate of Return
Not stated.

Value
The estimated cost of the power plant is $1-billion and that of the mine between $60-million and $80-million.

Duration
The mine and power plant will start construction simultaneously, with the power plant estimated to take three years to complete and the coal mine two years. Once the mine starts operations, it will accumulate a stockpile of coal for the power station to use once it has been completed.

Latest Developments
Ncondezi Energy is steadily progressing the joint development agreement (JDA) with Shanghai Electric Power (SEP) for its 300 MW power plant project.

The agreement, once effective, will result in SEP’s injecting $25.5-million to fund the balance of the power project development costs to financial close in return for a 60% shareholding in the subsidiary, Ncondezi Power Holding 2, which will own and operate the project.

The JDA will become effective upon completion or waiver of all the SEP investment conditions and the issue of a Ministerial Decree from the Mozambique government approving the award of the power concession agreement (PCA), both of which are targeted for completion in the first quarter of 2018.

SEP, Electricidade de Mozambique (EDM) and Ncondezi are making good progress on the power purchase agreement and PCA, which are expected to be completed by the fourth quarter of this year.

“Ncondezi is . . . in advanced negotiations with SEP to finalise a development funding agreement pursuant to which SEP will provide up to $3-million to fund a development programme and budget to obtain the decree and finalise the investment agreements over the next 12 months,” the company said in a statement on Thursday.

The funding is intended as a pre-investment to funding under the JDA and will form part of the total investment under the JDA.

The conclusion of the JDA will be followed by the last development phase of the power project development programme to finalise funding from lenders and achieve financial close in the third quarter of 2018.

Meanwhile, Ncondezi has assured shareholders that it has adequate cash resources to fund its activities until May 10 – the date on which the shareholder loan becomes repayable – owing to careful working capital management.

The company has an existing $2.32-million shareholder loan that is repayable at a 1.5 times return rate if paid before May 10, after which the loan becomes repayable at twice times the return.

Key Contracts and Suppliers
KPMG (mine feasibility study), Impacto and Environmental Resources Management Southern Africa (environmental- and social-impact assessment) and the Mineral Corporation (geological consultant).

On Budget and on Time?
Too early to state.

Contact Details for Project Information
NPC corporate development manager Hanno Pengilly, tel +44 20 7183 5402 or email info@ncondezicoal.com.