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

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

Client
Ncondezi Power Company (NPC).

Project Description
Ncondezi's 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 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 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.

Potential Job Creation
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
Construction of the mine and power plant will start 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 has entered into negotiations with China Machinery Engineering Corporation (CMEC) and General Electric (GE) South Africa for the development, construction and operation of the Ncondezi coal-fired power project and openpit coal mine.

Ncondezi said on October 20 that it had agreed in principle to the terms of a nonbinding offer (NBO) to enter into exclusive negotiations and conclude a binding joint development agreement (JDA) by April 30 for CMEC and GE’s acquisition of a 60% equity stake in the project.

This follows an intensive search for a new potential partner to take the lead in the financing, construction and operation of the power project.

“The CMEC and GE NBO has the potential to materially derisk the development, financing, construction and operation of the power and mine projects,” Ncondezi nonexecutive chairperson Michael Haworth has said.

The JDA will set out the commercial terms for the completion of the acquisition, and for the joint development and funding of the integrated project, including financial close, which is expected in the fourth quarter of 2018.

The agreement proposes the development of the power plant and mine projects as an integrated project to simplify the development, commercial and financing aspects of the process.

In addition, the power project’s boiler technology will return to the circulating fluidised-bed (CFB) from pulverised coal.

The board believes that a return to CFB technology, where technical work is more advanced, will also facilitate a shorter, more cost-effective route to financial close.

CMEC and GE will be responsible for the engineering, procurement and construction, as well as the operations and maintenance for the project on a build, own, operate basis.

The agreement remains subject to CMEC and GE successfully completing due diligence and agreeing to the commercial terms of the JDA.

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.