Construction of the Ncondezi Power Company (NPC) coal-fired power plant and the Ncondezi coal mine, in the Tete province of Mozambique, is expected to start in the second half of 2017, once power developer Ncondezi Energy has finalised an engineering, procurement and construction contractor, and financing.

The tenders for contractors that could construct the mine and the power plant were run separately, and started in 2014 and 2013 respectively. However, owing to changes in the boiler technology of the power plant, the tender processes will need to be updated with bids targeted in the fourth quarter of 2016, with contractors signed to start construction on the mine and power station during the second half of 2017.

Ncondezi Energy chief development officer Hanno Pengilly states that the combined project is one of the most advanced in Africa. He explains that the estimated cost of the power plant will be around $1-billion and that of the mine between $60-million and $80-million.

In January, Mining Weekly reported that the Aim-listed company had entered into a binding joint development agreement with China’s Shanghai Electric Power Company (SEP) to develop the Ncondezi thermal power station project. The deal will result in SEP becoming a strategic investor in the Mozambique project.

As a result of the agreement, SEP will own 60% of NPC in return for a $25.5-million investment in the development of the project up to the point of financial close (where first funding drawdowns and construction begin). SEP will be responsible for 60% of the equity and all the debt at financial close of the project, while Ncondezi will be responsible for funding 40% of its equity.

The joint development agreement was signed in January and is increasing the ties that SEP has with the NPC.

The power station is expected to initially produce 300 MW – 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, using coal supplied by the Ncondezi coal project.

Being built in phases, the power plant project has been designed to be scalable up to a planned maximum capacity of 1 800 MW. Although only about 20% of Mozambique is electrified, the acceleration and expansion of electrification is a policy of government.

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.

The Ncondezi 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. Pengilly explains that, as the mine will be the base for the project, the power plant will be located on the mining concession. The mining operation and power station land use and environmental and social plans have been approved by the Mozambique government.

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. Pengilly says coal from the mine – still at a lower quality than export-grade thermal coal – must be processed to achieve the desired grade of 18.66 MJ/kg before it can be used by the Ncondezi power plant.

“We have a bankable solution to supply the power plant throughout its operational life with coal from the mine,” he adds.

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

“We will always look to evaluate the opportunity to buy in third-party coal and blend it with the Ncondezi coal to produce the final product for the power station. There are existing operations in the surrounding basin – mining company Vale is mining in the Moatize basin and a smaller operation called the Minas Moatize coal mine supplies varying qualities of coal,” he explains.

Hence, the opportunity to buy coal from other surrounding mines for use at the Ncondezi power station exists, providing an outlet for these mines.

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 supply 50 permanent jobs, while the power plant will supply more than 200 permanent positions.

“We expect a significant multiplier effect on the back of these two projects. Local skills will be used where possible for the construction, with some engineers potentially being contracted from South Africa, China and the UK,” he says.