A 25-year concession contract was signed on Friday opening the way for the development of a 300 MW, $1-billion coal-fired independent power producer (IPP) project in the Tete province of Mozambique, about 1 500 km north of Maputo.

The contract was conclude between the government of Mozambique and a consortium led by ACWA Power, a Saudi Arabian company that has a 15 979 MW global electricity portfolio. Brazilian mining group Vale and Mitsui, of Japan, are co-sponsors of the project, while State-owned utility Electricity de Mozambique (EDM) and local investor Whatana Investment Group have taken up minority stakes in the project.

The greenfield pulverized-fuel project, known as the Moatize IPP project, would be developed on a build-operate-own-and-transfer basis, and would be powered by coal from Vale’s adjoining Moatize mine.

About 250 MW would be consumed by the mine, with the 50 MW balance to be fed into the EDM grid.

GS Engineering & Construction, of Korea, has been appointed as the engineering, procurement and construction contractors, while ACWA Power subsidiary, NOMAC, would be responsible for operations and maintenance.

The project is considered the first phase of a larger coal-fired power station and would be financed through a project finance framework.

“Signature on this concession agreement is a significant milestone for the Moatize IPP project, enabling us to complete the financing process and commence full scale construction,” ACWA Power CEO Paddy Padmanathan said in a statement.

He added that the investment would enhance the group’s position as power developer in Southern Africa, where it was also developing the 50 MW, R5-billion Bokpoort concentrated solar power project, in South Africa’s Northern Cape province.

ACWA Power has set a goal of building a Southern African portfolio of 4 000 MW by 2020 and was closely monitoring further renewables and conventional opportunities in South Africa, the region’s largest economy and biggest electricity consumer.