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 is making steady progress towards financial close in 2017 for its 300 MW power plant and integrated openpit thermal coal mine project, in Mozambique.

A three-year construction programme will start once financial close is reached, with commercial operations expected to begin in 2020.

Since the launch of the project in 2012, Ncondezi has focused on developing constructive dialogue and stable working relationships with the Mozambique government and local power utility Electricidade de Moçambique (EDM).

The project was originally conceptualised as part of a larger export mining operation that was scaled back to meet Ncondezi’s power strategy, owing to declining seaborne coal prices and delays in building coal export rail and port infrastructure.

Ncondezi chief development officer Hanno Pengilly has highlighted that, together with internationally recognised technical consultants, Ncondezi has completed technical studies on all key elements of the project, including mine and power plant feasibility studies and environmental- and social-impact assessment studies.

EDM will be the 100% offtaker of the first 300 MW for 25 years. Ncondezi has also signed a joint development agreement (JDA) with Chinese power generation group Shanghai Electric Power (SEP) for a 60% equity stake in the power project. SEP will co-develop, fund and operate the project.

He has added that Ncondezi also benefits from strong shareholder support and expertise, particularly from infrastructure development and finance institution Africa Finance Corporation (AFC), which is its largest shareholder.

In August, Mining Weekly reported that AFC committed a $3-million loan facility to Ncondezi for ongoing project development costs not covered in the JDA between Ncondezi and SEP. The loan will be paid in two tranches: the first tranche of $1-million is repayable in 2017, while the second tranche of $2-million has a 24-month term from first drawdown and is conditional on the completion of the JDA with SEP, providing an appropriate security package.

“The project will be well placed to move our strategy forward to further expand the power plant to its 1 800 MW capacity. The potential for increased investment interest will also be stronger as the project moves forward into a lower-risk operational phase of its life cycle, attracting strategic and yield-focused investors looking for an annuity income stream.”

Pengilly has highlighted that, in addition to providing secure and affordable electricity for Mozambique using proven and reliable technology, the project will promote regional economic development in the northern part of the country – an area with significant potential that is, however, constrained by a lack of reliable or affordable energy supply. 

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.