Kibo Energy PLC (LON:KIBO) has inked key preliminary deals that significantly advance the proposed Benga power project in Mozambique.
The company, in a statement on Thursday, revealed that it has entered into a non-binding power purchase term sheet (PPTS) and a non-binding coal supply term sheet (CSTS) with the Mozambique subsidiary of Brazil's Vale.
The PPTS sees Kibo sell around 37% of the available power in Phase 1 of the Benga plant’s operation.
Kibo said the agreement highlighted the "urgent need for reliable power in the region" and described the tariff mechanism in the agreement as typical of power purchase agreements.
It is anticipated that a definitive deal, based on the PPTS, will be agreed and finalised with Vale during the fourth quarter. Such a deal will significantly enhance the economic feasibility and ultimate ‘fundability’ of Benga, Kibo highlighted.
The company also signed a coal supply deal with Vale, with the Brazil headquartered miner set to provide the total coal requirement to Benga over an anticipated 25-year plant life.
It described that anticipated pricing for the coal as ‘competitive’ and noted that the coal source is ‘essentially co-located’ with Benga and as such the deal with Vale eliminates coal transport and handling costs.
The two deals pave the way for further integration between Kibo and Vale, the company noted.
"Finalisation of both a PPTS and a CSTS in such a short span of time after the completion of a base case definitive feasibility study and independent financial model clearly reflects the commercial robustness of the project, both representing key milestones in the development of our first pure energy project,” said Louis Coetzee, Kibo chief executive.
“Ultimately, this demonstrates the urgent need and fast-growing demand for electricity in a mineral and resource-rich region, which will remain unexploited without access to reliable and affordable electricity.”
Coetzee highlighted that Benga is “gaining increasing recognition as a critical energy project in Mozambique”.
He added: “The success of energy projects in developing economies and which is true for all of the company's utility-scale projects, will continue to depend on our ability to demonstrate a profound understanding, capacity and commitment to address the needs and requirements of all legitimate stakeholders. I look forward to updating shareholders on further progress."
Kibo owns a 65% interest in Benga which is envisaged as a 150-300 megawatt coal-fired power plant, supplied by nearby mining operations.