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Ncondezi Energy delighted with CMEC commitment to project in Mozambique

Snapshot

  • Developing 300Mw power station in northern Mozambique
  • Entered commercial and industrial off-grid power sector
  • First solar/battery project due to come online in H1 2020
coal

Quick facts: Ncondezi Energy Ltd

Price: 4.9 GBX

AIM:NCCL
Market: AIM
Market Cap: £17.14 m
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What it owns

Ncondezi

The project is in the heart of Tete, Mozambique’s most rapidly industrialising region and a hub for power generation.

Total capital expenditure is expected to be US$1.1bn and once completed it will be one of the largest generation plants in the country.

In July 2019, a joint development agreement was signed with Chinese firm CMEC and US group General Electric.

Ncondezi Energy (LON:NCCL) will look to retain a 40% equity stake in the project.

On the share register are the African Finance Corporation, a specialist Africa infrastructure fund, and Polenergia that together hold approximately 30% of the company’s issued shares.

Solar Power

Separately, Ncondezi has a joint venture deal with GridX Africa Development with a view to building captive solar and battery storage solutions for commercial and industrial use.

GridX has 15 solar and battery storage projects, of which six are at an advanced stage.

 

How it is doing

Ncondezi took a big step forward when it reached agreement in November with CMEC for a US$1.8mln programme of accelerated development works.

CMEC will fund the programme, which will focus on the additional survey drilling required to complete Chinese Government approvals and to ensure the key agreements are compliant with Mozambican laws.

Ncondezi added this funding deal is a supplement to the Joint Development Agreement announced in July 2019, which still remains in force.

Funds drawn down through the agreement will be treated as pre-financial close project development costs, to be reimbursed at financial close.

Ncondezi has agreed to a share pledge as security for the funding, which will be released upon achievement of financial close with CMEC as the strategic partner.

 

What the boss says: Hanno Pengilly, chief executive

"This provides the strongest signal to date of CMEC's commitment to the project, targeting its 60% equity stake, and we look forward to them leading the debt financing negotiations with Chinese financiers. Consultants have been instructed and work has commenced."

 

Video

 

Inflexion points

  • Finances for Ncondezi agreed and put in place
  • Permits agreed and construction gets underway in Mozambique
  • Expansion of GridX solar project
  • JDA timetable for Ncondezi

 

What the analysts say

Analyst at broker Canaccord Genuity said Ncondezi’s future lies beyond its current development of a thermal power station in Mozambique and in off-grid solar generation.

The broker, which initiated coverage in May with a ‘speculative buy’ rating and 13p price target on the shares, said that the short-term picture will be dominated by the 300Mw power project in Tete.

“The cost of solar is already highly attractive compared to off-grid diesel power, and with this cost expected to keep falling sharply we see customers moving increasingly to onsite off-grid generation,” the broker said.

There is sufficient coal in Ncondezi’s licence for a series of similar power stations, adds Canaccord, with export potential as well as Mozambique’s neighbours also chronically short of power but the plan is to build a 300 MW plant, supplied by 1.5mln tons of coal annually.

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