Ncondezi Energy Limited Exclusive Discussions with SEP Suspended (3272G)
May 26 2017 - 1:24AM
UK Regulatory
TIDMNCCL
RNS Number : 3272G
Ncondezi Energy Limited
26 May 2017
News Release
Ncondezi suspends exclusive discussions with SEP and announces
new partner search
26 May 2017: Ncondezi Energy Limited ("Ncondezi" or the
"Company") (AIM: NCCL) announces that it has suspended exclusive
discussions with Shanghai Electric Power Co., Ltd ("SEP") regarding
its Joint Development Agreement ("JDA"). Exclusivity arrangements
with SEP have lapsed and Ncondezi will now engage with additional
strategic partners who have expressed an unsolicited interest in
developing the project alongside Ncondezi. In addition, the Company
is pleased to announce that it has received indications of interest
for an additional US$350,000 shareholder loan which is in the
process of being finalised and documented and which would fund the
Company until 2 September 2017.
Suspension of Discussions with SEP
The decision to suspend exclusive discussions regarding the JDA
with SEP follows more than three years of negotiations and work
alongside SEP. Key milestones over this extended period
included:
-- In October 2014, Ncondezi and SEP signed a non-binding MOU
which outlined the intention for SEP to become the strategic
partner on the Ncondezi Power Project.
-- In January 2016, Ncondezi and SEP signed the binding JDA
which provided for SEP to invest up to $25.5 million for a 60%
stake in the Ncondezi Power Project. The original target date to
satisfy the SEP Investment Conditions was 8 February 2016 which was
extended to 30 May 2016 and then targeted for 30 September 2016 and
finally 31 December 2016.
-- In July 2016, Ncondezi and SEP signed a non-binding Shareholders' Agreement Term Sheet.
-- On 30 March 2017 Ncondezi announced that it was in advanced
negotiations with SEP in relation to a Development Agreement which
would provide interim funding to Ncondezi. This Development
Agreement was due to have been signed during March 2017.
Notwithstanding SEP's assurances that it is committed to the
Ncondezi Project, and the advanced stage of discussions, SEP has
not provided funding to the project. Accordingly, despite the
longstanding relationship with SEP and its credentials to act as a
strategic partner, the Board of Ncondezi believes that the ongoing
delays in SEP funding the Project is unsustainable and that it is
now in the best interests of the Company and its shareholders to
suspend exclusive discussions with SEP and to enter into
discussions with alternative potential partners.
New Partner Search
The Ncondezi power project is at an advanced stage and is
supported by attractive economics. Key highlights of the Ncondezi
project remain:
-- Advanced form Power Purchase Agreement and Power Concession
Agreement with "in principle" agreement with Electricidade de
Moçambique on the electricity tariff
-- Technical work substantially complete
-- Environmental and Social Impact Assessment studies complete for the mine and power plant
-- Mine Concession awarded and large thermal coal resource of 4 billion tonnes
-- Access to power grid approved
-- Clear pathway to Financial Close, subject to funding
The Company has recently received a number of unsolicited
expressions of interest from other strategic investors and project
developers. A new strategic partner process has commenced and
initial feedback is expected before the end of August.
Financial position and funding strategy
The Company has significantly reduced its cash burn over an
extended period and has stretched its available funding well beyond
the timeframe that had been originally been targeted. Ncondezi has
received indications of interest totalling US$350,000 to finance
the work programme and budget to 2 September 2017, the date when
the existing Shareholder Loan becomes payable. The Company is
currently in the process of drafting and agreeing the loan
documentation with the potential lenders and seeking the formal
agreement of the holders of the existing shareholder loan.
This proposed financing has been committed by the Chairman
Michael Haworth (US$200,000) and other existing long term
shareholders ($150,000) and is expected to form part of the
existing Shareholder Loan and will receive a 1.25x return at its
maturity on 2 September 2017. The terms of the existing Shareholder
Loan will remain unchanged.
Whilst the Company is confident of finalising the new
Shareholder Loan arrangements, there can be no certainty that the
new loan documentation will be finalised and entered into.
The Company's senior management deferred 50% of their salary
between November 2016 and January 2017 and has deferred 100% of
their salary since February 2017. The management team have agreed
to convert their deferred salaries into the Shareholder Loan. The
total amount to be converted into the Shareholder Loan is expected
to be $232,000 and will not attract any return.
The Company recognises that shareholders may be concerned about
the Shareholder Loan maturing on 2 September 2017 and is actively
engaging with the Shareholder Loan holders to seek an acceptable
funding solution ahead of these loans becoming repayable. However,
it must be noted that there is no certainty that additional funding
will be raised and there can be no certainty that the existing
Shareholder Loan can be refinanced before it becomes repayable on 2
September 2017.
With the new partner search underway and the focus on cost
control during this time, the Company regrets to announce that Mr
Chris Schutte has resigned as Chief Operating Officer with effect
from 26 May 2017 but will remain on the board as a Non-Executive
Director. Going forward, the finance function, financial advisor
and Mozambican operations will report directly to and be actively
managed by the Board.
More information will be provided to shareholders regarding any
developments with the partner search on an ongoing basis.
Enquiries
For further information please visit www.ncondezienergy.com or
contact:
+44 (0) 20 7183
Ncondezi Energy: Hanno Pengilly 5402
Liberum Capital
Limited: Neil Elliot / Richard +44 (0) 20 3100
NOMAD & Broker Crawley 2000
Note: This announcement contains inside information which is
disclosed in accordance with the Market Abuse Regulations.
Ncondezi Energy owns 100% of the Ncondezi Project which is
strategically located in the power generating hub of the country,
the Tete Province in northern Mozambique. The Company is developing
an integrated thermal coal mine and power plant in phases of 300MW
up to 1,800MW. The first 300MW phase is targeting domestic
consumption in Mozambique using reinforced existing transmission
capacity to meet current demand.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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