TIDMNCCL
RNS Number : 1361U
Ncondezi Energy Limited
20 October 2017
News Release
Ncondezi Agrees Non-Binding Offer with General Electric and
China Machinery Engineering Corporation
20 October 2017: Ncondezi Energy Limited ("Ncondezi" or the
"Company") (AIM: NCCL) is pleased to announce that it has agreed in
principle the terms of a Non-Binding Offer ("NBO") with China
Machinery Engineering Corporation ("CMEC") and General Electric
South Africa (PTY) Limited ("GE") (together the "Consortium") to
enter into exclusive negotiations to develop, construct and operate
the integrated Ncondezi 300MW coal fired power project (the "Power
Project") and open pit coal mine in Tete, Mozambique (the "Mine
Project")( together the "Integrated Project").
Highlights:
-- CMEC and GE are world leaders in the energy sector with
significant experience in Africa and Mozambique
-- Ncondezi agrees NBO with CMEC and GE to acquire a minimum 60%
equity stake in the Integrated Project
-- NBO grants exclusivity until 30 April 2018 to conclude a
binding Joint Development Agreement ("JDA")
-- JDA will set out the commercial terms on which the parties
will complete the acquisition and jointly develop and fund the
Integrated Project up to and including Financial Close ("FC")
-- CMEC and GE to lead project debt financing in conjunction
with Ncondezi for both the Power Project and Mine Project at FC
-- CMEC and GE will be responsible for the engineering,
procurement and construction ("EPC") and operations and maintenance
("O&M") for the Integrated Project on a build own operate
basis
-- Power project boiler technology will return to Circulating
Fluidized-Bed ("CFB") from Pulverized Coal ("PC"), where technical
work is more advanced
-- Offer subject to CMEC and GE successfully completing their
due diligence and agreeing the commercial terms of the JDA
-- FC targeted for completion end Q4 2018
-- Formal signing ceremony for the NBO planned in Beijing, China in early November 2017
Ncondezi Non-Executive Chairman, Michael Haworth, commented:
"The Company is pleased to announce agreeing to enter into
exclusive negotiations with CMEC and GE, following an intensive
process to identify a new partner to take a leadership role in
delivering the 300MW coal fired power project and integrated mine.
The CMEC and GE NBO has the potential to materially de risk the
development, financing, construction and operation of the Power and
Mine Projects. CMEC and GE's collective experience in both the
energy and mining sectors and specific experience and reputations
operating in Mozambique, gives them distinct advantages as a
potential partner with Ncondezi. The NBO proposes to develop the
power plant and mine projects as an integrated project, which has
the potential to greatly simplify the development, commercial and
financing aspects of the process to FC and is welcomed by Ncondezi.
The Board believes that a return to CFB technology, where technical
work is more advanced, will also facilitate a shorter, more cost
effective route to FC. Today's announcement further highlights the
advanced development stage of the Power Project and its
attractiveness to international developer and operators. All
efforts will now be focused on delivering the JDA."
Enquiries
For further information please visit www.ncondezienergy.com or
contact:
+27 (0) 71 362
Ncondezi Energy: Hanno Pengilly 3566
Liberum Capital
Limited: Neil Elliot / Richard +44 (0) 20 3100
NOMAD Broker Crawley 2000
Note:
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation ("MAR"). Upon the publication of this
announcement via Regulatory Information Service ("RIS"), this
inside information is now considered to be in the public domain. If
you have any queries on this, then please contact Hanno Pengilly,
Chief Development Officer of the Company (responsible for arranging
release of this announcement) on +27 (0) 71 362 3566.
Ncondezi 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.
Background
This announcement follows the launch of a new partner search in
June 2017, which focused on identifying a partner capable of
providing a leadership role in the financing, construction and
operation of the Power Project, with a credible track record in
both the global and African power sectors.
CMEC is a large Chinese integrated company with international
reach and engineering contracting as its core business. CMEC's
project experience, technical ability, and financing capacity, has
allowed it to undertake projects in more than 150 countries in the
fields of international contracting and general international
trade. CMEC's contracting business involves a broad range of areas
such as electric power & energy, transportation, electronic
communication, water supply & treatment, housing &
architecture, manufacturing and processing plant, environmental
protection, mining and resource prospecting. As a world-renowned
engineering contractor, CMEC has been ranked among China's top 10
contractors by business turnover from overseas contracted projects
by the Chinese Ministry of Commerce for many consecutive years.
GE is a world energy leader that provides technology, solutions
and services across the entire energy value chain from the point of
generation to consumption. GE's Power business is transforming the
electricity industry by uniting all the resources and scale of the
world's first Digital Industrial Company. GE's customers operate in
more than 150 countries, and together power more than a third of
the world to illuminate cities, build economies and connect the
world.
CMEC and GE have jointly worked on numerous projects across the
world and successfully completed a number of power projects in the
sub Saharan African region. Most relevant to Ncondezi, the two
parties are currently working together on the Thar Block II Power
Plant project in Pakistan, which is a 660MW integrated coal fired
power plant and mine which utilises two 330MW CFB boilers and due
to be commissioned in 2019.
Experience in Mozambique
Both CMEC and GE have successful track records operating in
Mozambique.
CMEC has been involved in supplying and installing transmission
infrastructure to Mozambique's state power utility Electricidade de
Moçambique ("EDM"), improving access to electricity for Mozambicans
and new industry development. In 2015, CMEC completed a 110kV
transmission line project in Nacala City in northern Mozambique,
and in 2017, CMEC signed an EPC contract for a 400kV transmission
line project in the same location. CMEC is also an EPC contractor
for the Moatize to Macuse railway and port project designed to
provide a new coal transport corridor from the Tete region.
GE has been present in Mozambique for over 4 years with offices
in Maputo and over 44 employees. GE is active in multiple sectors
including the transport, health care, oil and gas and energy
sectors. To date, GE has supplied over 120 locomotives, installed
10 4.4MW power units for the Kuvaninga gas IPP project and is to
provide technology solutions and services to ENI's US$7 billion
Coral South LNG project in the Rovuma Basin. In addition, GE is
working on initiatives to improve access and quality of basic and
diagnostic services of rural healthcare and reduce infant mortality
rates. This work is run in parallel to GE's local skills
development programs which include scholarships, funding of
educational facilities and the provision of local courses.
Non-Binding Offer
The NBO sets out the terms, work program and timetable by which
the parties will work together to executing a legally binding JDA
by 30 April 2018 or such later date agreed between the parties.
The terms of the NBO have been agreed and initialled by all
parties and a formal signing ceremony is planned in Beijing, China,
in early November 2017. However, the work program to finalise and
execute the JDA will start immediately.
The key terms of the NBO will include:
-- CMEC and GE to acquire a minimum 60% stake in both the Power
Project and Mine Project holding companies which currently hold
100% of each project respectively.
-- JDA will set out the commercial terms on which the parties
will complete the acquisition and jointly develop and fund the
Integrated Project up to and including FC.
-- The Power Project and the Mine Project will be developed as
an integrated project, with CMEC and GE taking full responsibility
for EPC and O&M contracting.
-- CMEC and GE will take full responsibility for managing the
EPC process for the Transmission Line, which will be constructed on
a Build Transfer model, subject to EDM approval.
-- CMEC and GE to lead project debt financing in conjunction
with Ncondezi for both the Power Project and Mine Project at
FC.
-- Funding ratios to be adjusted should CMEC and GE take an equity stake larger than 60%.
In addition, the power plant generation technology will return
to CFB boiler technology from PC boiler technology. This provides a
number of advantages to the project including the technical
feasibility work being more advanced on a CFB solution, reduced
time required to reach FC and lower coal costs as CFB fuel
requirements are more suitable for Mozambican coal qualities.
Conditions
The terms of the NBO will be subject to a number of conditions
including:
-- CMEC and GE completing satisfactory due diligence on the
project including development status, permits, project economics
and security package.
-- CMEC and GE completing satisfactory audit of the historic development costs.
-- CMEC and GE having exclusivity on the EPC and O&M for the
Integrated Project, and submitting binding offers that support the
agreed tariff envelope.
-- Confirmation of the process to award the Power Concession
Agreement and Power Purchase Agreement from Mozambican Government
and EDM respectively.
-- Execution of a binding JDA
-- Compliance with relevant CMEC and GE compliance rules and guidelines.
-- Compliance with Mozambique and relevant governmental regulations and approvals.
Exclusivity
CMEC and GE will have exclusivity until 30 April 2018 to
negotiate and enter into the JDA with Ncondezi and tender on the
EPC and O&M contracts for the Integrated Project.
Termination
This NBO will be terminated in case any of the following events
occurs:
-- CMEC and GE are not satisfied with the result of their due diligence.
-- Submission of Binding Offer for EPC and O&M not being
received by NEL before 31 December 2017 on terms that are
acceptable to NEL, or such later date as agreed between the
parties.
-- The Parties do not extend the term of this NBO by written
agreement on or before 30 April 2018.
Next Steps
The parties will commence the JDA due diligence process
immediately in order to meet the NBO conditions highlighted above.
This will likely involve site visits in Tete, Mozambique as well as
potential meetings with the Mozambican Government and EDM at the
appropriate time.
In parallel to this, CMEC and GE are preparing the submission of
binding bids for the EPC and O&M of the Integrated Project
before the end of December 2017.
The Company will make a further update to shareholders following
the formal signing of the NBO.
There is no certainty that the transactions contemplated by this
announcement will occur.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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