Ncondezi Energy Limited JDA signed with Shanghai Electric Power (4955L)
January 11 2016 - 11:03AM
UK Regulatory
TIDMNCCL
RNS Number : 4955L
Ncondezi Energy Limited
11 January 2016
News Release
Ncondezi Signs Joint Development Agreement with Shanghai
Electric Power
11 January 2016: Ncondezi Energy Limited ("Ncondezi" or the
"Company") (AIM: NCCL) is pleased to announce that it has signed a
binding Joint Development Agreement ("JDA") with Shanghai Electric
Power Co., Ltd ("SEP") (Shanghai Stock Exchange code 600021) to
develop the Ncondezi 300MW coal fired power project in Tete,
Mozambique (the "Power Project" or the "Project").
Highlights:
-- SEP to become the strategic investor in the Power Project
-- SEP will invest up to US$25.5 million to fund the development
costs to Financial Close in return for a 60% equity interest in
Ncondezi Power Company S.A ("NPC"), a subsidiary that will hold
100% of the Power Project
-- Based on SEP's expertise in coal fired power generation, the
Power Project boiler technology will change from Circulating
Fluidized-Bed ("CFB") to Pulverized Coal ("PC")
-- NPC will pay Ncondezi an additional US$35 million on initial
draw down of funds after Financial Close of the Power Project
Background
SEP is incorporated in the People's Republic of China and listed
on the Shanghai Stock Exchange with the majority of its shares held
by State Power Investment Corporation ("SPIC"). SPIC is one of the
largest power generation groups in China with an installed capacity
of over 100,000 MW. SEP has experience of owning, constructing and
operating coal fired power stations and has a stated strategy of
international growth.
The JDA is a binding agreement between Ncondezi and SEP and sets
out the terms on which the Power Project will be developed. The
Ncondezi Coal Mine will continue to be wholly owned by Ncondezi and
will be developed and financed separately. It is envisaged that a
Coal Supply Agreement will be entered into between the relevant
entities.
SEP Investment
SEP will fund up to US$25.5 million ("Subscription Price") into
a newly incorporated holding company that will own 100% of NPC and
which will be used to fund all development costs of the Power
Project (inclusive of transmission and project infrastructure) to
Financial Close.
The Subscription Price will be paid in instalments as per an
agreed budget between the Parties for the period from 1 January
2016 until Financial Close. The first instalment will be funded
once the JDA is effective, at which point Ncondezi will be refunded
for certain agreed project costs incurred from 1 January 2016. The
JDA becomes effective once all of the SEP Investment Conditions (as
defined below) have been satisfied, at which point SEP will be
issued with an indirect 60% interest in NPC.
The SEP Subscription Price is based on 1.5 times Ncondezi's
historic Power Project costs of US$17 million and is capped at
US$25.5 million. The Subscription Price will be inclusive of SEP's
historic costs of RMB 8 Million (c. $1.25 million). All historic
costs are subject to confirmation by an independent auditor.
It is anticipated that the Subscription Price will be sufficient
to fund the development costs to Financial Close of the Power
Project. Any additional costs are expected to be funded on a
pro-rata basis by the Company and SEP respectively. Once the JDA
has become effective, SEP will provide a bank guarantee for US$10
million in favour of the Company against the instalment payments of
the Subscription Price.
If on Financial Close the Subscription Price is not fully
utilised, any balance will be used to fund the first project equity
beyond Financial Close.
Financial Close
NPC (the Power Project company) will pay Ncondezi US$35 million
at the time of initial draw down after successfully achieving
Financial Close.
Management of the Ncondezi Project
SEP will have effective control of the Power Project following
satisfaction or waiver of the SEP Investment Conditions.
Appropriate corporate governance and minority protections will be
incorporated into a detailed Shareholders Agreement.
SEP will lead the procurement of the EPC agreements, the O&M
agreements and the debt financing to achieve Financial Close and
SEP has undertaken to use reasonable endeavours to procure the best
possible commercial terms from Chinese financiers for the proposed
debt financing facilities for the Power Project on a non-recourse
basis to Ncondezi.
Technology Change
Based on SEP's expertise and experience in coal fired power
generation, the power plant will change from CFB to PC technology
based on an updated feasibility study prepared by SEP. The PC
technology feasibility study demonstrates comparable economic
returns to the CFB solution and supports the existing tariff
envelope agreed with EDM (the "Commercial Deal").
SEP Investment Conditions
The transaction is targeting the satisfaction or waiver of a
number of conditions on or before 8 February 2016 including:
-- Formal approval by EDM of the change to PC technology and
confirmation of the existing Commercial Deal
-- Completion of the independent audit of the Ncondezi historical Power Project costs
-- Finalisation of the work program and budget to Financial Close
-- Finalisation of the relevant transaction documents including the Shareholders' Agreement
-- SEP obtaining the required Chinese regulatory and parent company approvals
-- No material adverse change having occurred to the Project
The Company and SEP have already started work on the SEP
Investment Conditions and are focused on satisfying them as quickly
as possible. Notwithstanding the progress that has been made, the
SEP Investment Conditions are unlikely to be satisfied by the
targeted date of 8 February 2016 and an extension is expected to be
required. The Company will update shareholders as appropriate.
Exclusivity
Ncondezi has granted SEP exclusivity in relation to the Power
Project until the earlier of 8 February 2016 or termination of the
JDA.
Enquiries:
+44 (0) 20 7183
Ncondezi Energy: Hanno Pengilly 6792
Liberum Capital
Limited: Neil Elliot / +44 (0) 20 3100
NOMAD & Broker Christopher Britton 2000
Daniel Thöle +44 (0) 20 7861
Bell Pottinger: / Marianna Bowes 3232
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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