UK-listed Ncondezi Energy is confident that it will emerge as one of the winners in Mozambique’s ongoing negotiations with four groups to establish independent power generation operations in the country. In a joint project with Shanghai Electric Power Co. (SEP), Ncondezi is banking on a policy described by Chief Development Officer Hanno Pengilly as “taking control of its own destiny”.
SEP is the subsidiary of Shanghai Electric Corp., which is principally engaged in the production and sale of electricity and thermal power. Its current installed capacity is in the region of 100 000 MW. Top shareholders are the China Investment Corp. and nine Chinese fund management companies.
The three other groups: are Jindal Africa, a subsidiary of Jindal Group; ACWA of Saudi Arabia in partnership with mining major, Vale; and India’s International Coal Ventures Ltd (ICVL).
Pengilly bases his confidence in the Ncondezi-SEP partnership on the stated focus on power generation, not the export of coal. His major points are that Ncondezi plans to mine the thermal coal it would need to the exclusion of everything else. It would not have to rely upon coal mined by anyone else. It would buy in, but only to gain a price advantage.
”Given the current market situation, in which export prices continue to fluctuate wildly, power projects in which the parent company is essentially reliant on an export operation cannot have a secure base from which to enter into long-term – usually 25 years – energy contracts,” Pengilly told World Coal. “We would be able to.”
Ncondezi has a JORC-compliant 4.8 billion t resource of which 120 million t has been measured. It would be the target area from which an opencast mine would initially feed a 300 MW plant to generate power for use in Mozambique. A 100% 25 year offtake from the first stage of the project has already been agreed with national power authority Electricidade de Mocambique (EdM).
“Mozambique needs this power yesterday. Less than 20% of the people have access to electricity,” Pengilly said. “We estimate three years – the first power by 2020. Which means construction of the mine must start during next year (2017).”
Feasibility studies for both initial and expansionary stages, environmental assessments, connections to the national grid, licensing, legal, land and other requirements, are complete.
Longer term, the target is to match mine and power plant development in five stages to 1800 MW. Pengilly stresses that Mozambique would remain the main focus of the project, but concedes that eyes would also be on the broader region.
Ncondezi Chairman Michael Haworth and SEP Chairman Wang Yundan met last month with Mozambique’s Ministers of Mineral Resources and Energy, the head of EdM and the Chinese Ambassador to Mozambique to review the project and sign a Development Agreement Term Sheet.
Ncondezi Energy directly owns 100% of the current project, Ncondezi Power Co. SEP will invest US$25.5 million, paid in agreed instalments up to the point of financial close and acquire 60% of that. Following financial close, Ncondezi Power Co. will pay Ncondezi Energy US$35 million. Once these conditions have been met SEP will take control of the project. The mine will remain an asset of Ncondezi Energy. There would presumably be rescripted versions of these actions to accommodate expansion.
Export of power could be on the longer-term agenda. Close by the national grid into which Ncondezi Power Co. would connect is the regional (Southern Africa Power Pool) grid. Connected to that is power-hungry South Africa. Despite its nuclear ambitions, South Africa does plan to import up to 5000 MW of energy from coal-fired generation, provided it has been produced using the pulverised coal technology chosen by SEP for Ncondezi.
As Pengilly confirmed, SEP does not normally play in the 300 MW league. “It is positioning itself to play a significant role in the broader region,” he said. Ncondezi had responded to South Africa’s requests for expressions of interest and subsequently been listed, but its immediate path was clearly defined.
“We would be ready to scale up as and when required, but Mozambique would remain our centre of interest. We do not want to hang on what a third-party may or may not do,” he said.
Two of the three other groups have significance. Jindal’s project and that of ACWA and Vale.
Jindal is proposing a plant at its 3 million tpy Chirodzi mine, which is over a 700 million t resource. The coal would be produced as a byproduct of coal mined for export, but Jindal nevertheless claims a 25 year power purchase agreement with EdM. The plan was a 42 MW plant to power the mine; now it is for 150 MW sold into the national grid. No cost estimates have been published nor is there any timeline.
ACWA and Vale wants to build a 300 MW power plant to burn coal that is the byproduct of Vale’s Moatize metallurgical coal mine. ACWA would hold 56.5% of the project, with smaller holdings by Vale and Mitsui of Japan, Mozambique’s Whatana investment group and EdM, which suggests an eventual takeoff agreement. Of the power output, 80% would be used by Vale to power the mine. The project would cost “just short of US$1 billion”, but there are reports that US$500 million is still to be found.
Meanwhile, ICVL has relaunched a tender for a 200 MW coal-fired power plant at its Benga mine. Government licensing for the plant has been secured and environmental assessments approved, but the group has acknowledged a lukewarm’ response. This, Mozambique head Nirmal Jha said, was due to EdM being unable to guarantee to take the power. He has since indicated the group might now seek to export it, but the contractor-operated 5.2 million tpy mine is in care and maintenance, its future unsecure. There is a stockpile of around 5 million t of thermal coal immediately available for power generation – but it is unlikely to be required unless Benga’s fortunes recover.
Article by Barry Baxter, World Coal
