Ncondezi Energy Limited (“Ncondezi” or the “Company”) (AIM: NCCL) has signed a Master Services Agreement (“MSA”) with Synergy Consulting (“Synergy”) to provide financial and transaction advisory services (the “Services”) to the Group for the integrated Ncondezi 300MW coal fired power project and coal mine in Tete, Mozambique (the “Project”).

Highlights:

• MSA covers potential advisory services to the Project up to Financial Close, including:
  • finalisation of Project power tariff with Electricidade de Moçambique (“EDM”);
  • negotiations with China Machinery and Engineering Corporation (“CMEC”) on Project subscription price;
  • negotiations with Project lenders for debt financing; and
  • capital raising for Ncondezi’s equity contribution towards the Project at Financial Close.
• Synergy has significant Project experience, having assisted the Company in achieving major milestones to date, including negotiation of the Joint Development Agreement (“JDA”) with CMEC and the tariff submission to EDM.
• Services also include potential support for capital raising for the Company’s renewable energy strategy in the high growth African Commercial and Industrial (“C&I”) sector.

Ncondezi Chief Executive Officer, Hanno Pengilly said: “Synergy has provided Project advisory services since 2016 and brings a wealth of expertise to our development team. Today’s announcement highlights the Company’s clearly laid out plan to achieve Financial Close and importantly ensures that sufficient resources are available to deliver on future key value enhancing Project milestones. Services provided will require approval by the Company on a workstream by workstream basis allowing the Company to efficiently manage cashflows.”

Project Financial Advisor

Synergy is a leading international project finance advisory firm specialising in the power sector with over US$50bn worth of transactions closed across the globe. In Mozambique, Synergy has extensive experience advising on a number of projects. This includes advisory services to Ncondezi, where Synergy has acted as financial advisor to the Project on various mandates since 2016.

Having delivered the required Project studies and proposals to EDM during December 2020, the next steps include the negotiation and finalisation of key Project de-risking milestones. The Company has entered into a Master Services Agreement with Synergy which includes a list of financial and transaction advisory workstreams it will provide to the Group that covers the full scope of potential services required to achieve Project Financial Close. The Services will be agreed on a per workstream basis with success fees agreed that are linked to achieving set milestones. The Company is not obliged to use Synergy for any specific workstream and total fees have been capped.

Synergy’s key potential responsibilities include:

• Updating of key Project studies;
• Ongoing optimisation and updating of the Project financial model;
• Finalisation of tariff negotiations with EDM;
• Finalisation of key Project agreements – Power Purchase Agreement, Power Concession Agreement, EPC and O&M agreements;
• Discussions with Lenders and Finalization of Finance Documents;
• Subscription price negotiations and agreements with CMEC; and
• Raising capital for Ncondezi’s equity contribution for the Project at Financial Close.

In addition to the main Project, the Master Services Agreement also includes the provision of capital raising services for the Company’s C&I renewable energy business. With the Company’s first C&I project targeting commercial operations in June 2021. Ncondezi’s strategy is to build scale quickly through the development and financing of its pipeline of C&I projects. The Company’s wholly owned subsidiary, Ncondezi Green Power (“NGP”), has a pipeline of US$5.5m in C&I projects with ambitions to grow this aggressively over the next 3 years. NGP has identified a number of potential opportunities which could significantly increase the C&I project pipeline.

Fee structure:

The Company has agreed a capped fee structure for any financial and transaction advisory Services for the Project under the MSA. The capped fees have been balanced between an hourly charge out rate up to a maximum US$410,000 for any Services approved by Ncondezi and a success fee of US$500,000 payable only when Financial Close is achieved.

In addition, a 2.0% success fee on any equity raised for the Project capped at US$1,000,000 if Synergy introduces investors that fund any portion of Ncondezi’s equity investment in the Ncondezi Project at Financial Close.

For any capital that is raised from a Synergy introduced investor for the Company’s C&I business, a scaled fee structure has been agreed as set out below:

• 3.125% success fee on any funds raised for working capital for the C&I business;
• 4.5% success fee on any additional funds raised to fund the C&I development pipeline; and
• 2.5% success fee on any additional funds from those investors which are received within 2 years of the date of the MSA.

A short video overview of the company is provided below

Video: Ncondezi Investors Overview

Announcement in full:

Remobilisation of C&I Solar Battery Storage Project and Proposed Directors Bridge Loan

Ncondezi Energy Limited (“Ncondezi” or the “Company”) (AIM: NCCL) is pleased to announce:

• its wholly owned renewables subsidiary, Ncondezi Green Power (“NGP”), has remobilised construction works at its maiden Commercial and Industrial (“C&I”), 400kWP solar and 912kWh battery storage project in Mozambique (the “Project”); and
• the signing of a non-binding US$500,000 bridge loan term sheet between NGP and certain Directors of the Company to finance the balance of construction costs to commission the Project (the “Bridge Loan”)

Highlights

Maiden C&I Solar & Battery Project

• Remobilisation of construction at C&I 400kWp solar PV plus 912kWh battery storage project
• Fully off-grid project, believed to be the first project of its type in Mozambique
• Target Project commissioning in June 2021
• Utilising market leading equipment including JA Solar panels and Tesla Power Pack
• Targeting generation of 600MWh and CO2 savings up to 517t per annum
• 15 year fixed price offtake agreement, denominated in US$ with annual price escalations
• Contracted revenues of US$3.1 over the life of the Project

US$500,000 Bridge Loan term sheet

• Funding split US$50k:US$100k:US$350k between Chairman Michael Haworth, CEO Hanno Pengilly and NED Scott Fletcher (the “Lenders”)
• Provides balance of funding required to complete Project construction
• Fixed 30% coupon payable at the earlier of 6 months or commissioning of the Project
• Entered into by Company subsidiary NGP allowing the Company to implement its C&I strategy without diluting shareholders
• Lenders right to convert the Bridge Loan into equity of NGP with a coupon of 50% should NGP default on repayments or under events of default typical for a project of this nature
• Bridge Loan is subject to finalisation and execution of full form loan agreements, targeted for completion in March 2021
• Bridge Loan expected to constitute an AIM Rule 13 related party transaction and further updates will be provided in due course

Ncondezi Chief Executive Officer, Hanno Pengilly said:

“Today’s announcement reinforces the Company’s commitment to the C&I renewable energy sector in Africa. Project construction is set to resume this month with commissioning targeted for June 2021 following the lifting of COVID-19 related force majeure. The Project is using leading technology from Tesla, JA Solar and ABB for the battery pack, solar panels and inverters respectively.

This is the first of our pipeline of green energy C&I assets to near completion and is expected to provide near term revenue for the Company. Although the impact of COVID-19 delayed the Project delivery timetable, the demand for sustainable energy solutions that provide increased energy security whilst also reducing costs has become more robust. Corporates globally are implementing aggressive net zero emission reduction policies which are outpacing Government targets by up to 20 years. Ncondezi’s early entry into this sector in 2019 has positioned it to take advantage of this with what is believed to be the largest fully off-grid solar and battery storage project in Mozambique. I believe this is an innovative, new high growth sector which complements our baseload power project and one in which we can become market leaders in a relatively short time frame.

A US$500,000 Bridge Loan term sheet has been put in place by certain of the Company’s Directors to provide sufficient capital to complete construction and commission the Project. The Bridge Loan will be provided directly to the Company’s wholly owned subsidiary, Ncondezi Green Power, and honours the prior commitments not to dilute shareholders to progress the Company’s C&I strategy.”