Ncondezi Energy Limited (“Ncondezi” or the “Company”) (AIM: NCCL) is pleased to provide an update on its pipeline of solar and battery storage projects in the Commercial and Industrial (“C&I”) sector.

Highlights:

• Ncondezi’s wholly owned renewable energy subsidiary Ncondezi Green Power (“NGP”) and Captive Power Limited (“CPL”) have signed a binding relationship agreement (the “CPL Relationship Agreement”) under which Ncondezi has the right (but not the obligation) to fund a pipeline of C&I solar and battery storage projects in Mozambique (the “Projects”)
• CPL provides power solutions for businesses in Africa with a strong focus on developing projects in Mozambique, and was setup by a former GridX founder
• The CPL Relationship Agreement supersedes the existing relationship agreement signed with GridX Africa Development (“GridX”), announced on 6 May 2020 (the “GridX Relationship Agreement”). The rights and obligations of GridX and NGP under the GridX Relationship Agreement have been suspended and may be reinstated by mutual agreement between the parties. As part of the suspension process, GridX has agreed to novate to CPL all commercial agreements in relation to NGP’s C&I project currently under construction and to release to CPL any rights in relation to 5 of the existing 6 Projects in the pipeline.
• The CPL Relationship Agreement:
  • Projects include a diversified portfolio of 6 potential projects in Mozambique with a combined potential installed solar capacity of 2.8 MWp and 6.2 MWh of battery storage (the “Initial Projects”)
  • Initial Project investments into qualifying projects, subject to funding, represent a potential annuity revenue stream of over US$750,000 per annum
  • CPL is responsible for all costs incurred up to a Project meeting the KPIs and NGP exercising its right to invest
  • Initial Projects are at an early stage of evaluation with first funding requirement not expected until later in H2 2021

Ncondezi Chief Executive Officer, Hanno Pengilly said: “The signing of a new Relationship Agreement with Captive Power is a no cost solution that ensures that the Company retains access to a C&I project pipeline in Mozambique. CPL’s management team has a strong track record in the sector operating and building relationships in Mozambique and we look forward to working with them on current and future pipeline projects as we grow our renewable C&I business.”

CPL Relationship Agreement Summary

NGP and CPL have signed the binding CPL Relationship Agreement giving NGP a right of first refusal to fund up to US$5.5 million of CPL developed Projects in Mozambique.

Under the agreement, CPL has identified 6 Initial Projects for development with a combined potential installed PV capacity of 2.8MWp and 6.2MWh battery storage. Capital costs range from US$250,000 to US$ 2.1 million. Should these Initial Projects meet the minimum KPI’s and NGP exercise its right to fund, it would represent a potential annuity revenue stream of over US$750,000 per annum.

Each Project must meet a minimum set of KPIs before being presented to NGP for funding. These minimum KPIs include:

• Project must be located in Mozambique;
• Project size between US$100,000 and US$10,000,000;
• Use of proven technology;
• Minimum post tax unlevered equity IRR of at least 10% to Ncondezi;
• Minimum credit requirements met;
• Bankable offtake denominated in US$;
• Completion of credit checks on potential clients with additional credit support in place where required
• Finalised Engineering Procurement and Construction and Operations & Maintenance contracts in place; and
• All consents and permits required to start construction in place.

NGP will have the right to fund 100% of each Project’s equity requirement, and Projects will be assessed for funding on a project by project basis. NGP will look to identify the optimal financing strategy for each Project and will look at both debt and equity options with gearing of up to 50%. Discussions with potential investors and debt providers to date have been positive as investment mandates and appetites to fund energy access and renewable power projects continues to grow.

The first Projects are anticipated to be presented for funding review by NGP during H2 2021.

If a Project does meet the minimum KPIs, NGP has the right not to fund that Project without any penalty. However, should NGP elect not to fund any further Projects that meet the minimum KPIs, it will lose its ROFR over the remaining Projects. If a Project does not achieve the KPIs within the proposed time frame allocated, CPL has the ability to substitute that Project for alternative projects.

As part of its ordinary course business as a developer, CPL is entitled to a capped development fee for each Project that Ncondezi funds, included as part of the Project capital cost.

CPL is expected to provide management and operations & maintenance services for each of the Projects that achieves financial close in accordance with market-related commercial terms for projects of a similar nature, contracting directly with the power offtaker.

Certain incentives to encourage CPL to achieve the best returns for each Project, will be paid through a profit sharing mechanism where an equity IRR hurdle of above 10% is achieved by NGP.

The CPL Relationship Agreement will expire at the earlier of Ncondezi financing US$5.5m of Projects or 24 months from the date of entering into the CPL Relationship Agreement.

About Captive Power

CPL is an Energy-as-a-Service company that focuses on energy awareness and reducing client’s power needs before using a holistic approach to developing financed power solutions for Commercial and Industrial (“C&I”) users in Africa.

CPL was founded by GridX co-founder, Justin Pengilly (and is the brother of Hanno Pengilly, the Company’s Chief Executive Officer), and has a strong focus on developing projects in Mozambique, with key managers residing in the capital Maputo for over 5 years. The team were successful in negotiating and agreeing the first renewable energy loan for a C&I project in Mozambique with the Mozambique Central Bank.

GridX Relationship Agreement Suspension and Novation Agreements

In a separate agreement between GridX and CPL, rights in relation to 5 of the 6 C&I development projects included in the GridX Relationship Agreement have been transferred to CPL. Pursuant to an agreement between NGP and GridX, the rights and obligations of NGP and GridX under the GridX Relationship Agreement have been suspended and may be reinstated only by mutual agreement between the parties. GridX also agreed to an updated list of C&I development projects as part of its obligations under the suspended GridX Relationship Agreement. This includes 5 alternative potential projects being evaluated by GridX with a combined capital requirement of up to US$5.5m (the “Substitute Projects”). If the GridX Relationship Agreement is reinstated, GridX will be required to present the Substitute Projects to NGP for investment consideration should any of the projects meet the required investment KPIs over the next 2 years. The Company considers the Substitute Projects to have a lower potential of success than the Initial Projects.

NGP expects the suspension of the GridX Relationship Agreement to be lifted should GridX progress any of the Substitute Projects to a level which requires investment consideration.

As part of this process, GridX has also agreed to novate to CPL all of its rights and obligations under the various agreements related to NGP’s C&I project currently under construction.