Half-year Report
30/09/2022 07:00
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RNS Number : 2371B Ncondezi Energy Limited 30 September 2022
News Release
Interim Results for the six months ended 30 June 2022
30 September 2022: Ncondezi Energy Limited ("Ncondezi", the "Company" or the
"Group") (AIM: NCCL) announces its interim results for the six months ended 30
June 2022.
Operational Highlights:
Ncondezi Power Project
· China Machinery Engineering Corporation ("CMEC") confirms ongoing
commitment to the Project and continues to lead on the process to unlock
Project financing
· Tariff negotiations awaiting further clarity on Project financing
from Chinese Government following announced policy not to fund new coal power
projects abroad
Grid Scale Solar Project
· Internal review and preliminary studies identify potential for a
grid scale solar plus battery storage power project at the Ncondezi Project
site (the "Solar Project") without compromising delivery of the main Ncondezi
Project
Financial and Corporate Highlights:
· Seritza Limited ("Seritza") confirmed it would extend the period
in which it would not call in the working capital facility term loan ("Working
Capital Facility") to 8 July 2022, whilst restructuring discussions were still
being finalised (the "Seritza Restructuring"). As set out below, the Seritza
Restructuring was finalised, subject to shareholder approval, post period end
· Cash conservation strategy implemented
· Cash at bank of US$0.4 million as at 30 June 2022. US$0.2 million as at 26 September 2022
Post period end events:
Grid Scale Solar Project
· Ncondezi Green Power ("NGP") launches FS for up to 300MW solar PV
power plant plus BESS ("Study") with target completion end October 2022
· Positive initial results from the Solar Project Study, confirm
the project's excellent location for solar generation with no red flags
identified
· Estimated pre-money NPV of between US$60.0 million and US$65.0
million and fully diluted cash flows of between US$130.0 million and US$180.0
million over a 25 year period for a 300MW plant
Working Capital
· Restructuring of Working Capital Facility to a convertible loan
note ("Convertible Loan") ("Restructuring") finalised, subject to shareholder
approval of the issue of shares under the Convertible Loan to be sought at the
annual general meeting
· Convertible Loan increased by an additional £100,000 made
available by certain Directors of the Company, to accelerate development of
the Solar Project ("First Tranche")
· An additional tranche of £150,000 may be made available to the
Company at the Convertible Loan lender's discretion in the six months
following the restructuring ("Second Tranche")
· Current cash position provides a working capital runway to the
end of October 2022. The Company needs, and intends to secure, additional
funding during October 2022, with the Second Tranche being one short term
option. Further announcements will be made in relation to funding as required
Shareholder Loan
· Certain Directors have entered into a binding Undertaking (the
"Undertaking") preventing the Shareholder Loan being called before the later
of 30 November 2023 ("Undertaking Period")
Financial highlights:
6 months to 6 months to
30 June 2022 30 June 2021
US$'000 US$'000
Loss for the period (743) (540)
Loss per share - cents (0.2) (0.1)
Cash at bank 436 374
Enquiries
For further information please visit www.ncondezienergy.com or contact:
Ncondezi Energy Hanno Pengilly +27 (0) 71 362 3566
Liberum Capital Limited Scott Mathieson, Edward Thomas, Kane Collings +44 (0) 20 3100 2000
NOMAD & Joint Broker
Novum Securities Limited Colin Rowbury +44 (0) 20 7399 9427
Joint Broker
Elizabeth Johnson +44 (0) 777 56 55 927
Pimlico Advisory Ltd
Investor Relations
About Ncondezi Energy
Ncondezi is an African power development company focused on the development of
renewable and baseload energy solutions at its concession located in the Tete
Province, northern Mozambique.
The Company is focused on providing reliable and affordable energy to
Mozambique to meet growing energy demands. Our projects support Mozambique's
energy strategy of universal electricity access by 2030. According to the
World Bank, only 30% of the Mozambican population had access to energy in
2017. Our projects would provide reliable and available power helping to close
the infrastructure gap of the region and serving as a catalyst for economic
development.
Chairman's Statement
Dear Shareholder,
The first half of 2022 has seen limited progress at the Company's Ncondezi
Project, driven by a lack of clarity from the sector's largest financier,
China, on financing advanced stage coal projects abroad. However, during this
period the Company has taken proactive steps to identify other potential
opportunities to unlock shareholder value through its wholly owned green
energy subsidiary, NGP.
In July, the Company formally announced its intention to launch the Study for
up to 300MW solar PV plus BESS following positive pre-feasibility study
results and support from the Mozambique authorities. The Board believes the
Solar Project represents a significant opportunity to crystalise additional
value for shareholders, with initial estimated pre-money NPV of between
US$60.0 million and US$65.0 million , and fully diluted cash flows of between
US$130.0 million and US$180.0 million over a 25 year period for a 300MW
plant. The Study will further refine these figures, taking into account final
transmission solution and scaling strategy.
Initial results from the Study have confirmed that the target project location
within the Company's existing mining concession in Tete, Mozambique, has
excellent solar generation resources with no immediate red flags identified.
The Study is expected to be completed at the end of October 2022, targeting a
market leading power tariff offering for the region. We believe that should it
proceed, the Solar Project would be one of the largest solar PV projects
undertaken in Mozambique to date and expect the project to be uniquely
positioned in the market, able to scale quickly and take advantage of
economies of scale. In addition, we expect the Solar Project to deliver a low
cost accelerated development programme to financial close, achievable through
leveraging existing advanced stage development work from the Company's
Ncondezi Project. Planning for success, there is a clear roadmap for delivery
of power onto the Mozambican Grid in 2024 which is exciting.
The Solar Project will look to supply power into the Mozambican northern grid,
which is a generation hub for Mozambique and the broader southern African
region. Discussions with potential off-takers for the project's power have
already started and we are reassured by the calibre of the parties engaging
with us. The Board believes that the Company's move into the grid scale
renewable energy space will broaden investor appetite and provide access to
competitive project financing as the Company aligns more closely with growing
investor and government demands to secure more renewable energy generation.
With respect to the Ncondezi Project, we have continued to work closely with
our development partners CMEC to break the financing deadlock. So far in 2022,
China has continued to support certain advanced stage coal power projects
abroad whilst formally terminating others, with limited clarity on the driving
forces behind these decisions. Financing confirmation from China is critical
to the success of the Project and it is important to highlight that a positive
outcome from the Chinese Government is out of the Company's control. Coal
power still plays a major role globally as the single largest source of power
generation and a key player in energy security. Nowhere has this been more
evident than in Europe, where the recent impact of the war in Ukraine on
European energy security has seen a number of coal power plants brought back
into commission and sent coal prices soaring globally. Africa has the lowest
energy security in the world, and we believe the Ncondezi Project continues to
offer a low cost, reliable baseload solution utilising the latest emission
control technologies. All workstreams to progress and finalise the tariff
remain ready to proceed as soon as financing is confirmed. The Board has
halted all non essential expenditure on the Ncondezi Project and launched an
internal review process to evaluate all potential options to maximise value to
shareholders in the near term.
Financing
On 29 March 2022, the Company announced the completion of a cash conservation
strategy to extend the Company's cash reserves, including further overhead
cost optimisations and reducing management salaries including a 40% reduction
for Company CEO, Hanno Pengilly.
On 16 September 2022, the Company announced that it had completed the
Restructuring of the Seritza working capital facility into a convertible loan
that matures at the end of November 2023. In addition, Company NED, Scott
Fletcher, and myself agreed to provide an additional £100,000 to the
Convertible Loan to provide working capital for the Company to deliver first
results on the Solar Project Study this month. The Restructuring provides the
Company with an attractive financing solution, protecting existing working
capital and increasing repayment optionality. A further tranche of £150,000
may be made available to the Company at the Convertible Loan Lenders'
discretion in the six months following the Restructuring.
In addition, the Undertaking which includes Hanno Pengilly and myself, was
signed and prevents the Shareholder Loan being called before the later of 30
November 2023 or when the Shareholder Loan restructuring is completed,
aligning all the Company's debts to 30 November 2023, so the Company can focus
on delivering key project development milestones in the interim.
At the end of the period, the Company had cash reserves of approximately
US$0.4 million.
Subject to the Shareholder Loan being extended and restructured, project costs
related to the Ncondezi Project and planned expenditure related to the Solar
Study, the Group will need to secure additional working capital during October
2022. The Directors are exploring a number of funding and working capital
solutions to extend working capital beyond October 2022, including a further
drawdown of £150,000 from the Convertible Loan. The Board is confident a
funding solution will be finalised as the Company has a successful track
record securing funding through debt and equity from its supportive Board,
management team and shareholders. At present there are no binding agreements
in place and there can be no certainty as to the Group's ability to raise
additional funding or the terms on which such financing may be available.
Acknowledgements
I would like to thank our team and Partners for their continued hard work and
commitment. I am aware of the hard work that goes on behind the scenes. We are
grateful for Shareholders' continued support and patience and look forward to
providing further updates going forward.
Michael Haworth
Non-Executive Chairman
Operational and Financial Review
Ncondezi is focused on the phased development of its renewable and baseload
energy projects located near Tete in northern Mozambique.
Ncondezi Project
About the Ncondezi Project
The Ncondezi Project is an integrated project including a coal fired power
plant, open pit coal mine and transmission integration solution connecting
with the Mozambique grid that is being developed in phases of 300MW. The
Ncondezi Project is located near Tete in northern Mozambique.
The Ncondezi Project has been designed to meet the objectives of the
Mozambique Government's Integrated Electricity Master Plan and will be
equipped with state-of-the-art emissions controls technologies that will
reduce local air pollutants, minimising the plant's impact on the environment
and ensuring its compliance with the most stringent emission standards.
The Ncondezi Project's objective is to provide reliable, affordable and
accessible baseload energy to Mozambique securing against the effects of
drought and intermittency of new renewables to assist with providing a
balanced and stable grid supply.
The Ncondezi Project remains one of the most advanced baseload projects in
Mozambique and continues to receive strong support from our joint venture
partner CMEC, which is focused on becoming the Ncondezi Project's strategic
partner, with a proposed 60% equity shareholding.
Ncondezi Project Work Programme Status
The next major development milestone for the Project is finalisation of the
power tariff. To progress this further the Company is still awaiting clarity
on China's position on the availability of financing for the Ncondezi Project
following President Xi's announcement regarding financing restrictions for
coal power projects abroad in September 2021. In January CMEC reiterated their
commitment to the Ncondezi Project and that they continued to lead the process
on Ncondezi Project financing. Additional steps were also taken to identify
potential alternative financing solutions. To date no such alternative
financing solutions have been identified and securing financing from China
remains the priority.
All key development studies for the power plant, mine and transmission line
have been finalised and submitted to the relevant Mozambique authorities and
EDM and are awaiting sign off. The key commercial agreements, namely the Power
Purchase Agreement ("PPA") and Power Concession Agreement ("PCA") are in near
final form and are expected to be finalised once a tariff has been agreed.
Given the ongoing delays being caused by lack of clarity on Chinese financing
for the Ncondezi Project, The Board has cut back on all non essential
expenditure for the Ncondezi Project and launched an internal review process
to evaluate all options for the Ncondezi Project to maximise value to
shareholders in the near term.
The Company will provide further updates at the appropriate time.
Ncondezi Green Power
NGP is a wholly owned subsidiary of Ncondezi which provides solar PV and
battery storage solutions in southern Africa. In May 2022 the Board announced
that following an internal review on the Project they believed there is
potential for a grid scale solar plus battery storage power project at the
Project site (the "Solar Project") which offers a significant opportunity to
unlock additional value for shareholders.
In July 2022, the Company announced that it was launching a feasibility study
for the Solar Project to be conducted by NGP.
Overview of the Solar Project
The Solar Project will be located within the Ncondezi mining concession 5967C
which covers over 25,000 hectares in the districts of Moatize and Chiuta in
the Tete Province which is large enough for solar PV generation potential over
5,000MW. Three preferred site locations have already been identified, with
similar climate conditions, that provide a generation potential of c.500MW
each.
The concession area has above average Global Horizontal Irradiance ("GHI") and
is located close to existing energy load centres in the Tete province.
It is the intention that the Solar Project would connect to the Mozambique
grid with target power off-takers in Mozambique and the Southern African Power
Pool (SAPP).
Pre-feasibility studies completed by NGP earlier this year confirm
significant potential value to shareholders with an estimated pre-money NPV of
between US$60m and US$65m, and fully diluted cash flows to NGP of between
US$130.0 million and US$180.0 million over 25 year period for a 300MW plant.
The Study will further refine these figures, taking into account final
transmission solution and scaling strategy.
In July 2022 the Board announced the launch of a feasibility study for up to
300MW solar PV power plant plus BESS ("Study") and appointed WSP Group Africa
(Pty) Ltd ("WSP") to lead it. The Study will take a modular design approach to
the Solar Project targeting 300MW with the flexibility to sale in 30MW to
100MW increments.
The Company believes that WSP, one of the world's leading engineering
professional services consulting firms, is well positioned to deliver the
Study as it has delivered many renewable energy projects in Africa and has
unique experience relevant to the Solar Project including leading the
Company's thermal project feasibility study as well as other grid scale solar
PV projects in Mozambique.
NGP has engaged the relevant Mozambique Government authorities throughout the
Solar Project development process and received the prerequisite support to
launch the Study. The Solar Project is aligned with Mozambique's strategy to
increase energy availability in a sustainable manner and promote new energy
investments in the private sector. Following successful completion of the
Study, NGP will work with Government authorities to attain the relevant
permissions to build and operate the Solar Project.
The Solar Project is uniquely positioned to take advantage of existing
advanced development work completed for the Ncondezi 300MW thermal power plant
that can be easily transitioned to the Solar Project. In September 2022, the
Company announced the initial results from the Study which indicated that in
addition to reducing development costs this has the potential to accelerate
first power to the grid as early as 2024, using existing long lead time work
streams already completed or at an advanced stage. The Company believes this
will reduce the development timetable by 6 to 12 months. Completion of the
Study is on track for the end of October 2022.
The following highlights were also provided:
Site Location
3 preferred site locations were investigated for their suitability for the
Solar Project, all with similar climate conditions and a generation potential
of c.500MW each. Site visits were completed earlier this month by the
Company's lead Study consultant, WSP, and no red flags were identified on any
of the sites. A preferred site has been identified and will be confirmed at
the completion of the Study.
Solar Resource Assessment
Four weather datasets were obtained and reviewed for the Solar Project to
confirm the solar energy that can be utilised by the solar modules. To ensure
the solar data used was representative, a minimum of ten years of historical
data was used to reduce any risks relating to inter-annual variation in the
solar resource. The critical parameter for solar resource assessment is the
Global Horizontal Irradiance ("GHI"), with the Solar Project achieving an
average annual GHI of 1,980kWh/m(2) which is considered excellent for the
region.
Energy Yield Assessment
Solar Project GHI results were used with system design assumptions to estimate
the energy output of the project, achieving a specific yield of over
2,000kWh/kWp and performance ratio over 80%. These results are very positive,
being in line with some of the most competitive grid scale projects in South
Africa. It is worth noting that the specific yield and performance ratio do
not vary as the Solar Project is scaled to 300MW, although the project will
benefit from economies of scale in the overall capex.
Grid Connection
A full generation integration study was launched in parallel to the main Study
to determine the optimal transmission line connection into the Mozambican
grid. Various integration studies have been produced for the coal power
project, and formed the basis for the Solar Project assessment. Working with
the relevant local authorities, 6 potential solutions are being investigated
taking into account potential scaling of the project, available or under
construction transmission infrastructure and planned generation plants in the
region. Initial results confirm that there is grid capacity for the Solar
Project and more than one feasible evacuation solution. The next phase of the
study will look to confirm the preferred transmission solution which optimises
project economics, network capacity and timing.
ESIA Red Flag Review
WSP conducted a red flag review of the Company's existing ESIA and supporting
documentation completed on the Company's coal power project and mine, with no
major issues identified. As the Solar Project is planned to be installed
within the coal project's concession area, the existing ESIA, which were
approved by the Mozambican authorities, can be utilised and updated to meet
the latest requirements local and international standards. This is expected to
save significant cost and time for the Solar Project.
Financial overview
Results from operations
The Group made a loss after tax for the period of US$0.7 million compared to a
loss of US$0.5 million for the previous interim period. The basic loss per
share for the interim period was 0.2 cents (2021 H1: 0.1 cents) and the
diluted loss per share was 0.1 cents (2021 H1: 0.1 cents)
Expenses totalled US$0.5 million (2021 H1: US$0.9 million). This includes
US$0.5 million (2021 H1 US$0.6 million) of administrative expenses and
US$0.003 million (2021 H1: US$0.3 million) of share-based payment charge.
Administrative expenses refer principally to professional fees and underlying
administrative expenses related to advancing the Ncondezi Project and Solar
Project. Net financing expense totalled US$0.2 million (2021 H1: US$0.4
million income) comprising mainly of US$0.2 million interest charged on loans,
further information can be found in note 9.
During the period, US$0.012 million (2021 H1: US$0.1 million) expenditure was
incurred on the development of the Power Project and no expenditure was
incurred on the development of the C&I sector (2021 H1: US$0.2 million).
Cash Flows
The net cash outflow from operating activities for the interim period was
US$0.5 million (2021 H1: US$0.7 million).
Net cash outflow from investing activities was US$0.012 million related to the
Ncondezi Project (2021 H1: US$0.3 million related to Power Project and C&I
sector).
Net cash inflow from financing activities was US$nil (2021: US$0.5 million).
The resulting period end cash held totalled US$0.4 million (2021 H1: US$0.4
million).
Outlook
As at 30 June 2022 the Group had cash reserves of approximately US$0.4 million
which, subject to the Shareholder Loan being extended and restructured,
project costs related to the Ncondezi Project and planned expenditure related
to the Solar Study, means that the Group is adequately capitalised to the end
of October 2022. Additional working capital will need to be secured during
October 2022 and Directors continue to explore a number of funding and working
capital solutions. At present there are no binding agreements in place and
there can be no certainty as to the Group's ability to raise additional
funding.
At the end of 2020, the Company submitted an updated Ncondezi Project
feasibility study and tariff proposal to EDM for review and comment. Although
positive steps to progress the tariff were made during 2021, further progress
awaits clarity on China's position on the availability of financing for the
Ncondezi Project following President Xi's announcement regarding financing
restrictions for coal power projects abroad in September 2021. While the
outcome on financing from China is outside of the Company's control, we
continue to work closely with CMEC to resolve the issue. In addition, the
Company and CMEC have initiated steps to identify potential alternative
financing solutions.
The Shareholder Loan of US$5.4 million as at 30 June 2022 (including
principal, historic redemption premium and interest) matured on 30 November
2019, and the Company is currently evaluating options to execute the
restructuring process as proposed on 26 November 2019. Certain Directors have
entered into a binding Undertaking preventing the Shareholder Loan being
called before the later of 30 November 2023.
The Working Capital Facility of US$0.3 million as at 30 June 2022 (including
principal and interest) matured on 24 February 2022. Agreement to restructure
the Working Capital Facility into a Convertible Loan was completed and
announced on 16 September 2022 extending the maturity to 30 November 2023.
In conjunction with the Restructuring of the Loan certain Directors agreed to
increase the Convertible Loan by an additional £100,000.
In addition, notwithstanding the Shareholder Loan, further funding will be
required as detailed above to meet operating cash flows under current
forecasts beyond October 2022 or in the event of accelerated project
advancement. The financial statements have been prepared on a going concern
basis in anticipation of a positive outcome but it is important to highlight
that there are no binding agreements in place and there can be no certainty
that any of these initiatives will be successful.
These factors indicate the existence of a material uncertainty which may cast
significant doubt about the Group's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if
the Group was unable to continue as a going concern. Such adjustments would
principally be the write down of the Group's non-current assets.
Consolidated statement of profit or loss and other comprehensive income
for the six months ended 30 June 2022
Note 6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Other administrative expenses (506) (642) (1,530)
Share-based payment charge 10 (3) (253) (529)
Total administrative expenses and loss
from operations (509) (895) (2,059)
Net finance income/(expense) 9 (234) 355 212
Loss for the period before taxation (743) (540) (1,847)
Taxation - - -
Discontinued operations:
Profit earned on the disposal of the discontinued operations - - 111
Gain for the year for discontinued operations - - 27
Gain for the year before taxation from discontinued operations - - 138
Taxation - - -
Loss and total comprehensive loss for the period attributable to
equity shareholders of the parent company (743) (540) (1,709)
Loss per share expressed in cents
Basic (0.2) (0.1) (0.5)
Diluted 2 (0.1) (0.1) (0.4)
Consolidated statement of financial position
at 30 June 2022
Note 30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Assets
Non-current assets
Property, plant and equipment 3 18,428 18,392 18,450
Intangible Assets 4 95 270 182
Loan receivable - 863 -
Total non-current assets 18,523 19,525 18,632
Current assets
Trade and other receivables 74 87 74
Cash and cash equivalents 436 374 900
Total current assets 510 461 974
Total assets 19,033 19,986 19,606
Liabilities
Current liabilities
Trade and other payables 298 354 363
Loans and borrowings 5 5,731 5,548 5,493
Derivative financial liability 7 12 149 15
Total current liabilities 6,041 6,051 5,871
Total liabilities 6,041 6,051 5,871
Capital and reserves attributable to shareholders
Share capital 6 95,009 94,347 95,009
Retained earnings (82,017) (80,412) (81,274)
Total capital and reserves 12,992 13,935 13,735
Total equity and liabilities 19,033 19,986 19,606
Approved on behalf of the Board on 29 September 2022.
Michael Haworth
Non-Executive Chairman
Consolidated statement of changes in equity
for the six months ended 30 June 2022
Share Retained Total
capital earnings US$'000
US$'000 US$'000
At 1 January 2022 95,009 (81,274) 13,735
Loss for the period - (743) (743)
Total comprehensive loss for the period - (743) (743)
At 30 June 2022 (Unaudited) 95,009 (82,017) 12,992
Share Retained Total
capital earnings US$'000
US$'000 US$'000
At 1 January 2021 94,137 (80,125) 14,012
Loss for the period - (540) (540)
Total comprehensive loss for the period - (540) (540)
Issue of shares 210 - 210
Equity settled share-based payment - 253 253
At 30 June 2021 (Unaudited) 94,347 (80,412) 13,935
Share Retained Total
capital earnings US$'000
US$'000 US$'000
At 1 January 2021 94,137 (80,125) 14,012
Loss for the year - (1,709) (1,709)
Other comprehensive loss for the year - - -
Total comprehensive loss for the year - (1,709) (1,709)
Issue of shares 1,040 - 1,040
Costs associated with issue of shares (168) - (168)
Broker's warrants issued - 20 20
Trusts dissolution - 11 11
Equity settled share-based payments - 529 529
At 31 December 2021 95,009 (81,274) 13,735
Consolidated statement of cash flows
for the six months ended 30 June 2022
6 months to 6 months to Year ended
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Cash flow from operating activities
Loss before taxation (743) (540) (1,709)
Adjustments for:
Finance (income)/expense 234 (355) (212)
Share based payments charge 3 253 529
Amortization 87 88 176
Depreciation 34 32 67
Gain on disposal of discontinued operations - - (111)
Unrealised foreign exchange movements (2) - (10)
Net cash flow from operating activities before changes in working capital (387) (522) (1,270)
Decrease in payables (65) (196) (187)
Decrease in receivables - 25 38
Net cash flow used in operating activities before tax (452) (693) (1,419)
Income taxes paid - - -
Net cash flow used in operating activities after tax (452) (693) (1,419)
Investing activities
Power and Mine development costs capitalized (12) (76) (169)
Loan provided to C&I Project - (197) -
Net cash flow used in investing activities (12) (273) (169)
Financing activities
Issue of ordinary shares - 210 1,040
Cost of share issued - - (55)
Proceeds from sale of discontinued operation - - 1,300
Repayment of bridge - - (650)
Loan draw down - 277 -
Net cash flow from financing activities - 487 1,635
Net (decrease)/increase in cash and cash equivalents in the period (464) (479) 47
Cash and cash equivalents at the beginning of the period 900 853 853
Cash and cash equivalents at the end of the period 436 374 900
Notes to the consolidated financial information
1. Basis of preparation
The consolidated interim financial statements have been prepared using
policies based on International Financial Reporting Standards, International
Accounting Standards and Interpretations (collectively "IFRS") issued by the
International Accounting Standards Board ("IASB") as adopted by the UK. The
consolidated interim financial statements have been prepared using the
accounting policies which will be applied in the Group's financial statements
for the year ended 31 December 2022.
The consolidated interim financial statements for the period 1 January 2022 to
30 June 2022 are unaudited and incorporate unaudited comparative figures for
the interim period 1 January 2021 to 30 June 2021 and extracts from the
audited financial statements for the year to 31 December 2021. It does not
include all disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the 2021 Annual
Report. The comparative financial information for the year ended 31 December
2021 in this interim report does not constitute statutory accounts for that
year. The auditors' report on those accounts was unqualified and included an
emphasis of matter drawing attention to the importance of disclosures made in
the annual report regarding going concern.
The same accounting policies, presentation and methods of computation are
followed in the consolidated financial statements as were applied in the
Group's latest annual audited financial statements except that in the current
financial year, the Group has adopted a number of revised Standards and
Interpretations. However, none of these has had a material impact on the
Group's reporting.
In addition, the IASB has issued a number of IFRS and IFRIC amendments or
interpretations since the last annual report was published. It is not expected
that any of these will have a material impact on the Group.
Going concern
As at 30 June 2022 the Group had cash reserves of approximately US$0.4 million
which, subject to the Shareholder Loan being extended and restructured,
project costs related to the Ncondezi Project and planned expenditure related
to the Solar Study, means that the Group is adequately capitalised to the end
of October 2022. Additional working capital will need to be secured during
October 2022 and Directors continue to explore a number of funding and working
capital solutions. At present there are no binding agreements in place and
there can be no certainty as to the Group's ability to raise additional
funding.
At the end of 2020, the Company submitted an updated Ncondezi Project
feasibility study and tariff proposal to EDM for review and comment. Although
positive steps to progress the tariff were made during 2021, further progress
awaits clarity on China's position on the availability of financing for the
Ncondezi Project following President Xi's announcement regarding financing
restrictions for coal power projects abroad in September 2021. While the
outcome on financing from China is outside of the Company's control, we
continue to work closely with CMEC to resolve the issue. In addition, the
Company and CMEC have initiated steps to identify potential alternative
financing solutions.
The Shareholder Loan of US$5.4 million as at 30 June 2022 (including
principal, historic redemption premium and interest) matured on 30 November
2019, and the Company is currently evaluating options to execute the
restructuring process as proposed on 26 November 2019. Certain Directors have
entered into a binding Undertaking preventing the Shareholder Loan being
called before the later of 30 November 2023.
The Working Capital Facility of US$0.3 million as at 30 June 2022 (including
principal and interest) matured on 24 February 2022. Agreement to restructure
the Working Capital Facility into a Convertible Loan was completed and
announced on 16 September 2022 extending the maturity to 30 November 2023.
In conjunction with the Restructuring of the Loan certain Directors agreed to
increase the Convertible Loan by an additional £100,000.
In addition, notwithstanding the Shareholder Loan, further funding will be
required as detailed above to meet operating cash flows under current
forecasts beyond October 2022 or in the event of accelerated project
advancement. The financial statements have been prepared on a going concern
basis in anticipation of a positive outcome but it is important to highlight
that there are no binding agreements in place and there can be no certainty
that any of these initiatives will be successful.
These factors indicate the existence of a material uncertainty which may cast
significant doubt about the Group's ability to continue as a going concern.
The financial statements do not include the adjustments that would result if
the Group was unable to continue as a going concern. Such adjustments would
principally be the write down of the Group's non-current assets.
2. Loss per share
Basic loss per share is calculated by dividing the loss attributable to the
Ordinary Shareholders by the weighted average number of Ordinary Shares
outstanding during the period. Diluted loss per share is calculated by
dividing the loss attributable to Ordinary Shareholders by the sum of the
weighted average number of shares outstanding and dilutive shares (unvested
share options and warrants).
Share incentives were outstanding at the end of the period that could
potentially dilute basic earnings per share in the future. However, due to
losses incurred during the current period, the impact of these incentives
would not be dilutive.
Unaudited Unaudited Audited
30 June 2022 30 June 2020 31 December 2021
Loss Weighted average number of shares Per Loss Weighted average number of shares Per share amount (cents) Loss Weighted average number of shares Per share amount (cents)
US$'000 (thousands) share amount (cents) US$'000 (thousands) US$'000 (thousands)
(743) 410,714 (0.2) (540) 368,707 (0.1) (1,847) 382,029 (0.5)
Basic EPS
(743) 491,057 (0.2) (540) 427,050 (0.1) (1,847) 447,142 (0.4)
Diluted EPS
3. Property, plant and equipment
Power Mining Buildings Plant and Other Total
assets assets US$'000 Equip. US$'000 US$'000
US$'000 US$'000 US$'000
Cost
At 1 January 2022 9,731 7,771 1,277 35 718 19,532
Additions 12 - - - - 12
At 30 June 2022 9,743 7,771 1,277 35 718 19,544
Cost
At 1 January 2021 9,596 7,737 1,277 35 718 19,363
Additions 76 - - - - 76
At 30 June 2021 9,672 7,737 1,277 35 718 19,439
Cost
At 1 January 2021 9,596 7,737 1,277 35 718 19,363
Additions 135 34 - - - 169
At 31 December 2021 9,731 7,771 1,277 35 718 19,532
Depreciation
At 1 January 2022 - - 337 27 718 1,082
Depreciation charge - - 34 - - 34
At 30 June 2022 - - 371 27 718 1,116
At 1 January 2021 - - 271 26 718 1,015
Depreciation charge - - 32 - - 32
At 30 June 2021 - - 303 26 718 1,047
At 1 January 2021 - - 271 26 718 1,015
Depreciation charge - - 66 1 - 67
At 31 December 2021 - - 337 27 718 1,082
Net Book value 30 June 2022 9,743 7,771 906 8 - 18,428
Net Book value 30 June 2021 9,672 7,737 974 9 - 18,392
Net Book value 31 December 2021 9,731 7,771 940 8 - 18,450
Power assets relate to the development of a 300MW power plant. In 2022, the
Power assets remain classified as property, plant and equipment.
Mine assets relate to the initial acquisition of the licences and subsequent
expenditure incurred in evaluating the Ncondezi mine project. These were
transferred from intangible assets on receipt of the mining concession in
2013.
Management has prepared an impairment assessment under IAS 36 as impairment
indicators have been identified. The 2020 financial model was sensitized for
inflationary adjustments indicating that the net present value is in excess of
the carrying value thus no impairment was necessary. Management did not deem a
reversal of impairment appropriate.
4. Intangible assets
ROFR to C&I projects pipeline US$'000
Total
US$'000
Cost (less impairment)
At 1 January 2022 522 522
Additions - -
At 30 June 2022 522 522
Cost (less impairment)
At 1 January 2021 522 522
Additions - -
At 30 June 2021 522 522
Cost (less impairment)
At 1 January 2021 522 522
Additions - -
At 31 December 2021 522 522
Amortisation
At 1 January 2022 340 340
Amortisation charge 87 87
At 30 June 2022 427 427
Amortisation
At 1 January 2021 164 164
Amortisation charge 88 88
At 30 June 2021 252 252
Amortisation
At 1 January 2021 164 164
Amortisation charge 176 176
At 31 December 2021 340 340
Net Book value at 30 June 2022 95 95
Net Book value at 30 June 2021 270 270
Net Book value at 31 December 2021 182 182
5. Loans and borrowings
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Shareholder Loans (unsecured) 5,423 4,968 5,197
Working capital facility (unsecured) 308 286 296
Bridge Loan (unsecured) - 294 -
Total Short term loan 5,731 5,548 5,493
Shareholders Loan:
The Shareholder Loan term expired on 30 November 2019 with no extensions or
restructuring legally agreed as at period end. The Shareholder Loan was
US$5,423,000 as at period end (2021: US$5,197,000), with interest of 12%
continuing to be accrued on the outstanding balance.
On 26 November 2019, the Company received "in principle" support from all
Lenders to enter a Shareholder Loan restructuring proposal. The Loan term
expired on 30 November 2019 with no extensions or restructuring legally agreed
as at the end of the period. The restructuring proposal is set out as below:
· Extension on existing terms, including 12% annual interest rate
and ability for Lenders to swap debt for equity in part or in full at a
conversion price of 10.0p per share
· 12 month extension from the future Restructuring approval date
· A right for Ncondezi to pay off the original principal amount of
the Loan along with conversion of all interest into Ncondezi shares on AIM at
a 25% to 30% premium to the 30 day VWAP
The restructuring process is currently waiting for completion of key Lender
internal approval from AFC.
On 26 November 2019 and reconfirmed on 20 May 2020, all Lenders, including
AFC, indicated that they will not call in the Shareholder Loan whilst the
Restructuring is being finalised. On 3 November 2020 certain Board and
management, including Chairman Michael Haworth and CEO Hanno Pengilly, who
represent 39.6% of the Shareholder Loan signed an Undertaking not to call in
the Shareholder Loan before the later of 30 November 2022 or when the
Restructuring is completed. The Undertaking prevents the Shareholder Loan from
being called as a majority agreement representing 66.7% of Shareholder Loan
holders is required. On 16 September 2022, the Company announced that
Chairman, Michael Haworth, and Company Chief Executive Officer, Hanno
Pengilly, have entered into the Undertaking, representing 35.2% of the
outstanding principal amount of the Shareholder Loan. The Undertaking prevents
the Shareholder Loan from being called as a majority agreement representing
66.67% of Loan holders is required. The parties to the Undertaking have also
indicated that during the Undertaking Period they will not transfer their loan
or convert it into shares without the consent of the other signatories to the
Undertaking or at all if it would cause them to hold less than 34% of the then
outstanding principal.
The Restructuring is subject to the Lenders agreeing to the documentation and
the necessary related party transaction process being completed by the
Company's Independent Directors.
At the end of the period the Shareholders Loan was valued at US$5.4 million
(H1 2021: US$5.0 million) including 12% annual interest rate applied since the
expiring date 26 November 2019.
Working Capital Facility
The US$750,000 working capital facility was made available for drawdown from 1
January 2020 until 30 June 2020 at the Company's election and was repayable
within 24 months from first drawdown, unless there was an event of default or
the Company elected to prepay the facility. The default of the Shareholder
Loan constituted an event of default under the Working Capital Facility
therefore the facility has been classified as current.
There was a drawdown on 24 January 2020 of US$250,000 and funds were received
on 24 February 2020 the repayment date being two years from this date. Further
drawdowns were not solicited and the working capital facility expired at the
end of June 2020.
Finance cost recognised for the period in relation to the working capital
facility was US$12,000 (H1 2021: US$12,000).
Bridge Loan:
Finance cost recognised for the period in relation to the Directors' Bridge
Loan was nil (H1 2021: US$17,000) as in December 2021 US$650,000 drawdown plus
30% coupon was fully repaid to lenders.
6. Share capital
Number of shares Year ended
6 months to 6 months to 31 December
30 June 30 June 2021
2022 2021 Audited
Unaudited Unaudited
Allotted, called up and fully paid
Ordinary shares of no par value 410,714,119 370,714,119 410,714,119
Unaudited Shares Share
issued Capital
Number US$'000
At 1 January 2022 410,714,119 95,009
At 30 June 2022 410,714,119 95,009
Unaudited Shares Share
issued Capital
Number US$'000
At 1 January 2021 366,361,716 94,137
Issue of shares 4,352,403 210
At 30 June 2021 370,714,119 94,347
Audited Shares Share
issued Capital
Number US$'000
At 1 January 2021 366,361,716 94,137
Issue of shares 40,000,000 830
Issue of shares (creditors & bonuses) 4,352,403 210
Issue costs - (168)
At 31 December 2021 410,714,119 95,009
7. Derivative financial liability
Warrants
0.03 0.03 0.06
Share Price (£)
Number issued 20,000,000 2,166,666 21,666,666
Expected volatility 76% 75% 75%
Options life (years) 1.5 2 2
Expiring date 10.03.23 29.05.2022 29.05.2022
Expected dividends 0 0 0
Risk free rate 0.47% 0.74% 0.74%
2022
US$'000
FV at 01.01.2022 14,669 72 6 14,747
Revaluation (2,904) - - (2,904)
Expired in the period - (72) (6) (78)
FV at 30.06.2022 11,765 - - 11,765
Share Price (£) 0.03 0.06 0.045 0.075
Number issued 2,166,666 21,666,666 833,333 8,333,334
Expected volatility 75% 75% 75% 75%
Options life (years) 2 2 1 1
Expiring date 29.05.2022 29.05.2022 08.12.2021 08.12.2021
Expected dividends 0 0 0 0
Risk free rate 0.74% 0.74% 0.25% 0.25%
2021
US$'000
FV at 01.01.2021 89,486 528,337 22,763 118,834 759,420
Revaluation (67,495) (465,725) (20,888) (56,101) (610,209)
FV at 30.06.2021 21,991 62,612 1,875 62,733 149,211
Share Price (£) 0.03 0.03 0.06 0.045 0.075
Number issued 20,000,000 2,166,666 21,666,666 833,333 8,333,334
Expected volatility 76% 75% 75% 75% 75%
Options life (years) 1.5 2 2 1 1
Expiring date 10.03.23 29.05.2022 29.05.2022 08.12.2021 08.12.2021
Expected dividends 0 0 0 0 0
Risk free rate 0.47% 0.74% 0.74% 0.25% 0.25%
2021
US$'000
FV at 01.01.2021 - 89,486 528,337 22,763 118,834 759,420
FV at recognition 94,152 - - - - 94,152
Revaluation (79,483) (89,414) (528,331) - - (697,228)
Expired in the period - - - (22,763) (118,834) (141,597)
FV at 30.12. 2021 14,669 72 6 - - 14,747
The warrants are classified at fair value through profit and loss as the
functional currency of the Company is US$ and the exercise price is set in
GBP. The remaining total fair value of expired warrants are derecognised
through the profit and loss.
On initial recognition the value of the warrants is deducted from the share
capital balance. Subsequent changes in the fair value of the warrants are
recognised through profit or loss.
During the period 2,166,666 warrants at a subscription price of 3.0p and
21,666,666 warrants at a subscription price of 6.0p issued in May 2020
expired. The remaining total fair value of US$78 was derecognised through the
profit and loss.
The warrants have been deemed to be Level 2 liabilities under the fair value
hierarchy.
8. Net finance income/(expense)
30 June 30 June 31 December
2022 2021 2021
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
Interest on loans (unsecured) (233) (255) (150)
Change on warrants fair value (1) 610 362
Net finance income/(expense) (234) 355 212
9. Share based payments
During the period there have not been any new issues of share options. The
total number of options outstanding for the period is 12,294,058 (2021:
12,294,058) no options had vested during the period.
The fair value of the equity instrument was measured using the Black-Scholes
model. The expected life used in the model was adjusted, based on management's
best estimate, for the effects of non-transferability, exercise restrictions
and behavioural considerations. A share base payment charge of US$2,500 (H1
2021: US$253,000) was recognised in period in relation to these options.
10. Related party transactions
Parties are considered to be related if one party has the ability to control
the other party, is under common control, or can exercise significant
influence over the other party in making financial and operational decisions.
In considering each possible related party relationship, attention is directed
to the substance of the relationship, not merely the legal form.
Shareholders Loan
In relation to the Shareholder Loan as at 30 June 2022 US$1.7 million (H1
2021: US$1.5 million) is due to a Trust of which Non-Executive Chairman,
Michael Haworth is a potential beneficiary and US$0.16 million (H1 2021:
US$0.15 million) to Executive Director Hanno Pengilly.
Hanno Pengilly - Executive Director of Ncondezi Energy Limited - Director of
Herne Capital (Pty) Ltd ("HCL")
During the period US$88,000 (H1 2021: US$120,000) was paid by the Company to
HCL in respect of services provided by Hanno Pengilly. There was no
outstanding deferred fees balance at the end of the period (H1 2021: US$ nil).
HCL provides leadership on key corporate activities such as capital raising,
reporting and press releases and investor relations strategy.
Working Capital Facility
The US$750,000 working capital facility expired at the end of June 2020. In
total US$250,000 had been drawn down. The facility was provided by a company
owned by a trust of which CEO, Hanno Pengilly, is a potential beneficiary. At
the end of the period the loan had accumulated US$58,000 in interest. On 1
August 2022 the lender has agreed not to call the Loan whilst the
restructuring agreements are finalised.
Aman Sachdeva - Non-Executive Director of Ncondezi Energy Limited - CEO of
Synergy Consulting Inc.
During the period US$nil (H1 2021: US$76,000) was paid by the Company to
Synergy Consulting Inc. in respect of services provided by Synergy. At end of
the period the outstanding balance was US$7,000 (H1 2021: US$nil).
Synergy is a global independent consultancy specialising in infrastructure
advisory and project finance, and has experience in achieving financial
closure for deals worth approx. US$25 billion and M&A advisory for deals
worth US$5.0 billion.
11. Events after the reporting period
Grid Scale Solar Project
· Ncondezi Green Power ("NGP") launches FS for up to 300MW solar PV
power plant plus BESS ("Study") with target completion end October 2022
· Positive initial results from the Solar Project Study, confirm
the project's excellent location for solar generation with no red flags
identified
· Estimated pre-money NPV of between US$60.0 million and US$65.0
million and fully diluted cash flows of between US$130.0 million and US$180.0
million over a 25 year period
Working Capital
· On 16 September 2022 the restructuring of the Working Capital
Facility to a convertible loan note ("Convertible Loan") ("Restructuring") was
finalised, subject to shareholder approval of the rights to issue shares under
the Convertible Loan. The Restructuring terms set out below:
o £373,447k Convertible Loan note, made up of:
§ Restructured £273,447k Seritza working capital facility
§ Additional £100k provided by Company Chairman Michael Haworth and NED
Scott Fletcher (split £20k and £80k respectively)
o Interest rate of 12%
o Maturity on 30 November 2023
o Right for each of the lenders to convert the principal amount into
Ncondezi Ordinary Shares ("Shares") at the higher of:
§ the amount calculated by applying a 25% discount to the Volume Weighted
Average Price ("VWAP") on the thirty days immediately preceding the date of
the conversion notice;
§ the amount calculated by applying a 25% discount to the placing price if a
placing of Shares has been concluded within 30 days prior to the date of the
conversion notice; and
§ £0.005 per ordinary share
o Right to convert any new interest portion of the Convertible Loan into
Shares at the higher of:
§ the amount calculated by applying a 30% premium to the VWAP on the thirty
days immediately preceding the date of the conversion notice;
§ the amount calculated by applying a 30% premium to the placing price if a
placing of Shares has been concluded within 30 days prior to the date of the
conversion notice; and
§ £0.005 per ordinary share.
o The Company can prepay all of the loan at any time at its discretion,
without penalty on 20 business days' notice.
o On receipt of a notice to convert, Ncondezi will have 15 business days to
exercise a right to exclude up to 50% of the amount to be converted on
condition that it is immediately redeemed in cash
o On receipt of a notice of early redemption of the Convertible Loan by
Ncondezi, the lenders will have 15 business days to execute its right to
convert up to 50% of the redeemable amount into equity on terms outlined above
o Converted Shares will be subject to orderly market provisions for 12
months after the conversion date
o Conversions of any outstanding amounts are subject to the Company
receiving the necessary approvals to issue shares upon conversion free of
pre-emption rights at a General Meeting to be convened shortly
o Convertible Loan increased by an additional £100,000 made available by
certain Directors of the Company, to accelerate development of the Solar
Project ("First Tranche")
o An additional tranche of £150,000 may be made available to the Company at
the Convertible Loan lender's discretion in the six months following the
restructuring ("Second Tranche")
o Restructuring is subject to approval to issue shares and to disapply
pre-emption rights at a General Meeting. and the fair and reasonable opinion
assessment being completed by the Company's Independent Directors in line with
the requirements of the AIM Rules in respect of related party transactions
Shareholder Loan
· Certain Directors have entered into a binding Undertaking (the
"Undertaking") preventing the Shareholder Loan being called before the later
of 30 November 2023 ("Undertaking Period")
Directors
Michael Haworth (Non-Executive Chairman)
Scott Fletcher (Non-Executive Director)
Aman Sachdeva (Non-Executive Director)
Hanno Pengilly (Executive Director)
Company Secretary
Elysium Fund Management Limited
PO Box 650, 1(st) Floor, Royal Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 3JX
Registered Office
Coastal Building
Wickham's Cay II
PO Box 2221
Tortola
British Virgin Islands
Company number
1019077
Nominated Advisor and Corporate Broker Liberum Capital Limited
Ropemaker Place
Level 12
25 Ropemaker Street
London
EC2Y 9AR
Joint
Broker
Novum Securities Ltd
Lansdowne House
57 Berkeley Square
London
W1J 6ER
Auditors
BDO LLP
55 Baker Street
London
W1U 7EU
Registrar
Computershare Investor Services (BVI) Limited
Woodbourne Hall
PO Box 3162
Road Town
Tortola
British Virgin Islands
Legal advisor to the Company
Ogier (Jersey) LLP
as to BVI
law
44 Esplanade
St Helier
Jersey
JE4 9WG
Legal advisor to the Company
Bryan Cave Leighton Paisner LLP
as to English law
Governors House
5 Laurence Pountney Hill
London
EC4R 0BR
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