Solar Valuation Update
21/11/2022 07:00
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RNS Number : 9732G Ncondezi Energy Limited 21 November 2022
News Release
Solar Valuation Update
21 November 2022: Ncondezi Energy Limited ("Ncondezi" or the "Company")
(AIM:NCCL) provides an update on its solar photovoltaic ("PV") and Battery
Energy Storage System ("BESS") project in Tete, Mozambique (the "Solar
Project").
Highlights:
· Solar Project valuation forecasts update for 100MW phases up to
300MW following inputs from 300MW solar PV plus BESS feasibility study ("FS")
· Forecast Solar Project pre money NPV at 10% discount rate:
o 100MW: US$ 23m
o 200MW: US$ 51m
o 300MW: US$ 75m
· Forecast Solar Project net cashflows over 25 year operational
period for each phase:
o 100MW: US$ 186m
o 200MW: US$ 400m
o 300MW: US$ 584m
· Forecast Ncondezi fully diluted net cash flows over 25 year
operational period for each phase:
o 100MW: US$ 33m to US$ 44m
o 200MW: US$ 96m to US$ 116m
o 300MW: US$ 171m to US$ 196m
· 100MW phases selected to capture economies of scale to lower
upfront capex per MW installed
· Tariff price based on comparable tariffs in Mozambique and
achieving competitive project equity IRR, which is acceptable in the regional
market.
· Forecasts updated to include transmission, permitting and
concession costs
· Capex, opex and financing forecasts adjusted for recent
escalations in global inflation and interest rates
· Ncondezi focus now on agreeing transmission connection solution
with Mozambique authorities and confirming power demand from potential off
takers
Ncondezi Chief Executive Officer, Hanno Pengilly said: "Ncondezi's updated
valuation forecasts further confirm the value potential of our Solar Project
to shareholders and new investors. These results are derived from the recently
announced positive FS results which confirm the project's technical viability
and strong solar resources. Inputs from the FS have been utilised to update
the Solar Project financial model with a greater degree of detail and
accuracy, generating what we believe to be a competitive power tariff for
potential off takers.
Our focus now shifts to engaging with potential off takers, a process that is
expected to start at the end of November 2022. In parallel to this, the
Company has submitted its preferred transmission connection solution to the
relevant Mozambican authorities for approval. The Solar Project is
strategically positioned from a transmission perspective, having access to
existing grid networks with available capacity and multiple evacuation paths
in Mozambique and the wider Southern African region.
There is potential to further enhance the Solar Project value through
optimisations, including competitive bid processes launched with Engineering
Procurement and Construction (EPC) companies and financiers to refine
forecasts and enhance confidence levels. This is expected to commence
following further progress with potential off takers.
The Board believes that the Company is at an exciting phase of development
with the Solar Project taking advantage of Mozambique's leading sustainable
energy resources and being fully aligned with Government's objective to become
a champion for energy transition impacting all of Southern Africa.
We look forward to providing additional updates in the near future."
Background
Ncondezi is developing the Solar Project within its Ncondezi mining concession
5967C which covers over 25,000 hectares in the districts of Moatize and Chiuta
in the Tete Province. This is large enough for solar PV generation potential
of over 5,000MW.
It is the intention that the Solar Project will connect to the Mozambique grid
with target power off takers in Mozambique and the Southern African Power Pool
(SAPP).
On 31 October 2022, the Company announced results from its final draft Solar
Project feasibility study ("FS") for up to 300MW solar PV power plant plus
BESS. The FS took a modular design approach to the Solar Project targeting a
total 300MW but assessing in increments of 30MW, 60MW, 100MW, 200MW and 300MW.
Results from the FS confirmed a technically viable project with attractive
parameters including:
· No fatal flaws identified on preferred site location
· Strong solar resource of 1,980kWh/m2 (Global Horizontal
Irradiation)
· High energy yield of over 2,000kWh/kWp confirms top tier
performance potential
· Standardised tier 1 solar PV specifications selected reducing
capex and improving performance
· Inclusion of BESS provides grid ancillary support and ability to
optimise dispatch profile
· No red flags identified on Environmental and Social Impact
Assessment ("ESIA") review
The FS also provided capex and opex estimates for the various solar PV plant
sizes which included latest available data from recent projects in Mozambique
and the region. Capex and opex figures are estimated to fall within the low to
medium range for solar PV projects globally, and this information has been
used to update the Solar Project's financial model and develop a commercially
attractive power tariff for presentation to potential power off takers.
Solar Project Financial Model
Using the FS results, Ncondezi has updated the Solar Project financial model.
Analysis of generation sizes between 30 and 300MW confirmed economies of scale
are achievable from 100MW, with estimated potential capex savings of between
20% and 30% driven largely by procurement and design efficiencies.
With the objective of delivering a more competitive tariff offering, the
Company focused on updating the financial model for the 100MW, 200MW and 300MW
phases only.
The FS confirmed that capex and opex for the Solar Project were expected to
fall within the low to medium pricing range globally however since the Company
last presented Solar Project valuation estimates in July 2022, capex and
financing costs have materially increased due to global inflationary, supply
and logistical pressures. The financial model has taken these trends into
account using the latest benchmark data from transactions in the solar sector
in Mozambique and the wider southern African region. Fortunately, the Solar
Project has been able to offset some of these increases through economies of
scale savings.
The key financial model inputs and assumptions are summarised below:
· Construction time period: 20 months for each phase installed
consecutively, inclusive of contingency and mobilisation
· Tariff: US$ denominated with annual adjustments based on US and
Mozambique CPI. 25 year off take for each phase. Tariff price based on
comparable tariffs in Mozambique and achieving competitive project equity IRR,
which is acceptable in the regional market.
· Capex and opex: Inputs from FS inclusive of transmission
connection, permitting and concession costs
· Debt structure: assumed leverage of 75% is achievable on each
phase based on similar projects in Mozambique and the region
· Local shareholding: assumed 5% equity carry provided to
Mozambican Government nominated local strategic partner in line with precedent
projects in Mozambique
· BESS: No BESS is assumed as this will be further defined by off
taker requirements
Valuation Update
The Company has updated its estimated valuation forecasts for the 100MW, 200MW
and 300MW solar PV phases based on the assumptions outlined above.
Phase Capex(1) Total Equity(2) Pre Money NPV(3) Project Net Cashflows(4) Ncondezi Fully Diluted Net Cashflows(5)
Lower Upper
US$m US$m US$m US$m US$m US$m
100MW 173 43 23 185 33 44
200MW 347 87 51 400 96 116
300MW 464 116 75 584 171 196
Note:
Figures above are estimates subject to further negotiation
(1) Capex is an all-in cost inclusive of solar plant, transmission, financing
and permitting costs
(2) Assumes 75% leverage
(3) 10% discount rate. Solar Project NPV at financial close, inclusive of
transmission costs and pre debt and equity investment to construct and
commission
(4) Net Solar Project cashflows after equity investment, tax, debt repayments
and 5% Mozambican Government carry
(5) Net Solar Project cashflows attributable to Ncondezi following dilution in
the scenario where total equity capital component at financial close for each
phase is financed by new investors at the project level. Also assumes any
development premium and development cost reimbursements received by Ncondezi
are reinvested as equity to maintain its shareholding. Lower and upper ranges
are based on new investor equity IRR target between 13.5% and 14.5%
The valuation forecasts outlined above are at a feasibility stage. Further
optimisation potential exists, particularly with respect to capex, opex and
financing assumptions which are not closed and will be subject to competitive
bid processes run by the Company once off take demand has been confirmed. In
addition, economies of scale assumptions are considered conservative with
capex savings of between 10% and 20% assumed for the 100MW, 200MW and 300MW
phases.
The forecasts above are an update to previous guidance provided on 15 July
2022 and now include phased deployment up to 300MW in 100MW phases as opposed
to a single phase which the Company believes is more manageable from a
construction and energy demand perspective. The forecasts are inclusive of
transmission costs to connect to the Mozambique grid and the recent impact of
global inflation and interest rate escalations.
Enquiries
For further information please visit www.ncondezienergy.com or contact:
Ncondezi Energy Hanno Pengilly +27 (0) 71 362 3566
Scott Mathieson, Edward Thomas, Kane Collings +44 (0) 20 3100 2000
Liberum Capital Limited
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
This announcement contains inside information for the purposes of Article 7 of
Regulation (EU) No 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018. Upon publication of this
Announcement, such information is now considered to be in the public domain.
The person who arranged for the release of this announcement on behalf of the
Company was Hanno Pengilly.
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.
Cautionary Statements Regarding Forward-Looking Information
Certain statements in this announcement are forward-looking statements with
respect to the Company's expectations, intentions and projections regarding
its future performance, strategic initiatives, anticipated events or trends
and other matters that are not historical facts and which are, by their
nature, inherently predictive, speculative and involve risks and uncertainty
because they relate to events and depend on circumstances that may or may not
occur in the future. All statements that address expectations or projections
about the future, including statements about expected growth in solar power,
production potential, the results of the feasibility studies, including,
without limitation, expected MW, construction period, expected costs, and
operating performance and other metrics, strategic initiatives, objectives,
market position, industry trends, general economic conditions, expected
expenditures, expected cost savings and financial results, are
forward ‐ looking statements. Any statements contained in this
announcement that are not statements of historical fact are, or may be deemed
to be, forward ‐ looking statements. These forward-looking statements,
which may use words such as "aim", "anticipate", "believe", "could", "intend",
"estimate", "expect", "may", "plan", "project" or words or terms of similar
meaning or the negative thereof, are not guarantees of future performance and
are subject to known and unknown risks and uncertainties. There are a number
of factors including, but not limited to, commercial, operational, economic
and financial factors, that could cause actual results, financial condition,
performance or achievements to differ materially from those expressed or
implied by these forward looking statements. Many of these risks and
uncertainties relate to factors that are beyond the Company's ability to
control or estimate precisely, such as changes in taxation or fiscal policy,
future market conditions, currency fluctuations, the behaviour of other market
participants, the actions of governments or governmental regulators, or other
risk factors, such as changes in the political, social and regulatory
framework in which the Company operates or in economic or technological trends
or conditions, including inflation, recession and consumer confidence, on a
global, regional or national basis. Given those risks and uncertainties,
readers are cautioned not to place undue reliance on forward-looking
statements. Forward-looking statements speak only as of the date of this
announcement. The Company, expressly disclaims any obligation or undertaking
to update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise unless required to do so by applicable
law or regulation. The information in this announcement is subject to change.
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