Page 4 - AfrElec Week 07

AfrElec COMMENTARY AfrElec
Mozambique deepens Chinese coal links
AIM-listed Ncondezi Energy is close to agreeing a tariff for 300MW of coal-fired capacity that relies on Chinese money and technology, writes Richard Lockhart
MOZAMBIQUE
WHAT:
Ncondezi Energy close to tariff deal for 300MW of Chinese-backed coal generation
WHY:
Mozambique aims to exploits its coal reserves to meet rising demand
WHAT NEXT:
Coal plays a crucial
role in Mozambique’s generation plans, despite the move away from fossil fuels. This leaves Maputo reliant on Chinese capital and expensive coal technology
AIM-LISTED Ncondezi Energy is confi- dent that it is close to signing tariff terms with Mozambique for its Chinese-backed 300-MW coal-to-power project in Tete Province.
Ncondezi said that it had also received confirmed EPC and O&M proposals from its partners, China Machinery Engineering Corp. (CMEC) and GE, for the $10bn integrated coal and power project in northern Mozambique.
Any final tariff deal would mean increased Chinese influence in the Mozambique economy and more future emissions, despite the current move away from fossil fuels by Western investors and governments.
Statement
Ncondezi Energy said in a statement that it was intending to finalise its tariff offer with state- owned utility Electricidade de Moçambique (EDM) in early Q1 2020. It also confirmed that it had received EPC and O&M proposals from its partners, as well as debt terms from the Indus- trial and Commercial Bank of China (ICBC).
It has also received a letter of intent (LoI) from China Export & Credit Insurance Corp. (Sinosure) for political and commercial risk insurance.
Ncondezi said that once it had submitted its tariff it aimed to finalise negotiations with EDM in H1 2020.
Ncondezi is backed by African Finance Cor- poration (20%), a multilateral investor that is owned by African governments and banks, and Poland’s Polenergia (10%), as well as a number of private investors.
Ncondezi holds a 40% interest in the gen- erating venture, while CMEC and US-based equipment supplier GE together took 60% after signing a July 2019 joint development agreement (JDA).
Ncondezi Energy says that it has access to 4bn tonnes of coal reserves in Tete Province and will be able to produce 1.5mn tonnes per year (tpy).
Mozambique’s needs
Mozambique needs new power sources, and is a both a major exporter and importer of electricy. Total capacity stands at 2,827 MW, with EDM currently running 2,140 MW, although 1,500
MW is earmarked for export. This means that EDM has to import from Eskom to meet domes- tic demand of about 900 MW, which is increas- ing at 7-9% per year.
In practice, grid problems – the country has two isolated northern and southern grids – variable output from Hidroeléctricade Cahora Bassa’s (HCB) 2,075 MW of hydro capacity and the currency risk on imports from South Africa mean none of these targets are met.
To counter this, Mozambique’s government has included 1,350 MW of new coal-fired capac- ity in its integrated Master Plan for Electricity Infrastructures (2018-2043), while also calling for universal access to power by 2025. The rate is currently 25%.
This would require domestic capacity to rise to 3,138 MW by 2022 and 4,163 MW by 2030 to provide universal access and to meet export commitments, government figures show.
Ncondezi’s 300-MW coal plants form part of this plan, and state-owned EDM is the sole offtaker for the project.
Investment climate
The project is supported by the Chinese via its state-owned investment bank and export insurer. Many African governments are also involved through African Finance Corporation.
However, this commitment to coal by the Mozambique government counters the prevail- ing investor climate.
The AfDB has said it will invest in no more coal projects, and the Western DFI community is no longer committing to coal.
AfDB president Akinwumi Adesina said in September 2019: “Coal is the past, renewable energy is the future. For us at the African Devel- opment Bank, we are getting out of coal.”
The AfDB also said it would not support Kenya’s Lamu coal project, in which GE is also involved.
Meanwhile, both the Japanese and South Korean governments and companies have piv- oted to renewables in Africa. Marubeni and POSCO have moved away from a coal project in Botswana.
This leaves China and the African govern- ments themselves to support coal. Yet Chinese
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w w w. N E W S B A S E . c o m Week 07 20•February•2020