Ncondezi conserving cash as it seeks clarity on China coal policy

29th Mar 2022 13:31

(Sharecast News) - Ncondezi Energy updated the market on its integrated 300MW power project in Tete, Mozambique on Tuesday, and its working capital facility term loan with Seritza, amid confusion over the Chinese government's approach to funding overseas coal projects.

The AIM-traded firm said Seritza had confirmed that it would extend the period in which it would not call in the loan to 29 April.

It said that would allow for restructuring discussions to be finalised, which was ongoing.

The company said it had implemented a cash conservation strategy, potentially extending its working capital runway from August to the first quarter of 2023, depending on the restructuring outcome.

China Machinery Engineering Corporation (CMEC), meanwhile, had initiated discussions with potential financiers for the project not affected by the Chinese government's statement on financing coal projects outside of China.

"The Chinese government's position on financing coal power projects abroad remains unclear at this stage," said chief executive officer Hanno Pengilly.

"Regardless, the company continues to work closely with its strategic partner CMEC to identify a solution to move the project forward, including engagement with potential private project financiers in China and elsewhere in the world who are not restricted by the Chinese government's position.

"In parallel to this, the company is reviewing alternative opportunities at the project's site, utilising existing works that could unlock additional value to shareholders whilst not affecting the main project."

Pengilly said the board was "fully committed" to identifying a solution to break the current project deadlock.

"The company has held project update meetings with Electricidade de Moçambique and the Mozambique Ministry of Mineral Resources and Energy during the quarter.

"Following the appointment of a new Minister for Mineral Resources and Energy in March, we now expect progress on finalising the project's transmission integration to be made during the second quarter."

Hanno Pengilly said a cost conservation strategy had been implemented by the board, which was expected to extend its cash position into August.

"Should the company be successful in its restructuring discussions with Seritza, this could potentially be extended to the first quarter of 2023."

At 1308 BST, shares in Ncondezi Energy were down 29.3% at 0.48p.