SUPPLYING THE WORLD S GROWING ENERGY MARKETS Power DFS Results Investor Presentation

Transcription

1 SUPPLYING THE WORLD S GROWING ENERGY MARKETS Power DFS Results Investor Presentation September

2 DISCLAIMER This document, which is personal to the recipient, has been issued by Ncondezi Coal Company Limited (the Company ). This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of the Company, nor shall any part of it nor the fact of its distribution form part of or be relied on in connection with any contract or investment decision relating thereto, nor does it constitute a recommendation regarding the securities of the Company. In particular, this document and the information contained herein does not constitute an offer of securities for sale in the United States. This document is being supplied to you solely for your information. The information in this document has been provided by the Company or obtained from publicly available sources. No reliance may be placed for any purposes whatsoever on the information or opinions contained in this document or on its completeness. No representation or warranty, express or implied, is given by or on behalf of the Company or any of the Company s directors, officers or employees or any other person as to the accuracy or completeness of the information or opinions contained in this document and no liability whatsoever is accepted by the Company or any of the Company s members, directors, officers or employees nor any other person for any loss howsoever arising, directly or indirectly, from any use of such information or opinions or otherwise arising in connection therewith. Nothing in this document or in the documents referred to in it should be considered as a profit forecast. Past performance of the Company or its shares cannot be relied on as a guide to future performance. Certain statements, beliefs and opinions in this document are forward-looking, which reflect the Company s or, as appropriate, the Company s directors current expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this document regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. The Company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this document. This document has been prepared in compliance with English law and English courts will have exclusive jurisdiction over any disputes arising from or connected with this document. 2

3 OVERVIEW OF NCONDEZI Company strategy targets phased development of two projects: Ncondezi Coal Project Export & domestic thermal coal mine Ncondezi Power Project Mine Mouth power plant for domestic & regional power supply Large 4.7Bt JORC coal resource on 100% owned Ncondezi Project Resource capable of supporting a long life open pit mining operation & power plant First coal production targeting H Mine DFS to be published Q First 300MW power plant unit targeting commissioning 2017 Cash of US$22.75m as at June 30, 2012 Funded until Sept 2013, including current initiatives Project DFS Power DFS & associated studies ESIA project & power Power Evacuation Strategic Partner Search 3

4 POWER OPPORTUNITY

5 STRATEGY TO MATCH GROWTH IN TRANSMISSION & POWER DEMAND Phased strategy to develop generation output Generation Capacity Ramp Up In line with domestic & regional transmission & demand growth ,800MW coal fired, mine mouth power station Developed in 300MW units Ramp up to 1800MW over 6 year period Targeting commissioning of first 300MW unit in 2017 MW Mtpa Using Ncondezi mine s domestic grade coals Consumption of 1.2Mtpa coal per 300MW unit = total 7.2Mtpa for 1800MW Proposal to ring fence 250Mt coal resource as dedicated source of supply for 25 year life at 1800MW Total generation capacity (MW) Coal requirement (Mtpa) 0 5

6 DEMAND FORECAST NORTH MW Northern Region Northern Grid Medium Forecast High Forecast Low Forecast Source: Transmission Grid Consulting 6

7 POWER PLANT SITE SUITABILITY Power plant site meets all key criteria: Proximity to coal source 5-7kms from coal processing plant CFB technology well suited for Ncondezi coal Proximity to water Ncondezi & Revuboe rivers Site topography no major civil works required Land availability no major settlements in selected area Favourable environmental impact Power evacuation 90kms to nearest grid connection 7

8 COMMERCIAL OVERVIEW PHASE 1A EdM 1 will be offtaker of Phase 1A output Phase 1A consists of a 300MW power plant unit commissioned in % (230MW) of power generated to be sold into Mozambican grid via EdM Ncondezi coal mine (40MW) and the power plant (30MW) will consume balance Power offtake negotiations with EdM to commence shortly Targeting a competitive tariff rate EdM is ideal offtaker as it can readily absorb power today Mitigates commercial, transmission & legal risks associated with exporting power Ncondezi coal mine will enter into Coal Supply & Power Purchase Agreements with Ncondezi power plant Agreements will be on arm s length commercial terms Minimum duration of 25 years 1 Electricidade de Moçambique ( EdM ) Mozambican state power and transmission utility 8

9 POWER DFS HIGHLIGHTS Parsons Brinckerhoff DFS study confirms technical & economical viability of 1800MW coal fired, mine mouth power station Power plant expected to be cost competitive with other supply options in the region Independent peer review by STEAG confirms DFS findings and verification of independent financial model Mine DFS is due for publication Q Strong Mozambican Government support and first Ministry of Energy approvals granted Phase 1A: 300MW* Phase 1B: 600MW* Phase 2: 1800MW** Power Plant Capex Estimates*** Transmission Capex Estimate Project NPV (10%) including transmission capex US$504m US$1.10bn US$2.25bn US$50m - US$247m US$159m US$317m US$1.33 billion * Parsons Brinckerhoff and Ncondezi estimates to be confirmed by EPC proposals based on Minimum Functional Specifications ** Parsons Brinckerhoff DFS financial model *** Minimum Functional Specifications will be distributed to selected EPCs for more accurate quote 9

10 THE NCONDEZI POWER PROJECT: MULTIPLEWIN-WIN BENEFITS Maximising Mozambique s Resource Endowment In-Country Supports Government policy to become a net export of power Mozambique people will get new, modern power plant supplying greatly needed power for economic growth Multiplier effect across Mozambique s industrial & consumer bases Growing Mozambique s Power Capabilities & Quality of Supply Provides sustainable power generating capacity Enhances stabilised capability for transmission Further potential to add additional power generation Improving Lives & Creating Long Lasting Development Increasing Mozambique people s access to electricity & improving quality of life Direct & indirect job creation & skills transfer & training Contributor to local, national & regional development Providing Power without Comprising on the Environment Beneficiation of a by-product to electricity CFB (Circulating Fluidised Bed) is proven technology Lower SOx & Nox emissions meets Mozambique & World Bank standards Reducing environmental impact of discard coal dumps 10

11 WELL POSITIONED TO TAKE ADVANTAGE OF LOCAL & REGIONAL POWER DEVELOPMENT Tete is strategic location for power in Mozambique & general southern African region: High load growth in Mozambique & South Africa Mozambique has established wheeling relationship with South Africa Close to Malawi & Zimbabwe Existing & future trading possibilities in SAPP Expansion of transmission capacity to Tete via STE Project, a strategic imperative for Mozambique Higher tariffs trend in region to continue & will further support viability of IPP projects Ncondezi best positioned in Tete to become a key power supplier Substantial coal resource to support large, long life power project Development of power project not dependent on development of rail & port export infrastructure Suitable location for coal & water supply Close to planned STE network for future generation growth EdM willing to buy initial power from Phase 1A 11

12 NEXT STEPS

13 TYPICAL STRUCTURING CONSIDERATIONS FOR IPP PROJECT Strategy to identify preferred IPP developer to take an equity stake in the power project and assist with development Provide additional operational and technical experience Reduce equity requirement on Ncondezi Enhance overall project credibility Ncondezi will complete as much project development as possible ahead of selecting a preferred IPP partner Reduce project uncertainty and risk Attract a broader range of potential IPPs Will generate larger project equity for Ncondezi Opportunity exists for additional strategic or equity partners who could provide financial support or strategic benefits to the project Financial institutions Mozambique equity holders 13

14 TYPICAL IPP STRUCTURE Power Developer Financial/Local Investor EPC, O&M contract Combined Equity: 30% Ncondezi Power Plant Project Debt: 70% Debt Financiers PPA Coal supply contract Offtaker (EdM, Eskom, power consumer) 14

15 FUTURE POWER EVACUATION

16 MOZAMBICAN TRANSMISSION NETWORK Existing Mozambican transmission network has 3 separate grids Responsible for majority of current & future power generation 2000MW currently generated at Cahora Bassa hydroelectric dam Transmission infrastructure located within Zambezi coal basin Northern Grid also has established wheeling path to South Africa & Zimbabwe Northern Grid Future potential connections into Malawi and Zambia grids Central Grid Central grid has limited connection with Northern Grid & Zimbabwe Southern Grid Responsible for majority of current & future electricity demand Southern Grid not connected to Northern & Central grids Currently imports 1,390MW from South Africa 950MW allocated to BHP s Mozal aluminium smelter Further development of south of Mozambique constrained No additional power supply from South Africa Limited domestic generation potential 16

17 ROBUST ENERGY DEMAND OUTLOOK IN MOZAMBIQUE Mozambique Load Growth: Medium Forecast CAGR : 4% 1500 MW Source: Transmission Grid Consulting, forecast excludes Mozal consumption of c.950mw Mozambique currently largest demand growth in southern Africa Substantial investments & new power infrastructure needed to sustain demand, socio-economic development Coal & gas generation represent most cost effective supply options in short to medium term Gas generation currently limited to small scale projects of MW units, mainly for sale into South Africa 17

18 EXISTING CAPACITY FOR NEW POWER TRANSMISSION Short term focus is existing transmission capacity on Northern Grid Northern Grid currently has c.600mw transmission capacity for in-country demand & exports to Zimbabwe & South Africa Additional load growth on Northern Grid driven by: Moma expansion Cement industry growth Special Economic Zone and port development at Nacala Additional short term power demand growth from Malawi of 200MW to 300MW Ncondezi Power Project located c.90km from Malawi substation 18

19 LONG TERM SUPPLY POTENTIAL TO MEET DOMESTIC & REGIONAL DEMAND GROWTH Mozambique under significant pressure to expand transmission capacity to meet domestic & regional demand Key limiting factor is lack of transmission interconnection between energy generating North & main consumption centre in South The STE Project* is a key Government development project Connects all three grids together, from Tete to Maputo +3100MW transmission capacity via 2 new transmission lines Estimated total cost of US$1.8 billion Commissioning target Range of potential partners already in discussions Brazil s Eletrobras, Portugal s REN, France s Electricité de France & South Africa s Eskom Will provide additional transmission capacity into South Africa & Zimbabwe *Previously known as CESUL 19

20 SAPP POWER OPPORTUNITY

21 REGIONAL POWER OPPORTUNITY SAPP Transmission Grid Southern African region currently in power capacity shortage SAPP 1 currently has shortfall of 6,000MW Additional 1,500MW pa required over next 20 years This situation encourages bilateral trading as a means of ensuring security of power supply between SAPP countries Mozambique is an increasingly important regional player Currently sells to South Africa & Zimbabwe Future average wholesale energy price increases making Independent Power Producer ( IPP ) projects financially viable Previous policy of artificially low prices resulted in region short fall 1 Southern African Power Pool Source: SAPP, NERSA, EDM Tariff increase in last 2 years South Africa 25.3% Mozambique 10.3% Zambia 25.0% Tanzania 18.5% Botswana 50.0% 21

22 SOUTH AFRICAN POWER OPPORTUNITY Largest producer & consumer of power Current installed capacity of 44,175MW Current Electricity Breakdown 1.2% 0.5% 0.1% 5.7% Electricity market worth $6.5bn in 2010 & expected to grow to $10.3bn by 2014 Faces critical shortage of power in medium to long term Since 2008, balancing supply & demand been challenging Most power stations are in their mid-life, require increased maintenance Maintenance has constantly been shifted in order to meet demand Strategy of shifting maintenance outages can no longer be sustained South African Grid 92.6% Coal Nuclear Pumped Hydro Gas Requires additional 40,000MW by 2025 Equivalent to over 130Mtpa coal requirement IPPs expected to make 30% of new generation Strategy to import power from coal power plants in Mozambique *Source: Eskom, South African Department of Energy 22

23 CONCLUDING REMARKS

24 NCONDEZI OFFERS COMPELLING INVESTMENT PROPOSITION Phased approached, minimise capital outlay, maximise project returns Focused on Deliverability Well positioned for expansion to meet infrastructure & power transmission capacity growth Meets Mozambican Government s strategy for in-country beneficiation Supplying Asian Energy Growth Markets Robust long-term fundamentals Ncondezi s export products ideally suited Transport optionality Meeting Southern African Power Supply Shortfalls Capitalise on local and regional power shortage, access to current and future transmission networks Provides flexibility by reducing reliance on development of third party transport infrastructure Revenue source for domestic grade products at minimal additional cost enhances the overall project economics 24

25 CONTACT DETAILS Hanno Pengilly Alex Buck Chief Development Officer Investor Relations Tel: +44 (0) Tel: +44 (0)