September 13, 2012 / 4:21 PM / 5 years ago

UPDATE 1-Ncondezi Coal seeks partner for Mozambique plant

* Plant to supply 600 MW, to be ramped up to 1,800 MW

* To supply electricity to Mozambique, regional market (Recasts, adds details, CEO comments, changes dateline)

By Agnieszka Flak

JOHANNESBURG, Sept 13 (Reuters) - AIM-listed coal development company Ncondezi Coal is looking for a partner to build a coal-fired power plant in Mozambique to supply the domestic and regional markets, its chief executive officer said on Thursday.

The power plant, to be commissioned in 2017 and to be located in Mozambique’s northern Tete province, would be built in phases, initially ramping up to generate 600 MW by 2019.

After 2020, the plant would be expanded to produce up to 1,800 MW, with the ramp up dependent on the construction of a $1.8 billion transmission line connecting the northern provinces with the capital of Maputo in the south.

“In the future, there would be potential to go to 3,600 MW and the coal resource would support that, but that would depend on the ability to transmit that power,” CEO Nigel Walls told Reuters in an interview.

The power plant will be supplied by a nearby coal mine, which is expected to start production towards the end of 2015.

Ncondezi’s mine will initially ramp up to produce around 4 million tonnes of coal, half of which will go to the power plant, with the remainder shipped for exports. Next decade, the mine would supply around 7.2 million tonnes for a 1,800 MW plant, with an additional 3-5 million tonnes going for exports.

The firm will soon start talks with Mozambican utility EDM for a power purchase deal for the initial phase of the project, with electricity from the plant expected to be cost-competitive with other supplies in the region, Walls added.

While most coal companies busy exploring in Tete have been developing deposits of coking coal, with the region estimated to hold one of the world’s largest reserves of the steel-making ingredient, Ncondezi’s focus will remain on thermal coal.

“We have a very large resource which is surrounded by a regional power market where there is a critical shortage,” Walls added. “Power for us is a fundamental part of our project.”

Mozambique’s current generating capacity is around 2,200 MW, mainly supplied by the Cahora Bassa hydroelectric dam. Most of that is exported to South Africa, while only 18 percent of Mozambicans have access to electricity.

Many of Mozambique’s neighbours have been suffering from chronic blackouts. South Africa’s national grid nearly collapsed in 2008, forcing mines and smelters to shut for days and costing the continent’s top economy billions of dollars in lost output.

The country has since invested billions to ramp up domestic output and has been in active talks with Mozambique to source more power from its abundant hydro, coal and gas resources.

Walls said there had been extensive interest in the project, including from several Asian players, and the company hopes to select a partner by the first quarter of next year.

The cost of the plant is estimated at between $504 million for a 300 MW facility to $2.25 billion for a $1,800 MW plant, although Walls was confident these numbers would come down. (Editing by James Jukwey)

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