TIDMNCCL
RNS Number : 7016N
Ncondezi Energy Limited
26 September 2019
News Release
Interim Results for the six months ended 30 June 2019
26 September 2019: Ncondezi Energy Limited ("Ncondezi", the
"Company" or the "Group") (AIM: NCCL) announces its interim results
for the six months ended 30 June 2019.
Project Highlights:
-- Approval from Mozambique Government led Liaison Committee of
updated work programme and timetable for the Company's integrated
300MW power and coal mine project in Tete Mozambique (the
"Project"), targeting power on the grid by 2023.
-- China Machinery Engineering Corporation ("CMEC") and General
Electric Switzerland Gmbh ("GE") (together the "Parties") confirmed
the process to conclude the Joint Development Agreement ("JDA") for
the Project.
-- Company joined Mozambique government delegation to the Second
Belt and Road Forum in Beijing, China and held successful meetings
with His Excellency Mr Filipe Nyusi, President of the Republic of
Mozambique, the Governor of Tete and the Deputy Minister of
Ministry of Mineral Resources and Energy ("MIREME").
Solar Project
-- Term sheet agreed to enter into a Joint Venture ("JV") with
GridX Africa Development ("GridX"), an African power developer,
focused on building and operating captive solar and battery storage
solutions for the African Commercial and Industrial ("C&I")
sector.
Financial Highlights:
-- Successful fund raising of GBP1.88m (US$2.38 million) to
finance general working capital, definitive agreements to finalise
JV with GridX and potentially fund the first project C&I
project.
-- Total of US$935,000 of the Shareholder Loan converted into
equity at a price of 10 pence per share and 7,193,328 new ordinary
shares were issued.
-- Exercise of 1,000,000 warrants at a subscription price of 5
pence per share raised a total of GBP50,000.
-- Issue of 1,000,000 new ordinary shares of no par value on
exercise of 1,000,000 nil price share options which were vested at
grant on 25 May 2018.
-- Cash at bank of US$1.5 million (as at 23 September 2019).
Post period end events:
-- Binding JDA signed with the Parties to co-develop and construct the Project.
-- A further US$409,000 of the Shareholder Loan converted into
equity at a price of 10 pence per share and 3,144,485 new ordinary
shares were issued.
-- Exercise of 1,500,000 warrants at a subscription price of 5
pence per share raising a total of GBP75,000.
Financial highlights:
6 months to 6 months
30 June 2019 to
US$'000 30 June
2018
US$'000
----------------------------------------------------- ------------------------- --------------------
Loss for the period (1,260) (2,413)
Loss per share - cents (0.4) (0.9)
Cash at bank (including restricted cash) 1,790 1,123
Enquiries
For further information please visit www.ncondezienergy.com or
contact:
+27 (0) 71 362
Ncondezi Energy: Hanno Pengilly 3566
Liberum Capital Limited: Andrew Godber, Edward Thomas, +44 (0) 20 3100
NOMAD & Joint Broker Kane Collings 2000
Novum Securities Limited +44 (0) 20 7399
Joint Broker Colin Rowbury 9427
Note:
The information contained within this announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulation ("MAR"). Upon the publication of this
announcement via Regulatory Information Service ("RIS"), this
inside information is now considered to be in the public domain. If
you have any queries on this, then please contact Hanno Pengilly,
Chief Development Officer of the Company (responsible for arranging
release of this announcement) on +27 (0) 71 362 3566.
Ncondezi is an emerging African power development company which
owns 100% of the 300MW Ncondezi Coal Power Project which is one of
the most advanced development power project's in Mozambique. The
project is strategically located in the Tete Province in northern
Mozambique, a power generating hub that distributes power across
the region. The Company is targeting delivery of first power onto
the Mozambican grid by 2023 through a 25 year offtake agreement to
meet existing demand.
Ncondezi has also entered the captive solar and battery storage
sector through a proposed Joint Venture with GridX Africa
Development, to develop, build and operate power solutions for the
African Commercial and Industrial sector.
Chairman's Statement
Dear Shareholder,
The first half of the 2019 financial year has been focused on
the delivery of a binding JDA with the Parties for the
co-development and construction of the Company's integrated 300MW
power and coal mine project, which was successfully concluded in
late July 2019.
This project supports Mozambique's energy strategy of universal
electricity access by 2030 -according to World Bank, only 30% of
the population had access to energy in 2017. The Ncondezi power
plant, located in Tete province, once constructed is expected to
provide reliable and available power helping to close the
infrastructure gap of the region and serving as a catalyst for
economic development. The power plant will be equipped with
state-of-the-art emissions controls technologies that will reduce
local air pollutants, minimizing the plant impact on the
environment and ensuring its compliance with the most stringent
emission standards.
The JDA is a major milestone for the Company, representing a
material de-risking event, enhancing the Project's credibility and
setting a clear pathway to closing out project investment and
financing.
From a commercial perspective, the JDA confirms that Ncondezi is
expected to maintain a 40% equity interest in the Project at
Financial Close ("FC") and is expected to receive a reimbursement
of historical development costs and payment of a subscription price
for the 60% equity share. It is expected that the historical
development costs and subscription price will be agreed between the
parties before the PPA and PCA are finalised, subject to government
and lender approvals, and will likely be allocated towards the
Company's 40% equity contribution at FC. Further details of the JDA
are set out below.
Following the JDA signing, the Company and the Parties have
begun a detailed review of the Project programme and timetable with
a focus on the next value enhancing milestones, namely finalisation
of the Project power tariff, Power Purchase Agreement ("PPA") and
Power Concession Agreement ("PCA"). A Steering Committee has been
setup to manage this process.
The next major milestone for the Project is confirmation of a
tariff offer with Electricity de Mozambique ("EDM"). The first step
in this process is to elevate the existing tariff proposal
(submitted to EDM in 2018) to a firm offer, which will require
updated Engineering, Procurement and Construction ("EPC") and
Operations and Maintenance ("O&M") inputs. Upon receipt of the
EPC and O&M inputs, the Project financial model can be updated
and a revised tariff proposal submitted. This process is expected
to be completed in Q4 2019. The Company is confident that the
existing tariff proposal is both attractive and competitive in
Mozambique and is working to update the tariff. Once submitted, the
Company expects to enter negotiations with EDM to finalise a tariff
offer for 100% of the Project power output, which the Company is
targeting for Q1 2020. The Company believes that its experience in
previously agreeing a tariff offer with EDM (since expired) puts it
in a good position for the upcoming negotiation process. Once
approved, the tariff offer will confirm the project economics and
viability, allowing the development process to focus on finalising
the PPA and PCA. The Company is currently fully funded to deliver
on these work streams.
With a more detailed project development programme and work
streams unfolding, more resources have been allocated to the
Project. To ensure that the Company can maintain development
momentum alongside its partners, the Board is carrying out a review
of the current management team structure to asses where it can be
strengthened.
In addition to the main Ncondezi Project, in April 2019 the
Company announced its intention to enter the solar and battery
storage sector through a JV with GridX. The JV process has been
designed to allow proof of concept work to be completed first,
reducing uncertainty as much as possible, with an opportunity to
scale up in the future. The Company believes this brings
significant opportunity to complement its existing large scale
baseload power project and access near-term low risk annuity income
streams which the Company believes has significant growth
potential. GridX has presented the first project for investment
approval, which the Company is currently reviewing.
As at 23 September 2019, the Shareholder Loan repayment amount
due on 30 November 2019 will be US$4.1 million which includes
principal, rolled up premiums under the previous loans and interest
not taking into consideration further conversions. Since the
successful restructuring in November 2018, over US$1.3 million of
debt has been converted into equity at a price of 10p, representing
a significant premium to the share price. The Company intends to
either extend, restructure or refinance the outstanding loan before
maturity and has initiated discussions with the holders of the
Shareholder Loan. The Company is confident of a positive outcome as
there is significant alignment between the loan holders and the
major shareholder and senior management of the Company with 87% of
the loan outstanding held between Africa Finance Corporation
("AFC") (the Company's largest shareholder), the Board and senior
management. However, discussions are at an early stage and there
can be no certainty that the holders of the Shareholder Loan will
agree to an extension or restructure or the terms on which they
will agree to do so.
As at 23 September 2019, the Company had cash reserves of
approximately US$1.5 million. Based upon projections, which are
subject to the Shareholder Loans being converted, extended or
restructured, the Group will be funded until Q3 2020. The Company
is currently reviewing a potential investment in a GridX solar
battery project, however there is currently nothing binding in
place. Should the Company elect to make an investment, it will
explore all options available to it to ensure cash reserves are
prioritised for the immediate funding needs of the main
Project.
Michael Haworth
Non-Executive Chairman
Operational and Financial Review
Ncondezi is focused on the phased development of an integrated
coal fired power plant and mine, commencing with 300MW first phase.
The Project is located near Tete in northern Mozambique.
Ncondezi has also agreed to enter the captive solar and battery
storage sector through a proposed JV with GridX, to develop, build
and operate power solutions for the African C&I sector.
Joint Development Agreement
As per the announcement on 23 July 2019, the Company signed a
JDA with the Parties. A Project Steering Committee has been setup
under the terms of the JDA and the parties are currently finalising
a detailed joint development programme and timetable to FC. The
next key deliverables with target delivery dates are highlighted
below:
-- Technical team site visits and final due diligence- Q4 2019
-- Submission of updated EPC and O&M proposals - Q4 2019
-- Update the Project Financial model and power tariff - Q4 2019
-- Finalise tariff offer with EDM - H1 2020
-- Finalisation of Ncondezi historic costs - Q2-Q3 2020
-- Finalisation of subscription price - Q2-Q3 2020
-- Finalise PPA and PCA - Q2-Q3 2020
A more detailed update will be provided to shareholders once
work programme and timetable has been signed off by all
parties.
Approval of Project timetable
In February the Company announced that it had concluded positive
meetings with the Liaison Committee, setup and chaired by MIREME,
where the updated Project work program and timetable targeting
power on the grid by 2023 was presented and approved. The approval
also confirmed the development process to finalise the PPA and PCA
with Government and EDM.
Second Belt and Road Forum for International Cooperation
In April Ncondezi joined the Mozambique government delegation in
Beijing, China, for the Second Belt and Road Forum for
International Cooperation. During the visit, Ncondezi held
successful meetings with His Excellency Mr Filipe Nyusi, President
of the Republic of Mozambique, the Governor of Tete and the Deputy
Minister of MIREME. The meetings focused on the current status of
the Project and critical next steps, including the signing of the
JDA. The Mozambican Government re-emphasised the importance of new
energy generation in the country's strategic planning and provided
its support for the Project, encouraging the Company and the
Parties to continue working to deliver the Project. Follow up
meetings with the Mozambican Government will be targeted post
execution of the JDA.
China Mozambique International Cooperation Summit
In the first half of 2019, the Project was formally included by
the Chinese government and the Mozambique government on the list of
key infrastructure projects at the 2nd China-Mozambique
International Cooperation Summit. This has provided greater
awareness of the Project within both Governments as well as
ensuring it forms part of strategic infrastructure planning and
investment between both countries. The Company has been requested
to provide monthly updates as part of this process.
Joint Venture with GridX
In April 2019, the Company announced that it entered into the
Term Sheet with GridX, an African power developer, enabling it to
enter into a JV focused on building and operating captive solar and
battery storage solutions for the African C&I sector.
Background to the GridX JV
Since Ncondezi transitioned from a coal exploration business
into an integrated power plant and mine project, the Company has
built up significant Sub-Saharan African power development
expertise and has been evaluating a number of alternative power
projects that would complement its existing 300MW Ncondezi Project
in Tete, Mozambique. This process led to the identification of the
GridX opportunity in the C&I sector and is outlined in more
detail below.
Overview of GridX
GridX is a power developer focused on delivering competitive
sustainable energy solutions in the African C&I sector. GridX
identifies C&I energy users who have either no or poor quality
grid access and are dependent on diesel power generation.
In January 2019, GridX delivered its first project in Tanzania.
The project was designed for Singita Grumeti, a luxury game lodge,
and involved the installation of a 189 kWp solar plant and 522kWh
battery storage unit from Tesla. The battery storage unit is
believed to be the first Tesla installation in Tanzania. GridX
expects that the project will replace over 100,000 litres of diesel
consumption annually and result in an annual US$150,000 reduction
in diesel costs.
GridX's directors own 70% of GridX, 15% is held by Eden
Renewables, an international solar and storage development company,
currently developing projects in the US and UK, 10% by Pan African
Group, a private equity and investment banking firm focused
exclusively on Sub-Saharan Africa, and the balance of 5% is held by
a private individual. GridX was founded by executive directors
Chalker Kansteiner and Justin Pengilly, who have both been working
in the African power development sector for a number of years.
Chalker was previously at Blackstone's large scale African energy
project developer, Black Rhino, whilst Justin previously worked at
Pele Green Energy, one of South Africa's leading independent power
producers in the renewable energy sector (and is the brother of
Hanno Pengilly, the Company's Chief Development Officer).
Term Sheet Overview
Ncondezi has signed a Term Sheet with GridX to acquire a ROFR to
fund GridX C&I projects through a newly setup JV.
It is intended that GridX's role under the JV will be to deliver
US$20 million of construction ready African C&I projects to the
JV (the "GridX Pipeline"). Each project must either meet a minimum
set of KPI's or have the KPI's waived by both parties before
funding takes place ("Approved Project"). Ncondezi will have the
right to elect to fund a minimum of at least 50% of the Approved
Projects' equity requirement. Funding from Ncondezi will be
provided on a project by project basis. GridX will have the right
to fund up to 15% of the Approved Projects' equity requirement as
well as a right to introduce a third party investor to fund the
remaining 35%. Ncondezi will have an additional right to elect to
fund any funding shortfalls should funding from either GridX or a
third party investor not materialise, in the event that Ncondezi
wishes the project to proceed.
The key KPI's include:
-- projects located in approved jurisdictions;
-- project size between US$100,000 and US$10,000,000;
-- minimum post tax unlevered equity IRR of 10% to the JV;
-- use of proven technologies;
-- bankable offtake denominated in US$;
-- completion of credit checks on potential clients with
additional credit support in place where required;
-- finalised EPC and O&M contracts in place; and
-- all consents and permits required to start construction are in place.
The Term Sheet sets out a phased approach to setting up the JV
and funding projects:
1. Phase I
Ncondezi has made an upfront payment of 2/3rds of the GridX Fee
of US$390,000 to GridX on 24 April 2019 to secure an initial 120
day exclusivity and the ROFR for the GridX Pipeline to give both
parties time to agree Definitive Agreements. GridX will use funds
of US$260,000 (the "Initial Payment") to cover third party legal,
structuring and tax advice costs to setup the JV and draft the
Definitive Agreements to be entered into between the parties.
2. Phase II
Payment of the Initial Payment will give Ncondezi a ROFR to fund
at least 50% of the equity requirement of any Approved Projects.
Whilst the Definitive Agreements are being finalised and to
facilitate delivery of the first projects, Ncondezi has
conditionally agreed to evaluate funding of the 6 advanced stage
projects with a total funding of up to US$2.0 million on a combined
project basis. Ncondezi has the right to elect whether to fund such
projects before the Definitive Agreements are entered into (the
"Initial Investments").
3. Phase III
A final payment of 1/3rd of the GridX Fee is due on the later of
execution of the Definitive Agreements or the first project
reaching commercial operations. The Definitive Agreements will
create a clear framework for making future investments and the
management of the portfolio of operational projects.
The phased approach allows the Company and GridX to deliver
certain projects (subject to available funding) before finalisation
of the Definitive Agreements demonstrating proof of concept, and
the setup of the appropriate investment vehicle to warehouse all of
the future projects before additional funding is considered for the
rest of the portfolio.
The JV investment structure will be designed to optimise
warehousing of Approved Projects in various African jurisdictions;
minimising operational costs and minimising tax leakage. GridX will
be responsible for the JV setup costs. Before the Definitive
Agreements have been executed, the parties intend to agree a simple
special purpose vehicle funding structure for Approved Projects,
with the intention that these projects will be incorporated into
the JV structure at a later stage.
As part of its ordinary course business as a developer, GridX is
expected to be entitled to a capped development fee for each
Approved Project, included as part of the project capital cost.
Ncondezi will have a right to participate in any development fee
for projects it sources that are funded through the JV.
GridX is expected to provide O&M services for each Approved
Project in accordance with market-related commercial terms for
projects of a similar nature, contracting directly with the power
offtaker. GridX is also expected to be appointed to manage the JV
for an annual fee of approximately 1.5% drawn project capital. It
is expected that the management agreement can be terminated by the
Company should GridX fail to meet agreed KPI's.
Certain incentives to encourage GridX to achieve the best
returns for each project, will be paid through a profit sharing
mechanism where an equity IRR hurdle of above 10% is achieved by
Ncondezi.
Exclusivity and Right of First Refusal
Following payment of the Initial Payment, Ncondezi has
exclusivity and a ROFR for 120 days to conclude and execute the
Definitive Agreements, subject to it electing to fund any initial
projects presented during this period which meet the KPI's (up to a
maximum of US$2.0 million in aggregate).
This was automatically extended for up to an additional 180 days
as the Definitive Agreements have not been executed. This extension
is conditional on Ncondezi electing to fund all Approved Projects
as they become available for funding during the first period of
exclusivity (up to a maximum of US$2.0 million in aggregate) and
continues to fund at least 50% of all projects presented during
this 180 day period which meet the KPI's.
After this second period of exclusivity, if the Definitive
Agreements remain unexecuted, but Ncondezi continues to fund at
least 50% of all projects presented during this period which meet
the KPI's, Ncondezi has a right to match any project funding for a
further 180 days.
If the Term Sheet is terminated by either party during the
initial 120 day exclusivity period or in the 180 days after that,
provided that the second 180 day extension to the exclusivity
period is not triggered, GridX will refund US$100,000 of the
Initial Payment to Ncondezi.
Following execution of the Definitive Agreements and the first
project being successfully commissioned, it is expected that
Ncondezi's ROFR will allow it to accept or reject funding of
Approved Projects, however there are limits to the number of
rejections Ncondezi can give and it will no longer have a ROFR if
it exceeds these limits over a 6 to 12 month period.
It is emphasised that notwithstanding that it has agreed the
Term Sheet there can be no certainty that Ncondezi will elect to
fund any projects in order to maintain ROFR during the exclusivity
period, that it will agree the terms on which any such investments
will be made or agree the definitive documentation for the JV.
Shareholder Loan
On 16 November 2018, the Company announced that a formal
agreement to amend the US$ 5.1 million Shareholder Loan (the
"Loan") had been reached (the "Loan Restructuring") with loan
holders the key terms of which are detailed below.
2018 Loan Restructuring Amended terms
1. Loan Repayment Date:
The Loan term has been extended from 2 September 2018 to 30
November 2019.
2. Interest:
Interest on the outstanding Loan amount shall accrue from 15
November 2018 at the rate of 12% per annum payable in arrears on
the earlier of conversion into equity or repayment of the Loan
(specific to each Lender). Interest shall be calculated on the
basis of a 365-day year.
The interest rate represents a significant reduction in the
effective interest rates historically incurred on the Loan e.g. in
June 2017, the Company raised an additional US$350,000 at a 1.25x
return.
3. Voluntary Prepayment:
The Company may, at any time prior to 1 November 2019, prepay
the whole or any part of the Loan provided that:
(a) the Company gives the Lenders written notice specifying the
aggregate amount the Company wishes to prepay and the specific
amount to be paid; and
(b) the lenders have 3 business days to exercise the First
Conversion and give the Company a conversion notice.
4. Debt for Equity Swap:
For so long as any part of the Loan remains outstanding:
(a) First Conversion: Lenders shall be entitled to convert all
or part of their portion of the Loan (in multiples of US$1,000)
into fully paid ordinary shares of the Company at a 10.0p
conversion price from the date of this announcement until 1
November 2019 (the "First Conversion"); and
(b) Second Conversion: if Lenders who are owed (in aggregate)
not less than 50.1% of the outstanding principal amount of the Loan
from 1 November 2019 until maturity provide a conversion notice to
the Company, all amounts outstanding under the Loan shall convert
into fully paid ordinary shares of the Company at a conversion
price the higher of the 30% discount to the 60 day VWAP at 30
November 2019 or 5.2p (the "Second Conversion").
The First Conversion price represents a premium of 50% to the
closing share price on 15 November 2018, the day before the Loan
Restructuring was announced.
The maximum number of shares that can be issued under the First
Conversion is 38.9 million new shares.
The Second Conversion is only executable if Lenders representing
no less than 50.1% of the outstanding Loan principle at the time
elect to convert. This prevents any single Lender from having
negative control over a decision to convert. The minimum conversion
price represents a discount of 22% to the closing price on 15
November 2018, and restricts the maximum number of shares that can
be converted to 84.6 million. The Second Conversion has been agreed
to provide Lenders and the Company with an alternative repayment
mechanism in the event that the Company has not repaid the Loan
during the new term.
The US Dollar to British Pound exchange rate has been fixed for
any debt for equity swap at US$1.3 to GBP1.0.
Current Status
As at 23 September 2019, the repayment amount due on 30 November
2019 will be US$4.1 million which includes principal, rolled up
premiums under the previous loans and interest not taking into
consideration further conversions. To date, conversion notices in
relation to 10,337,813 shares have been given since the year end,
reducing the Shareholder Loan by US$1,344,00 of principal, rolled
up previous redemption premiums and interest.
The Company is currently evaluating options to either extend,
restructure or refinance the outstanding loan before maturity and
has initiated discussions with Shareholder Loan holders.
Financial overview
Results from operations
The Group made a loss after tax for the period of US$1.3 million
compared to a loss of US$2.4 million for the previous interim
period. The basic loss per share for the interim period was 0.4
cents (2018 H1: 0.9 cents).
Expenses totalled US$0.9 million (2018 H1: US$1.6 million). This
includes US$0.6 million (2018 H1 US$0.8 million) of administrative
expenses and US$0.3 million (2018 H1: US$0.8 million) of
share-based payment charge. Administrative expenses refer
principally to staff costs, professional fees and travel costs and
underlying administrative expenses basic related to advancing the
integrated power and mining project.
During the period as part of the JV with GridX, US$0.3 million
expenditure was capitalised in relation to exclusivity and the ROFR
for the GridX Pipeline.
Cash Flows
The net cash outflow from operating activities for the interim
period was US$0.5 million (2018 H1: US$0.7 million).
Net cash outflow from investing activities was US$0.3 million
(2018: US$0.05 million) related to investment on JV with GridX.
Net cash inflow from financing activities was US$2.2 million
(2018: US$1.2 million), mainly relating to an oversubscribed
placing of 28,856,060 ordinary shares in the Company at a price of
6.5 pence per ordinary share.
The resulting period end cash held totalled US$1.8 million (2018
H1: US$1.1 million).
Outlook
As at 23 September 2019 the Group had cash reserves of
approximately US$1.5 million. Based upon projections, which are
subject to the Shareholder Loans being converted, extended or
restructured and include corporate costs, project costs to progress
the Project, the Group will be funded until Q3 2020. The company is
currently reviewing a potential investment in a GridX solar battery
project, however there is currently nothing binding in place.
Should the Company elect to make an investment, it will explore
debt options available to it to ensure cash reserves are
prioritised for the immediate funding needs of the main Project.
However, the forecasts remain subject to the Shareholder Loan being
extended or restructured. The outstanding Shareholder Loan balance
will be US$4.1 million (principal, historic redemption premium and
interest not considering further conversions) and matures on 30
November 2019. The Company is currently evaluating options to
either extend, restructure or refinance the outstanding loan before
maturity and has initiated discussions with Shareholder Loan
holders.
The Directors continue to explore options in respect of raising
further funds to continue with the power plant and mine development
programmes, as well as fund potential GridX projects. At present
there are no binding agreements in place and there can be no
certainty as to the Group's ability to raise additional
funding.
In addition, notwithstanding the Loan, further funding will be
required as detailed above to meet operating cash flows under
current forecasts beyond Q3 2020 or in the event of accelerated
project advancement. The Directors are exploring a number of
funding and working capital solutions beyond the 30 November 2019
maturity of the Loan. The financial statements have been prepared
on a going concern basis in anticipation of a positive outcome but
it is important to highlight that there are no binding agreements
in place and there can be no certainty that any of these
initiatives will be successful.
These factors indicate the existence of a material uncertainty
which may cast significant doubt about the Group's ability to
continue as a going concern. The financial statements do not
include the adjustments that would result if the Group was unable
to continue as a going concern. Such adjustments would principally
be the write down of the Group's non-current assets.
Consolidated statement of profit or loss
for the six months ended 30 June 2019
6 months 6 months
ended ended Year ended
30 June 30 June 31 December
2019 2018 2018
Note Unaudited Unaudited Audited
US$'000 US$'000 US$'000
------------------------------------- ----- ----------- ----------- --------------
Other administrative expenses (626) (794) (1,461)
Share-based payment charge 7 (252) (854) (1,297)
Total administrative expenses
and loss
from operations (878) (1,648) (2,758)
Finance expense (382) (765) (722)
------------------------------------- ----- ----------- ----------- --------------
Loss for the period before taxation (1,260) (2,413) (3,480)
Taxation - - -
------------------------------------- ----- ----------- ----------- --------------
Loss for the period attributable
to
equity shareholders of the parent
company (1,260) (2,413) (3,480)
------------------------------------- ----- ----------- ----------- --------------
Loss per share expressed in
cents
--------------
Basic and diluted 2 (0.4) (0.9) (1.3)
------------------------------------- ----- ----------- ----------- --------------
Consolidated statement of other comprehensive income
for the six months ended 30 June 2019
6 months 6 months Year ended
ended ended 31 December
30 June 30 June 2018
2019 2018 Audited
Unaudited Unaudited US$'000
US$'000 US$'000
------------------------------------------------ ------------------- ---------------------- ---------------------
Loss after taxation (1,260) (2,413) (3,480)
Other comprehensive income:
Exchange differences on translating - -
foreign operations* -
Total comprehensive loss for the
period (1,260) (2,413) (3,480)
*items that may be reclassified to profit or loss.
Consolidated statement of financial position
at 30 June 2019
30 June 30 June 31 December
2019 2018 2018
Note Unaudited Unaudited Audited
US$'000 US$'000 US$'000
------------------------------------- ----- ----------- ----------- ------------
Assets
Non-current assets
Property, plant and equipment 3 18,239 18,284 18,272
Investments - JV GridX 318 - -
Total non-current assets 18,557 18,284 18,272
------------------------------------- ----- ----------- ----------- ------------
Current assets
Trade and other receivables 34 64 54
Cash and cash equivalents 1,790 1,123 424
------------------------------------- ----- ----------- ----------- ------------
Total current assets 1,824 1,187 478
------------------------------------- ----- ----------- ----------- ------------
Total assets 20,381 19,471 18,750
------------------------------------- ----- ----------- ----------- ------------
Liabilities
Current liabilities
Trade and other payables 505 1,834 481
Loans and borrowings 3,793 3,495 4,182
Derivative financial liability 6 639 245 845
------------------------------------- ----- ----------- ----------- ------------
Total current liabilities 4,937 5,574 5,508
------------------------------------- ----- ----------- ----------- ------------
Total liabilities 4,937 5,574 5,508
------------------------------------- ----- ----------- ----------- ------------
Capital and reserves attributable
to shareholders
Share capital 5 92,104 88,450 88,796
Retained earnings (76,660) (74,553) (75,554)
------------------------------------- ----- ----------- ----------- ------------
Total capital and reserves 15,444 13,897 13,242
------------------------------------- ----- ----------- ----------- ------------
Total equity and liabilities 20,381 19,471 18,750
------------------------------------- ----- ----------- ----------- ------------
Approved on behalf of the Board on 25 September 2019.
Michael Haworth
Non-Executive Chairman
Consolidated statement of changes in equity
for the six months ended 30 June 2019
Foreign
Currency
Share Translation Retained
capital reserve earnings Total
US$'000 US$'000 US$'000 US$'000
------------------------------ -------------- ----------------- ---------- -----------------
At 1 January 2019 88,796 - (75,554) 13,242
Loss for the period - - (1,260) (1,260)
Total comprehensive loss for
the period - - (1,260) (1,260)
Issue of shares 2,380 - - 2,380
Costs associated with issue
of shares (213) - - (213)
Exercise of share options 98 - (98) -
Shareholders Loan conversion
into equity 935 - - 935
Exercise of warrants 108 - - 108
Equity settled share-based
payment - - 252 252
At 30 June 2019 (Unaudited) 92,104 - (76,660) 15,144
------------------------------- -------------- ----------------- ---------- -----------------
Foreign
Currency
Share Translation Retained
capital reserve earnings Total
US$'000 US$'000 US$'000 US$'000
------------------------------ -------------- ----------------- ---------- -----------------
At 1 January 2018 87,384 - (72,994) 14,390
Loss for the period - - (2,413) (2,413)
Total comprehensive loss for
the period - - (2,413) (2,413)
Issue of shares 1,310 - - 1,310
Costs associated with issue
of shares (244) - - (244)
Equity settled share based
payments - - 854 854
At 30 June 2018 (Unaudited) 88,450 - (74,553) 13,897
------------------------------- -------------- ----------------- ---------- -----------------
Foreign
Currency
Share Translation Retained
capital reserve earnings Total
US$'000 US$'000 US$'000 US$'000
------------------------------ -------------- ----------------- ---------- -----------------
At 1 January 2018 87,384 - (72,994) 14,390
Loss for the period - - (3,480) (3,480)
Total comprehensive loss for
the period - - (3,480) (3,480)
Issue of shares 1,310 - - 1,310
Costs associated with issue
of shares (204) - - (244)
Exercise of share options 306 (306) -
Equity settled share-based
payments - - 1,226 1,226
At 31 December 2018 88,796 - (75,554) 13,242
------------------------------- -------------- ----------------- ---------- -----------------
Consolidated statement of cash flows
for the six months ended 30 June 2019
6 months 6 months Year ended
to to 31 December
30 June 30 June 2018
2019 2018 Audited
Unaudited Unaudited
US$'000 US$'000 US$'000
------------------------------------------- ----------- ----------- -------------
Cash flow from operating activities
Loss before taxation (1,260) (2,413) (3,480)
Adjustments for:
Finance expense 382 765 722
Share based payments charge 252 854 1,297
Unrealised foreign exchange movements 1 - 2
Gain on disposal of fixed assets - - (44)
Depreciation and amortization 33 34 68
Net cash flow from operating activities
before changes in working capital (592) (760) (1,435)
Increase in payables 24 29 (25)
Decrease in receivables 20 19 29
------------------------------------------- ----------- ----------- -------------
Net cash flow used in operating
activities before tax (548) (712) (1,431)
------------------------------------------- ----------- ----------- -------------
Income taxes paid - - -
------------------------------------------- ----------- ----------- -------------
Net cash flow used in operating
activities after tax (548) (712) (1,431)
------------------------------------------- ----------- ----------- -------------
Investing activities
Sales of property plant and equipment - - 47
Power development costs capitalized - - (25)
Mine exploration and evaluation
costs capitalised - (5) (7)
Solar project - JV GridX (318) - -
------------------------------------------- ----------- ----------- -------------
Net cash flow used in investing
activities (318) (5) 15
------------------------------------------- ----------- ----------- -------------
Financing activities
Issue of ordinary shares 2,380 1,310 1,310
Cost of share issue (213) (84) (84)
Warrants exercised 65 - -
Net cash flow from financing activities 2,232 1,226 1,226
------------------------------------------- ----------- ----------- -------------
Net increase in cash and cash equivalents
in the period 1,366 509 (190)
------------------------------------------- ----------- ----------- -------------
Cash and cash equivalents at the
beginning of the period 424 614 614
------------------------------------------- ----------- ----------- -------------
Cash and cash equivalents at the
end of the period 1,790 1,123 424
------------------------------------------- ----------- ----------- -------------
Notes to the consolidated financial information
1. Basis of preparation
The consolidated interim financial statements have been prepared
using policies based on International Financial Reporting
Standards, International Accounting Standards and Interpretations
(collectively "IFRS") issued by the International Accounting
Standards Board ("IASB") as adopted for use in the EU. The
consolidated interim financial statements have been prepared using
the accounting policies which will be applied in the Group's
financial statements for the year ended 31 December 2019.
The consolidated interim financial statements for the period 1
January 2019 to 30 June 2019 are unaudited and incorporate
unaudited comparative figures for the interim period 1 January 2018
to 30 June 2018 and extracts from the audited financial statements
for the year to 31 December 2018. It does not include all
disclosures that would otherwise be required in a complete set of
financial statements and should be read in conjunction with the
2018 Annual Report. The comparative financial information for the
year ended 31 December 2018 in this interim report does not
constitute statutory accounts for that year. The auditors' report
on those accounts was unqualified and included an emphasis of
matter drawing attention to the importance of disclosures made in
the annual report regarding going concern.
The same accounting policies, presentation and methods of
computation are followed in the consolidated financial statements
as were applied in the Group's latest annual audited financial
statements except that in the current financial year, the Group has
adopted a number of revised Standards and Interpretations. However,
none of these has had a material impact on the Group's
reporting.
In addition, the IASB has issued a number of IFRS and IFRIC
amendments or interpretations since the last annual report was
published. It is not expected that any of these will have a
material impact on the Group.
Going concern
As at 23 September 2019 the Group had cash reserves of
approximately US$1.5 million. Based upon projections, which are
subject to the Shareholder Loans being converted, extended or
restructured and include corporate costs, project costs to progress
the Project, the Group will be funded until Q3 2020.
The forecasts remain subject to the Shareholder Loan being
extended or restructured. The outstanding balance of the
Shareholder Loan of US$4.1 million (principal, historic redemption
premium and interest not taking into consideration further
conversions) matures on 30 November 2019, and the Company is
currently evaluating options to either extend, restructure or
refinance the outstanding loan before maturity and has initiated
discussions with Shareholder Loan holders. However, there can be no
certainty that any of these initiatives will be successful.
The financial statements have been prepared on a going concern
basis in anticipation of a positive outcome but it is important to
highlight that there are no binding agreements in place. These
factors indicate the existence of a material uncertainty which may
cast significant doubt about the Group's ability to continue as a
going concern. The financial statements do not include the
adjustments that would result if the Group was unable to continue
as a going concern. Such adjustments would principally be the write
down of the Group's non-current assets.
2. Loss per share
Basic loss per share is calculated by dividing the loss
attributable to the ordinary shareholders by the weighted average
number of ordinary shares outstanding during the period.
Share incentives were outstanding at the end of the period that
could potentially dilute basic earnings per share in the future.
However, due to losses incurred during the current period, the
impact of these incentives would not be dilutive.
Unaudited Unaudited Audited
30 June 2019 30 June 2018 31 December 2018
--------- --------------------------------- ---------------------------------- ----------------------------------
Weighted Weighted Weighted
average Per average Per average Per
number share number share number share
Loss of shares amount Loss of shares amount Loss of shares amount
US$'000 (thousands) (cents) US$'000 (thousands) (cents) US$'000 (thousands) (cents)
--------- -------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
Basic
and
diluted
EPS (1,260) 299,518 (0.4) (2,413) 270,346 (0.9) (3,480) 276,187 (1.3)
--------- -------- ------------ --------- --------- ------------ --------- --------- ------------ ---------
3. Property, plant and equipment
Power Mining Plant
assets assets and
US$'000 US$'000 Buildings Equipment Other Total
US$'000 US$'000 US$'000 US$'000
---------------------------- --------- --------- ---------- ----------- --------- ---------
Cost
At 1 January 2019 9,462 7,661 1,277 35 718 19,153
Additions - - - - - -
Disposals - - - - - -
At 30 June 2019 9,462 7,661 1,277 35 718 19,153
---------------------------- --------- --------- ---------- ----------- --------- ---------
Cost
At 1 January 2018 9,437 7,654 1,399 42 718 19,250
Additions - 5 - - - 5
Disposals - - - - - -
At 30 June 2018 9,437 7,659 1,399 42 718 19,255
---------------------------- --------- --------- ---------- ----------- --------- ---------
Cost
At 1 January 2018 9,437 7,654 1,399 42 718 19,250
Additions 25 7 - - - 32
Disposals - - (122) (7) - (129)
At 31 December 2018 9,462 7,661 1,277 35 718 19,153
---------------------------- --------- --------- ---------- ----------- --------- ---------
Depreciation
At 1 January 2019 - - 139 24 718 881
Depreciation charge - - 33 - - 33
Disposals - - - - - -
---------------------------- --------- --------- ---------- ----------- --------- ---------
At 30 June 2019 - - 172 24 718 914
---------------------------- --------- --------- ---------- ----------- --------- ---------
At 1 January 2018 - - 190 29 718 937
Depreciation charge - - 34 - - 34
Disposals - - - - - -
At 30 June 2018 - - 224 29 718 971
---------------------------- --------- --------- ---------- ----------- --------- ---------
At 1 January 2018 - - 190 29 718 937
Depreciation charge - - 67 1 - 68
Disposal - - (118) (6) - (124)
At 31 December 2018 - - 139 24 718 881
---------------------------- --------- --------- ---------- ----------- --------- ---------
Net Book value 30 June
2019 9,462 7,661 1,105 11 - 18,239
---------------------------- --------- --------- ---------- ----------- --------- ---------
Net Book value 30 June
2018 9,437 7,659 1,175 13 - 18,284
---------------------------- --------- --------- ---------- ----------- --------- ---------
Net Book value 31 December
2018 9,462 7,661 1,138 11 - 18,272
---------------------------- --------- --------- ---------- ----------- --------- ---------
4. Short term loan
30 June 30 June 31 December
2019 2018 2018
Unaudited Unaudited Audited
US$'000 US$'000 US$'000
------------------------------- ----------- ----------- ------------
Short term loan (unsecured) 3,793 3,495 4,182
Unamortised related costs - - -
Total Short term loan 3,793 3,495 4,182
-------------------------------- ----------- ----------- ------------
On 16 November 2018 the Shareholder Loan was modified with the
maturity date extended to 30 November 2019 and an interest coupon
of 12%. Under the terms the lenders have the right to convert the
loan into equity as follows:
(a) First Conversion: lenders shall be entitled to convert all
or part of their portion of the Loan (in multiples of $US1,000)
into fully paid ordinary shares of the Company at a 10.0p
conversion price from the date of this announcement until 1
November 2019; and
(b) Second Conversion: if Lenders who are owed (in aggregate)
not less than 50.1% of the outstanding principal amount of the Loan
from 1 November 2019 until maturity provide a conversion notice to
the Company, all amounts outstanding under the Loan shall convert
into fully paid Ordinary Shares of the Company at a conversion
price the higher of the 30% discount to the 60 day VWAP at 30
November 2019 or 5.2p.
At the date of the restructuring the carrying value of the
previous loans was US$5.1 million and the loan was extinguished and
replaced with the convertible loan notes. The fair value of the new
instrument was determined to be equivalent to the fair value of the
old instrument, with no gain or loss being recognised on
extinguishment. The potential issuance of a variable number of
shares meant the instrument was treated as a host debt liability
with a separate embedded derivative representing the conversion
right. The embedded derivative was valued at US$1.0 million and the
residual attributed to the host debt liability. Subsequently the
host debt liability has been recorded at amortised cost and
interest recorded at the effective interest rate and the embedded
derivative recorded at fair value through profit and loss.
As at 30 June 2019, a total of US$935,000 of the Shareholder
Loan was converted into equity at a price of 10 pence per share,
and 7,193,328 were issued.
Net financial cost for the period in relation to short term loan
was US$370,000 (H1 2017: US$787,000).
In the prior year, interest accrued on the short-term loan was
recognised as a separate payable in accruals. However since the
date of the restructuring, the interest accrued is being recognised
within the short term loan balance itself.
5. Share capital
6 months 6 months
to to Year ended
30 June 30 June 31 December
2019 2018 2018
Number of shares Unaudited Unaudited Audited
Allotted, called up and fully
paid
Ordinary shares of no par value 320,349,232 281,849,844 282,299,844
--------------------------------- ------------ ------------ -------------
Shares Share
Unaudited issued Capital
Number US$'000
At 1 January 2019 282,299,844 88,796
Issue of shares 28,856,060 2,380
Costs associated with issue
of shares - (213)
Exercise of share options 1,000,000 98
Shareholders Loan conversion
into equity 7,193,328 935
Exercise of warrants 1,000,000 108
At 30 June 2019 320,349,232 92,104
--------------------------------- ------------ ------------ -------------
Shares Share
Unaudited issued Capital
Number US$'000
At 1 January 2018 265,299,844 87,384
Issue of shares 16,550,000 1,310
Issue costs - (244)
-------------------- ------------ ---------
At 30 June 2018 281,849,844 88,450
-------------------- ------------ ---------
Shares Share
Audited issued Capital
Number US$'000
At 1 January 2018 265,299,844 87,384
Issue of shares 15,200,00 1,310
Issue of shares (exercised share
awards) 1,800,000 306
Issue costs - (204)
At 31 December 2018 282,299,844 88,796
----------------------------------- ------------ ---------
6. Derivative financial liability
2019 2018
US$'000 US$'000
----------------- --------- ---------
Warrants 108 138
Loan derivative 531 707
639 845
----------------- --------- ---------
Warrants
During the period 1,000,000 warrants issued in June 2018, were
exercised resulting in a decrease in the warrants value of
US$42,748.
The changes in the fair value of the remaining 3,020,000
warrants were recognised through profit or loss. These warrants
were valued at US$108,065 at 30 June 2019, US$95,439 at 31 December
2018, with an increase in fair value of US$12,626.
The net change in fair value of US$30,122 was recognised through
profit or loss.
The warrants have been deemed to be Level 2 liabilities under
the fair value hierarchy.
Loan derivative
The loan derivative, measured at fair value through profit or
loss, has been deemed to be Level 2 liabilities under the fair
value hierarchy, based on the valuation method used.
7. Share based payments
During the period 1,000,000 share options at nil value vested on
grant and were exercised on 25 May 2019. The total number of
options outstanding for the period is 11,996,906 (2018:12,996,906)
all of which had vested and were exercisable.
The fair value of the equity instrument was measured using the
Black-Scholes model. The expected life used in the model was
adjusted, based on management's best estimate, for the effects of
non-transferability, exercise restrictions and behavioural
considerations. A share base payment charge of US$252,000 (H1 2018:
US$854,000) was recognised in period in relation to these
options.
8. Related party transactions
Parties are considered to be related if one party has the
ability to control the other party, is under common control, or can
exercise significant influence over the other party in making
financial and operational decisions. In considering each possible
related party relationship, attention is directed to the substance
of the relationship, not merely the legal form.
In relation to the Shareholder Loan as at 30 June 2019
US$1,300,000 (H1 2018: US$1,194,000) is due to a Trust of which
Non-Executive Chairman, Michael Haworth is a potential beneficiary
and US$96,000 (H1 2018: US$88,000) to Non-Executive Director
Estevão Pale.
Aman Sachdeva -Non-Executive Director of Ncondezi Energy Limited
- CEO of Synergy Consulting Inc.
During the period US$85,000 (2017: US$120,000) was paid by the
Company to Synergy Consulting Inc. in respect of services provided
by Synergy. At 30 June 2019 the outstanding balance was nil (2017:
US$45,000). During the period Synergy provided due diligence and
transaction advisory services relating to the evaluation of the
GridX investment opportunity and Term Sheet.
Synergy is a global independent consultancy specialising in
infrastructure advisory, project finance and has experience in
achieving financial closure for deals worth approx. US$25bn and
M&A advisory for deals worth US$5bn.
9. Events after the reporting period
-- On 12 July 2019 a total of US$378,000 of Shareholder Loan was
converted into equity at a price of 10 pence per share, with
3,144,485 ordinary shares being issued.
-- On 23 July 2019 the Company announced it had signed a binding
JDA with the Parties to co-develop and construct the Project.
-- On 30 July 2019 1,500,000 warrants were exercised at a
subscription price of 5 pence per share which raised a total of
GBP75,000.
Company details
Directors Michael Haworth (Non-Executive
Chairman)
Estevão Pale (Non-Executive
Director)
Jacek Glowacki (Non-Executive
Director)
Aman Sachdeva (Non-Executive
Director)
Company Secretary Elysium Fund Management Limited
PO Box 650, 1(st) Floor, Royal
Chambers
St Julian's Avenue
St Peter Port
Guernsey
GY1 3JX
Registered Office Ground Floor, Coastal Building
Wickham's Cay II, Road Town
P.O. Box 2136, Carrot Bay
VG1130 Tortola
British Virgin Islands
Company number 1019077
Nominated Advisor Liberum Capital Limited
Ropemaker Place
Level 12
25 Ropemaker Street
London
EC2Y 9AR
Auditors BDO LLP
55 Baker Street
London
W1U 7EU
Registrar Computershare Investor Services
(BVI) Limited
Woodbourne Hall
PO Box 3162
Road Town
Tortola
British Virgin Islands
Legal advisor to the Ogier LLP
Company 41 Lothbury
as to BVI law London
EC2R 7HF
Legal advisor to the Bryan Cave Leighton Paisner
Company LLP
as to English law Adelaide House
London Bridge
London
EC4R 9HA
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR DELFLKKFEBBF
(END) Dow Jones Newswires
September 26, 2019 02:01 ET (06:01 GMT)
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