Ncondezi Energy Limited ("Ncondezi" or the "Company") announced that further to the announcement on 12 November 2020, it has signed a Supplementary Agreement to the Joint Development Agreement (the "SA") with China Machinery Engineering Corporation ("CMEC") pursuant to which CMEC will fund specified accelerated development works at the Ncondezi 300MW coal-fired power project and coal mine in Tete, Mozambique (the "Project"). JDA Supplementary Agreement: The SA sets out the agreed basis for accelerated development work to be carried out on the Project. Provisional budget of USD 1.8 million approved by the parties and to be funded by CMEC. Accelerated development work will focus on a number of milestones, including: Additional survey drilling required by CMEC to complete Chinese Government approvals for their investment in the Project. Ensuring key agreements such as the Engineering Procurement and Construction ("EPC") agreements are compliant with Mozambican laws. The SA is a supplement to the Joint Development Agreement announced in July 2019. The provisions of the JDA remain in full force and effect. Funds drawn down as part of the SA will be treated as pre financial close Project development costs, to be reimbursed at Financial Close along with the Company's approved historical development costs or by the Company or its affiliates in certain circumstances including the Company achieving financial close with a third party, or on the sale or liquidation of the project company holding the mine project or the power project. Ncondezi and CMEC to agree a form of share pledge as security for funding made by CMEC as part of the SA. Ncondezi will pledge shares in its wholly owned Mozambican subsidiary that holds the power project ("PowerCo").
The number of shares pledged will be equivalent to the amount funded by CMEC, divided by the nominal value per share of PowerCo's shares. The total nominal value of all PowerCo's shares is USD 15.7 million, so assuming CMEC funds the full USD 1.8 million, Ncondezi would need to pledge approximately 11% of its shares in PowerCo to CMEC. Pledge will be released upon achievement of Financial Close with CMEC as strategic partner.