Aim-listed Ncondezi Energy has finalised a binding agreement with GridX Africa Development for a pipeline of solar and battery storage projects in the commercial and industrial (C&I) sector.

Ncondezi and GridX have signed a binding relationship agreement under which Ncondezi has the right but not the obligation to fund a pipeline of GridX C&I solar and battery storage projects in Mozambique.

Ncondezi has a right of first refusal (ROFR) to fund 100% of the projects up to a total of $5.5-million.

Projects include a diversified portfolio of seven identified potential projects with a combined potential installed solar capacity of 2.8 MW and 4.5 MWh of battery storage.

These initial project investments into qualifying projects, subject to funding, represent an annuity revenue stream potential of over $750 000 a year.

Projects are to be funded on a project by project basis and must meet strict minimum key performance indicators (KPIs) to be eligible for funding.

These include a signed offtake agreement; the use of proven technology; all consents and permits to start construction; the meeting of minimum credit requirements; and generating an ungeared equity post-tax internal rate of return to Ncondezi of at least 10%.

GridX will be responsible for all costs incurred up to a project meeting the KPIs and Ncondezi exercising its right to invest.

The ROFR will be managed under newly formed subsidiary Ncondezi Green Power.

These initial projects are at an early stage of development, with first funding requirement not expected until the fourth quarter of this year or the first quarter of 2021.

The relationship agreement replaces the term sheet signed with GridX in April 2019.

"We are pleased to have finalised the relationship agreement with GridX and believe it provides an optimal structure for Ncondezi to build out its C&I solar and battery storage strategy, bringing a focused portfolio of potential projects in Mozambique, which we will have full control over, in a jurisdiction we know well.

"This structure provides the opportunity for a phased and low risk entry point into the sector, with GridX responsible for the development and delivery of construction-ready projects for investment consideration and, over time, a diversified portfolio approach spreading investment risk across multiple projects,” says Ncondezi CEO Hanno Pengilly.

He notes that the initial project pipeline includes seven potential projects covering a diverse range of sectors from hospitality and tourism to food and drink manufacturing and retail centres, which ensures a wide range of potential offtakers and securing against any downturn in a single industry.

“We believe the C&I solar and battery sector continues to represent a significant opportunity for the company, and the relationship agreement allows us to develop our presence in the sector as we progress our flagship 300 MW integrated coal-to-power project to financial close,” he says.