TIDMEDL
RNS Number : 1205G
Edenville Energy PLC
02 March 2015
02 March 2015
Edenville Energy plc
("Edenville" or the "Company")
POWER PLANT FEASIBILITY STUDY
Edenville Energy is pleased to announce the results of the Power
Plant Feasibility Study for its Rukwa Coal to Power Project in
Western Tanzania.
In November 2014, Lahmeyer International (India) Pvt. Ltd
("Lahmeyer India") was appointed as a consultant for the
preparation of a feasibility study for exploring and assessing the
viability of converting the Company's Measured and Indicated coal
resources to a power generating project at Rukwa, Tanzania (the
"Feasibility Study").
Lahmeyer India is the Indian subsidiary of Lahmeyer
International GmbH Germany, a leading international engineering
company offering a broad range of planning and consultancy services
relating primarily to infrastructure projects including energy. The
Lahmeyer group has experience in 165 countries, including several
in Africa, working on behalf of Project Developers, EPC
Contractors, Equity Investors and Financial Institutions. Lahmeyer
India has extensive experience in various countries in thermal
power plant design, construction, transmission and distribution
along with a strong background in the regulatory environment of
various jurisdictions.
Contemporaneously with the production of the Feasibility Study,
the Company has developed a financial model to assess the economics
of the Rukwa Coal to Power Project (the "Financial Model"). The
Financial Model has been reviewed and validated by Lahmeyer
India.
The Feasibility Study and Financial Model consider the coal mine
and power plant as an integrated commercial entity, with profits
generated by the sale of electricity from a coal-fired power
station.
The Feasibility Study and Financial Model suggest that a power
plant could be developed in two phases:
-- Phase 1 comprising of two units of 60MW each (total 120MW)
-- Phase 2 comprising of two units of up to 120MW each (total 240MW)
-- Opportunity for rapid scale up to Phase 2 in parallel with
the increasing demand profile in Tanzania
Phase 1 (120MW) Highlights
-- Estimated project cost of USD175M
-- A modelled plant load factor of 80%
-- An estimated project payback of 9 to 10 years
-- Sufficient near-surface coal supplies, at a strip ratio of
1:1, are available to feed the 120MW plant for at least 30
years
-- Modelled on a flat tariff for all power produced ("Base
Case"), Phase 1 returns an estimated Pre Tax NPV(10%) of USD220M,
with an IRR of 23.1%
-- Modelled using a commercial power Off-Take with variable
commercial tariffs for 40% of the production ("Off-Take Scenario"),
returns an estimated Pre Tax NPV(10%) of USD322M, with an IRR of
27.8%
-- The average EBITDA over the life of the project for the Base
Case and Off-Take Scenario are USD58M and USD75M per annum
respectively
-- The option to expand the project into Phase 2 to greater
300MW, as the power demand profile increases over time, is being
reviewed
The Rukwa Coal-to-Power Project has several key positives which
assist development discussions:
-- Combined capital expenditure of USD175M for the power plant
and mine which equates to approximately USD1.45M per MW (median
estimate) is considered competitive in terms of industry costs to
develop the project
-- A sustainable market for this level of power ties in with
official plans for power grid development and private enterprise,
allowing the project to grow in parallel with the economic
development of Tanzania
-- The option for commercial power off-take increases and diversifies the revenue stream
-- Development of commercial operations near to the project site
drives growth and employment opportunities for Tanzania
Scenario Analysis
Two scenarios have been considered for the 120MW output under
Phase 1. The Base Case assumes on a flat tariff basis to a single
end user whilst the Off-Take Scenario sells a portion of the
generated power at a variable tariff to commercial projects in the
region of the mine and power plant. Both the Base Case and the
Off-Take Scenario use a discount rate of 10% and have inflation
built into the model. The calculations are pre tax. Both scenarios
demonstrate a very robust internal rate of return ("IRR") and net
present value ("NPV"). Further details are shown in Table 1.
Table 1. Phase 1 - 120MW Power Plant Scenarios
Capacity 120MW Base 120MW with Commercial
Case Power Off-Take
--------------------------- ----------- ----------------------
NPV 220 322
--------------------------- ----------- ----------------------
IRR 23.1% 27.8%
--------------------------- ----------- ----------------------
Total Capex (Mine & Power
Plant) 175 181
--------------------------- ----------- ----------------------
Years of Operation 30 30
--------------------------- ----------- ----------------------
Phase 2 Expansion Opportunities
Based on a review of the available coal resources, the option to
develop a larger project exists. This expansion would likely be a
second phase development as power usage in the area increased over
time. The Company will consider the development of Phase 2 and
expanding the power generated to greater than 300MW at the
appropriate time.
Coal Resource
The Feasibility Study is based on coal extraction from the
Mkomolo and Namwele deposits. The Muze deposit which has a JORC
compliant mineral resource of approximately 11 million tonnes and a
historical mineral resource (non-JORC compliant) of approximately
60 million, was not considered for the purposes of the Feasibility
Study. Inclusion of the Muze deposit could bring considerable
upside to the already positive findings from the Feasibility Study
and would be considered in future expansion planning.
Financial Model
The Financial Model, which will be further developed as
parameters are optimised, has been reviewed and validated by
Lahmeyer India as part of the feasibility process.
The Financial Model is indicative and based on the best
available data and estimates at the time. As technical and
commercial work progresses the Financial Model will be further
assessed and refined, by the Company and by external consultants.
Accordingly the valuation metrics set out in this announcement
should not be taken as a financial forecast or definitively relied
upon for economic assessment purposes.
Tanzanian Authorities
In accordance with requests by Tanzanian authorities, key
documents have also been submitted in order to move forward with
technical and regulatory requirements in order for the project to
be placed on the Tanzanian Power Master Plan and to advance
technical and commercial discussions. The process is ongoing and
the Board are in close discussions with the Tanzanian authorities.
Further announcements will be made as appropriate.
End Users
Delivery to the Tanzanian grid system depends on the
construction of the Western Transmission line which is planned to
pass within 12km of the Edenville project site. Recent information
has indicated this being completed in 2018, broadly in line with
the conceptual development timeframe for the Power Plant. However,
our approach is to explore all possibilities to develop the project
as rapidly and economically as possible and we are assessing
commercial offtake opportunities in parallel with Tanzanian
government guidelines and timelines for the transmission line.
Rufus Short, CEO of Edenville Energy commented:
"We are extremely pleased to have advanced the project to a
stage where it can be taken forward on the basis of a feasible and
realistic business plan. The completion of this vitally important
work to demonstrate the viability of mining and power generation at
our project site is critical to the next phase of development. The
results show a robust case to move forward with further work to
advance the project for the benefit of both our shareholders and
the people of Tanzania.
"We are now in a position to progress through the next steps of
project development through advanced discussions with Tanzanian
government organisations; commercial entities seeking a sustainable
power supply and potential partners who wish to become involved in
the project development.
"The 120MW Power Plant demonstrates the optimal attributes from
a technical and economic perspective and we believe the ability to
support local and regional business development is an important
part of making the project successful.
"The project studies are now sufficiently advanced to enable us
to move forward with detailed partnership discussions and
completion of the necessary steps to progress the project in line
with Tanzanian Government requirements.
"As a result, over the coming months work will be increasingly
concentrated to move forward the options open to the company and to
progress towards the development phase. Shareholders will
appreciate that identification of, and negotiation with, potential
partners for the financing, development and operation of a plant
can be complex and time consuming. The commercially sensitive
nature of much of the dialogue prevents us from being explicit on
certain aspects at this stage but we will continue to update the
shareholders as and when appropriate. The Board is excited about
the prospects for the Company."
Qualified Persons Review
Mark J. Pryor, Pr.Sc.Nat. has reviewed and approved the
technical information contained within this announcement in his
capacity as a Qualified Person, as defined by the AIM Rules and
National Instrument 43-101 Standards of Disclosure for Mineral
Projects.
Lahmeyer India has reviewed and validated the contents of the
Financial Model. They have also sighted the information contained
in this announcement and confirm it is in accordance with the facts
as they are aware and it does not omit anything likely to
materially affect the statements and conclusions.
Enquiries:
+44 (0) 20 7653
Edenville Energy plc 9850
Sally Schofield - Chairman
Cantor Fitzgerald Europe (Nominated +44 (0) 207 894
Adviser and Broker) 7000
Stewart Dickson / Jeremy Stephenson
+44 (0) 207 653
Newgate (Financial PR) 9850
Roddy Watt / Edward Treadwell
This information is provided by RNS
The company news service from the London Stock Exchange
END
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