Ncondezi Energy Limited announced that it has signed a binding Joint Development Agreement with Shanghai Electric Power Co. Ltd. (SEP) to develop the Ncondezi 300MW coal fired power project in Tete, Mozambique. Highlights: SEP to become the strategic investor in the Power Project, SEP will invest up to $25.5 million to fund the development costs to Financial Close in return for a 60% equity interest in Ncondezi Power Company S. A (NPC), a subsidiary that will hold 100% of the Power Project, based on SEP's expertise in coal fired power generation, the Power Project boiler technology will change from Circulating Fluidized-Bed (CFB) to Pulverized Coal (PC), and NPC will pay Ncondezi an additional $35 million on initial draw down of funds after Financial Close of the Power Project.

The JDA is a binding agreement between Ncondezi and SEP and sets out the terms on which the Power Project will be developed. The Ncondezi Coal Mine will continue to be wholly owned by Ncondezi and will be developed and financed separately. It is envisaged that a Coal Supply Agreement will be entered into between the relevant entities.

SEP will fund up to $25.5 million into a newly incorporated holding company that will own 100% of NPC and which will be used to fund all development costs of the Power Project to Financial Close. The Subscription Price will be paid in instalments as per an agreed budget between the Parties for the period from 1 January 2016 until Financial Close. The first instalment will be funded once the JDA is effective, at which point Ncondezi will be refunded for certain agreed project costs incurred from 1 January 2016.

The JDA becomes effective once all of the SEP Investment Conditions (as defined below) have been satisfied, at which point SEP will be issued with an indirect 60% interest in NPC. The SEP Subscription Price is based on 1.5 times Ncondezi's historic Power Project costs of $17 million and is capped at $25.5 million. The Subscription Price will be inclusive of SEP's historic costs of RMB 8 Million ($1.25 million).

All historic costs are subject to confirmation by an independent auditor. It is anticipated that the Subscription Price will be sufficient to fund the development costs to Financial Close of the Power Project. Any additional costs are expected to be funded on a pro-rata basis by the Company and SEP respectively.

Once the JDA has become effective, SEP will provide a bank guarantee for $10 million in favour of the Company against the instalment payments of the Subscription Price.