2nd Mar 2015 09:23
LONDON (Alliance News) - Edenville Energy PLC saw its shares fall Monday after it got the results of the feasibility study and financial model for its Rukwa Coal to Power Project in Western Tanzania.
In a statement, the company said the study and model suggest a power plant could be developed in two phases: phase one comprising two units of 60 megawatts each and phase two comprising two units of up to 120 megawatts each. It added that there was the opportunity for a rapid scale-up to phase two due to the increasing demand profile in Tanzania.
It said the estimated project costs for phase one is USD175 million, with an estimated project payback of nine to 10 years.
Modelled on a flat tariff for all power produced, phase one returns an estimated pretax net present value of USD220 million and an internal rate of return of 23.1%. Modelled using a commercial power off-take with variable commercial tariffs for 40% of the production returns an estimated pretax net present value of USD322 million and an internal rate of return of 27.8%.
The average earnings before interest, tax, depreciation and amortisation over the life of the project for the base case and off-take scenario are USD58 million and USD75 million a year, respectively, it said.
"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 300 megawatts at the appropriate time," it added.
The company also said it has responded to requests by Tanzanian authorities be submitting key documents 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. It said the process is ongoing and the board are in "close discussions" with the Tanzanian authorities.
It's also going to move forward with detailed partnership discussions now the project studies are sufficiently advanced.
"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," Edenville Chief Executive Rufus Short said in a statement.
"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," he added.
Edenville shares were down 16.7% at 0.0500 pence in London Monday morning.
By Steve McGrath; [email protected]; @stevemcgrath1
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