Ncondezi Energy Ltd (AIM:NCCL, FRA:9NE) has raised £600,000 in a placement led by major shareholder Scott Fletcher.

The fundraising effort comes just days after CMEC, a Chinese partner, agreed to sign the EPC contract for their Mozambique-based power plant project.

The shares will be priced at 1.5p each, with a one-for-two warrant attached that can be exercised for 3p.

Fletcher, a non-executive director, has invested £50,000 in the company, bringing his stake to 18.7%.

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Ncondezi’s CEO, Hanno Pengilly, has agreed to purchase shares with any bonuses he receives in 2021.

Net proceeds from the placing will be used for general working capital purposes and development expenditure at the 300MW Ncondezi power station project in Mozambique.

Pengilly added that the fundraise ensures the company is adequately capitalised to complete the next phase of de-risking milestones for the project.

“The board considered a range of funding options and proceeded with the fundraise as the best solution on a cost and dilution basis for all shareholders versus other alternative financing arrangements that were proposed.

“Despite the increasing challenges around coal investment globally, a strong business case remains for its use as a key supplier of reliable, low-cost baseload power.

“As a result, coal power remains one of the main generation sources globally, and Ncondezi believes it can play an important role as part of a balanced and sustainable energy transition for the southern African region whilst adhering to the strictest international environmental standards.

“The company can now fully focus its attention on delivering key workstreams to further advance the project before year-end.

“The recent commitment from CMEC to sign the EPC contract this quarter provides a critical steppingstone for the delivery of future milestones.”

The EPC contract with CMEC for the power plant will be signed this quarter, Ncondezi said on Monday.