The project, in the Tete Province, northern Mozambique, is targeting power generation in 2017.
The PFA covers the first two phases of the Ncondezi project up to 600 megawatts.
It stipulates Ncondezi and the Mozambique government shall negotiate in good faith terms and conditions that are mutually acceptable to both parties for any subsequent phases of the project up to 1800MW.
The agreement governs the relationship between Ncondezi and the Mozambique government.
It sets out the agreed pathway and government and developer milestones that have to be reached prior to project financial close for Ncondezi to become eligible for the award of a formal power concession.
The PFA is a legal pre-requisite to the initiation of exclusive power off-take discussions with potential customers. That includes the state-owned power utility Electricidade de Mozambique.
It is a key step on the way to a power purchase agreement.
Mozambique is one of the largest generators and exporters of electricity in sub-Saharan Africa.
It is well positioned, with existing transmission infrastructure, to meet shortfalls in energy supply domestically and in the broader Southern African Power Pool. That goes to the likes of South Africa, Zimbabwe, Botswana, Malawi and Namibia.
Ncondezi acting chief executive officer Paul Venter said the company aimed to have the Heads of Terms on key commercial contracts in place by the fourth quarter of this year.
“The PFA formally confirms the Mozambican government’s commitment to supporting the development of the Ncondezi Project and underlines the importance of the project as part of the government’s overall strategy to encourage direct long-term foreign investment in independent power generation and capitalise on Mozambique’s potential as a net exporter of electricity to other countries within the Southern African Development Community,” he said.
With the PFA locked away Ncondezi and the Mozambican government will put together a liaison committee to help implement the agreement.
The committee will initially have one member from Ncondezi, one from the Mozambican government and one from EdM.