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Corporate Governance

 Statement of Compliance with the QCA Corporate Governance Code

Ncondezi Energy Limited (the “Company”) is committed to maintaining the highest standards of corporate governance throughout its operations and to ensuring that all of its practices are conducted transparently, ethically and efficiently. As a result of this commitment and in line with the London Stock Exchange’s recent changes to the AIM Rules for Companies requiring all AIM-listed companies to adopt and comply with a recognised corporate governance code, the Company has chosen to adopt the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”).

The QCA Code includes ten broad principles which the Company strives to implement in order to deliver growth to its shareholders in the mid and long term. The following paragraphs set out the Company’s compliance with the ten principles of the QCA Code.

Principle 1: Establish a strategy and business model which promote long-term value for shareholders

The Company is focused on the phased development of its large scale, long life, integrated thermal coal mine and 1,800MW power plant project (the “Project”) which it believes offers the most achievable and financeable route to production, thereby delivering value for shareholders.

300MW Project

The first phase of development is a 300MW integrated mine and power plant project (“300MW Project”) that will use existing transmission capacity to meet local demand in the North of Mozambique. This scenario maximises Ncondezi’s control of project delivery in a reasonable timeframe and is not reliant on the development of third party infrastructure projects.

The 300MW Project has unique advantage over other potential power projects in the region as it is solely dedicated to meeting Mozambican demand, it is scalable in 300MW units ultimately to 1,800MW, it is close to existing transmission infrastructure with available capacity and, perhaps most importantly, it is not dependent on the development of rail and port infrastructure projects.

Joint Development Agreement

In October 2017, in principle terms were agreed between China Machinery Engineering Corporation (“CMEC”), General Electric South Africa (PTY) Limited (“GE”) and the Company. It is the Board’s view, that the proposed terms represent a material opportunity to de-risk the delivery of the Project and deliver long term value to shareholders. The Board is currently working with CMEC and GE to finalise the terms of the joint development agreement.  

Principle 2: Seek to understand and meet shareholder needs and expectations

The Company remains committed to maintaining an open dialogue with its shareholders to ensure that its strategy, business model and performance are clearly understood. Understanding what analysts and investors think about the Company, and in turn, helping these audiences understand its business, is a key part of driving the business forward and understanding current or potential shareholders expectations for the Company. We seek to engage with these market participants through investor roadshows, attending investor conferences, regular reporting, social media and traditional media routes.

Additionally, the Company’s annual report, which is sent to all registered shareholders and holders of depositary interests, contains extensive information about the Company’s activities. Enquiries from individual shareholders on matters relating to their shareholdings and the business of the Company are welcomed.

The Annual General Meeting is a key forum for communication with shareholders. The notice of meeting and annual report are sent out to all registered shareholders and holders of depositary interests at least 21 days before the meeting. Shareholders are encouraged to attend the Annual General Meeting to discuss the progress of the Company.

Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success.

Communication with stakeholders

The Company will communicate with shareholders and the market generally using a Regulatory Information Service provider for regulatory news releases which, in accordance with AIM Rule 26, will be available on the Company’s website along with interim and annual accounts, shareholder notifications and other corporate governance material for at least the last five years. Shareholder votes will be notified and kept on the website in a clear and transparent manner.

In addition to shareholders, the Company recognises the different stakeholder groups, both internal and external, on which the business relies and has established structures to communicate and receive feedback from these various groups.

In the case of internal stakeholders and due to the relatively small size of the Company’s operations, the Directors and senior management are closely involved in the day-to day running of the business and are therefore in continued close dialogue with the Company’s finance function, financial advisers and Mozambican operations.

In the case of external stakeholders, the Company retains ongoing dialogue with its third party partners, including CMEC and GE, and the relevant government authorities in Mozambique, where the Company’s operations are currently based.

Social Responsibility

Good corporate citizenship is integral to the way the Company operates. Environment, social, health and safety responsibilities are a priority for the Company in all aspects of its business.

The Company’s corporate social responsibility (“CSR”) policy has been designed to promote social development projects that facilitate sustainable development and focus on community involvement. The Company adheres to the Equator Principles, the IFC performance standards and to Mozambican legislative requirements.

Further details of the CSR initiatives that the Company participates in, please see the CSR section of the Company’s website 

Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation

Risk management

The Company adopts a risk approach appropriate to the business activities being conducted and the Board retain responsibility for regularly reviewing risk management strategies. Risks and uncertainties for the business are classified in two main categories, Financial and Operational, and the Board constantly monitors the operational and financial aspects of the Company’s activities and is responsible for the implementation of policies and on-going review of business risks that could affect the Company. Duties in relation to risk management that are conducted by the Directors include but are not limited to:

  • Initiate action to prevent or reduce the adverse effects of risk;
  • Control further treatment of risks until the level of risk becomes acceptable;
  • Identify and record any problems relating to the management of risk;
  • Initiate, recommend or provide solutions through designated channels; 
  • Verify the implementation of solutions; 
  • Communicate and consult internally and externally as appropriate; and 
  • Inform investors of material changes to the Company’s risk profile.

The monitored risk categories and the main policies for their control can be found in the Risk Factors section shown on ‘Risk Factors’ session of the Company’s Annual Report and Accounts.

Ongoing review of the overall risk management programme is conducted by external parties where appropriate. The Board ensures that recommendations made by the external parties are investigated and, where considered necessary, appropriate action is taken to ensure that the Company has an appropriate internal control environment in place to manage the key risks identified.

Financial control

The audit committee which consists of Michael Haworth and Jacek Glowacki. The committee provides a forum for reporting by the Company’s external auditors and is responsible for reviewing a wide range of financial matters including monitoring the controls which ensure the integrity of the financial information reported to the shareholders.

The Board is responsible for establishing and maintaining the Group’s system of internal financial controls. Internal financial control systems are designed to meet the particular needs of the Group and the risk to which it is exposed, and by its very nature can provide reasonable, but not absolute, assurance against material misstatement or loss.

The Directors are conscious of the need to keep effective internal financial control, particularly in view of the cash resources of the Group. Due to the relatively small size of the Group’s operations, the Directors and senior management are very closely involved in the day-to-day running of the business and as such have less need for a detailed formal system of internal financial control. The Directors have reviewed the effectiveness of the procedures presently in place and consider that they are still appropriate to the nature and scale of the operations of the Group.

Principle 5: Maintaining the Board as a well-functioning, balanced team led by the Chair

The Board is responsible for promoting the success of the Company by directing and supervising the Company’s affairs and formulating, reviewing and approving the Company’s strategy, budgets and corporate actions.

As at the date of this statement, the Company maintains a balanced Board comprising a Non-Executive Chairman, (Michael Haworth) and three Non-Executive Directors (Jacek Glowacki, Estevão Pale, and Aman Sachdeva), each member possessing a complementary skillset. In addition, as at the date of this statement, Christiaan Schutte is also a Non-Executive Director, however he has resigned from the Board with effect from 30 September 2018.

Under the UK Corporate Governance Code, (excluding the Chairman) none of the Non-Executive Directors would be viewed as independent. However, although Estevão Pale and Aman Sachdeva would not be viewed as independent under the UK Corporate Governance Code by virtue of the options that they each hold in the Company and, in respect of Aman Sachdeva, his role as CEO of Synergy Consulting (which provides consultancy services to the Company), the Directors believe that independence is not a state of mind that can be measured objectively and, given the character, judgement and decision making process of the individuals concerned, the Directors believe that Estevão Pale and Aman Sachdeva can be considered independent.

Given the current size and level of operational activity of the Company the Board currently considers its composition to be appropriate. The Company reviews the independence of the Directors annually and all new appointments will be made after consideration of the independence of the Company’s Directors.

All Directors retire by rotation at regular intervals in accordance with the Company’s Articles of Association. The Company’s Articles of Association require that one-third of the Directors must stand for re-election by shareholders annually in rotation; that all Directors must stand for re-election at least once every three years; and that any new Directors appointed during the year must stand for election at the AGM immediately following their appointment. Mike Haworth, Non-Executive Chairman, and Aman Sachdeva, Non-Executive Director, resigned and were re-appointed to the Board at the 2017 AGM and Estevao Pale and Jacek Glowacki resigned and were re-appointed to the Board at the 2016 AGM. Christiaan Schutte has resigned from the Board with effect from 30 September 2018. There is no present intention for him to be replaced.

The Board currently fulfils the responsibilities that might otherwise by assumed by a nominations committee and therefore the Directors have responsibility to ensure that the Board is a well-functioning and balanced team.

The Company has established a remuneration committee of the Board with formally delegated duties and responsibilities. As at the date of this statement, Michael Haworth and Estevao Pale comprised the remuneration committee. The remuneration committee is responsible for making recommendations to the Board, within agreed terms of reference. The Board determines the remuneration of Non-Executive Directors within the limits set by the Company’s Articles of Association.

Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities

The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience, including in the areas of natural resources, infrastructure and finance. For details of the Directors past experience, please refer to ‘Director’s Biographies’ session of the Company’s Annual Report and Accounts.

All Directors receive regular and timely information on the Group’s operational and financial performance. Relevant information is circulated to the Directors in advance of meetings. As explained above, due to the relatively small size of the Group’s operations, Directors and senior management are very closely involved in the day-to-day running of the business and as such have less need for a detailed formal system of financial reporting.

An agreed procedure exists for Directors in the furtherance of their duties to take independent professional advice. With the prior approval of the Non-Executive Chairman, all Directors have the right to seek independent legal and other professional advice at the Company’s expense concerning any aspect of the Company's operations or undertakings in order to fulfil their duties and responsibilities as Directors. If the Non-Executive Chairman is unable or unwilling to give approval, Board approval will be sufficient. Newly appointed Directors are made aware of their responsibilities through the Company Secretary. The Company does not make any provision for formal training of new Directors.

Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement

Since the appointment of Michael Haworth as Non-Executive Chairman, and given that due to the size of operations the Company does not currently have a nominations committee he has been assessing the individual contributions of each of the members of the team to ensure that:

  • their contribution is relevant and effective;
  • that they are committed; and
  • where relevant, they have maintained their independence.

Over the next 12 months, the Company intends to continue to review the performance of the team as a unit to ensure that the members of the board collectively function in an efficient and productive manner.

Principle 8: Promote a culture that is based on ethical values and behaviours

It is the Company’s policy to conduct all of its business in an honest and ethical manner. The Directors believe that the main determinant of whether a business behaves ethically and with integrity is the quality of its people. As the Board currently fulfils the responsibilities that might otherwise be assumed by a nominations committee, the Directors have responsibility for ensuring that individuals employed by the Group demonstrate the highest levels of integrity.

The Board has also instituted a process for reporting and managing any conflicts of interest held by Directors. Under the Company's Articles of Association, the Board has the authority to authorise, to the fullest extent permitted by law:

a) any matter which would otherwise result in a Director infringing his duty to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company and which may reasonably be regarded as likely to give rise to a conflict of interest (including a conflict of interest and duty or conflict of duties); and

b) a Director to accept or continue in any office, employment or position in addition to his office as a Director of the Company and may authorise the manner in which a conflict of interest arising out of such office, employment or position may be dealt with, either before or at the time that such a conflict of interest arises provided that for this purpose the Director in question and any other interested Director are not counted in the quorum at any board meeting at which such matter, or such office, employment or position, is approved and it is agreed to without their voting or would have been agreed to if their votes had not been counted.

The Company takes a zero-tolerance approach to bribery and corruption and are committed to acting professionally, fairly and with integrity in all its business dealings and relationships wherever we operate, implementing and enforcing effective systems to counter bribery.

The Company is committed to upholding all laws relevant to countering bribery and corruption in all the jurisdictions in which we operate and remain bound by the laws of the UK, including the Bribery Act 2010, in respect of their conduct both at home and abroad.

Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board

The Board provides strategic leadership for the group and operates within the scope of a robust corporate governance framework. Its purpose is to ensure the delivery of long-term shareholder value, which involves setting the culture, values and practices that operate throughout the business, and defining the strategic goals that the group implements in its business plans.

Board meetings are held on average every quarter. This may be supplemented by additional meetings on an ad-hoc basis as and when required. Decisions concerning the direction and control of the business are made by the Board.

Generally, the powers and obligations of the Board are governed by the Company’s Memorandum and Articles and the BVI Business Companies Act 2004, as amended and the other laws of the jurisdictions in which it operates. The Board is responsible, inter alia, for setting and monitoring Group strategy, reviewing trading performance, ensuring adequate funding, examining major acquisition opportunities, formulating policy on key issues and reporting to the shareholders.

The Audit Committee

The Audit Committee is responsible for reviewing a wide range of financial matters including the annual accounts, financial statements and accompanying reports before their submission to the Board and monitoring the controls which ensure the integrity of the financial information reported to the shareholders.

The Remuneration Committee

The Remuneration Committee is responsible for making recommendations to the Board, within agreed terms of reference, on the Company’s framework of executive remuneration and its cost. The Remuneration Committee determines the contract terms, remuneration and other benefits for Executive Directors, including performance related bonus schemes, compensation payments and option schemes. The Board itself determines the remuneration of the Non-Executive Directors.

The Board has approved the adoption of the QCA Code as its governance framework against which this statement has been prepared and will monitor the suitability of this code on an annual basis and revise its governance framework as appropriate as the Group continues to evolve.

Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

The Company communicates with shareholders through the Annual Report and Accounts, full and half yearly announcements and, where appropriate, one-to-one meetings with larger existing or potential new shareholders. The Company encourages communication with both its institutional and private shareholders and does its best to respond quickly to all queries received.

The Board is kept updated on key stakeholder views through briefings from the Company’s brokers. The analysts’ notes and brokers’ commentary on market sentiment are also reviewed to achieve a wider understanding of investors’ views.

The Annual General Meeting is a key forum for communication with shareholders. Shareholders are encouraged to attend the Annual General Meeting to discuss the progress of the Company.

 

September 2018