Last Tuesday we updated the market (link) on recent organisational changes and on the status of our project in India.
We received several emails seeking clarification on a common point. Specifically, we state:
“The independent external review remains in process and is a necessary component of the NITI Aayog review ahead of the signing of the Master Project Agreement (MPA)…
“ECT has developed an extensive data room to facilitate this independent review process and, based on current guidance, anticipates its conclusion in 6 to 8 weeks once started.”
There have been a number of questions received seeking additional detail and clarity regarding the independent review, its status, and where that process fits into the overall program of activities leading to MPA approval.
These questions are understandable. There are several layers to the activity being undertaken. Some activities are nested within others in terms of timing, hence the possible source of the confusion.
In this instance, the process of undertaking the external, independent financial review involves a prescribed sequence for Indian government-owned enterprises when engaging service providers. That sequence remains in process and entails the scoping, tendering, selection, appointment and execution of scope deliverables, including a final report to NLC for submission as part of the package to NITI Aayog.
Within that process, the reviewing party has been selected and following the recent appointment of the new CMD at NMDC, the reviewing party will be officially appointed and be able to formally commence their review.
The above sits within the broader sequence of events aimed at progressing the MPA to signing; Negotiation, drafting, legal review, internal Board approvals and Ministry approvals, then signing.
The Ministry approvals focused on technical and commercial review. However, this sequence saw an additional layer of activity injected last February in between Ministry approvals and signing when the new Secretary of the Ministry of Coal referred the project to NITI Aayog for consideration as a project of potential national interest.
For context, NITI Aayog’s process for review, at a high level, entails technical and commercial (including legal, structural and financial) aspects assessed against national planning and policy objectives. Due to the scope and value of the MPA, the requirement for an independent, external financial review was also triggered. This sits within the legal and financial aspect and was triggered due to the binding nature of the MPA which entails a significant financial commitment.
In other words, the R&D stage will articulate into a commercial project under the terms of the MPA, along the lines of that envisaged by the Techno-Economic Feasibility (TEF) study released in August 2016.
Overview of Activities
The above diagram provides a simple overview of the nested processes currently underway, as we understand them.
It is anticipated that the execution of the external financial review will take up to 8 weeks, based on the tender scope issued by NLC. The parties will work to expedite where possible. ECT has already provided all the requested documents so far identified to support the review and will be on hand to respond to any further requests for information as the review proceeds.
To summarise; the external, independent financial review sequence, which commenced in June, remains in process. The appointment of the reviewing party is anticipated soon and based on guidance received, we understand they are ready to commence their work immediately.
We understand and acknowledge that any delays are undesirable. However, as we continue to note to shareholders, we are pursuing a first-of-a-kind project, for two first-of-a-kind technologies in the world’s largest democracy. No other Australian company (or any company globally that we’re aware of) has reached such an agreement with two Indian government-owned enterprises.
We will continue to engage with our partners, NLC and NMDC, in a professional manner to support their navigation of their own operational requirements to deliver on our mutual objectives, and will provide updates on the above as appropriate.