Banks help Mozambique buy majority of 2,040-MW Cahora Bassa

Two European banks are to lend Mozambique US$700 million so it can pay off a colonial-era debt to Portugal and take a majority stake in the 2,040-MW Cahora Bassa hydroelectric project.

Mozambique’s Energy Ministry said May 22 that France’s Calyon Bank and Portugal’s BPI will lend Mozambique the money to repay the Portuguese government for building the Zambezi River dam during its colonial rule over the southern African country.

“The selected consortium will develop a syndicate for an international operational strategy for the funding of the debts for the transfer of HCB,” the ministry said, referring to project operator Hidroelectrica de Cahora Bassa (HCB).

The Energy Ministry said the consortium outbid other banks such as South Africa’s Standard Bank/DBSA, Portugal’s Millennium bcp and several Mozambican banks interested in the deal.

Portugal retained 82 percent interest in Cahora Bassa when Mozambique achieved independence in 1975 while the Mozambican government had just 18 percent. Mozambican President Armando Guebuza and Portuguese Prime Minister Jose Socrates signed a deal last October aimed at providing Mozambique 85 per cent of the dam’s ownership while Portugal’s participation will drop to 15 per cent. (HNN 10/30/06)

“The consortium will immediately start work to structure and put together the funds for reverting HCB,” the statement said, noting that Mozambique had until the end of the year to clear its debt with Portugal.

The Franco-Portuguese consortium also was expected to assist with other major infrastructure projects in future, the ministry statement said. Further details of the agreement with Calyon and BPI were not released.

Officials say Cahora Bassa has the potential to produce 14,000 MW. Its existing capacity is sold 60 percent to South Africa and 40 percent to Zimbabwe under contracts adopted before independence. Mozambique, which is pushing to develop its own economy, now consumes only 5 percent of the energy, which it buys back from South Africa at market prices.

In December, HCB won a solicitation to sell 300 MW to Malawi. (HNN 5/21/07)

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