Portugal transfers 2,040-MW Cahora Bassa to Mozambique

Portugal and Mozambique have completed an agreement to transfer majority ownership of 2,040-MW Cahora Bassa dam from Portugal to Mozambique, its former colony.

Portuguese Prime Minister Jose Socrates and Mozambique President Armando Guebuza scheduled a formal signing ceremony November 1 during Socrates’ visit to Maputo.

Portugal, which holds 82 percent of hydro project operator Hidroelectrica de Cahora Bassa (HCB) is to transfer all but 15 percent of the project to Mozambique, giving the African government 85 percent ownership of the company. Additionally, Portugal agreed to sell another 5 percent stake to an independent investor to be named by Mozambique.

In return, Mozambique is to pay Portugal US$250 million and pledged to pay an additional US$700 million. Portugal is to forgive any additional debts.

Portugal’s Ministry of State and Finance said October 26 the agreement results in continuing joint ownership of the hydro project by both countries, which are to work together to develop Mozambique’s energy sector.

In a preliminary agreement, Portugal pledged in November 2005 to turn over the Zambezi River hydro project to its former colony for payment of US$700 million.

The agreement resolves a dispute over control of the project that has lasted since the early 1970s. A major sticking point had been payment Portugal wanted from deeply indebted Mozambique for building and maintaining the dam. The amount of debt has been estimated at US$1.8 billion.

In June, the International Monetary Fund (IMF) released a US$2.4 million loan to Mozambique, while complimenting the African nation for its handling of the acquisition of Cahora Bassa from Portugal. (HNN 6/28/06)

“The authorities’ commitment to financing the transfer of majority ownership in the Cahora Bassa Dam operating company through non-recourse financing that does not increase the government’s liabilities to commercial creditors is welcome,” IMF Deputy Managing Director Takatoshi Kato said at that time.

Although Mozambique faces persistent power outages, HCB sells the bulk of its power to South Africa. (HNN 9/6/06) In 2003, HCB announced the beginning of a US$40 million rehabilitation of Cahora Bassa. It also said it is advancing plans for a second power station, Cahora Bassa North, with capacity between 800 and 1,200 MW.

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