EDM promises to pay HCB accumulated debt this year

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EDM promises to pay HCB accumulated debt this year

2:18 CAT | 24 Feb 2017

Folha de Maputo (File photo) / EDM building in Maputo

The accumulated debt of more than US$50 million that public electricity company EDM owes the state-owned Cahora Bassa hydroelectric plant (HCB) will be settled this year, according to EDM board of directors chairman Mateus Magal.

The companies met this week to discuss the matter and found a strategy that would allow EDM to liquidate old debt. Magala has not disclosed details of the discussion between the parties, but says he will announce the payment strategy soon.

“We are confident that by the end of this year a large part of this debt will be liquidated,” Magal promised. Including its debt to HCB, EDM owes its suppliers more than US$800 million, but is unable to pay the debt because it bought energy at 10 cents and sold at eight cents.

On the visit of the MDM political party to EDM in February 2016, the chairman declared that the public company was in fact bankrupt, and had not closed only because it was the monopoly supplier of electricity to the population.

The EDM chairman explained yesterday that at the moment, in the countries of Southern Africa, electricity is sold on average for 12.5 cents of US dollar per kilowatt and EDM sells for only 7.5 cents of dollar per kilowatt. “Our price is very low. This entails costs that certainly do not contribute to the necessary investments. I think that in the near future, say by 2018, if we can reach 12.5 cents per kilowatt, we will be at a level that reflects costs,” he said.

The country needs about US$10 billion to invest in energy transmission lines if, by 2030, the entire population is to have access to electricity. An urgent increase in the electricity tariff is needed to raise funds for the necessary investments.

At present, the demand for electricity consumption in the country is 900 megawatts. Of this, EDM buys about 750 megawatts from the CBH, and the rest from outside the country.

“With 150-200 megawatts more, we could meet immediate needs. But we are not just looking at the immediate future: our goal is 2030. So any immediate goal would be insufficient to meet the long-term universal need,” Magal said.

As a solution, the country will have a new power station in Temane, Inhambane from 2021 on, which will produce 400 megawatts of energy from natural gas. In addition, a transmission line will be built to the capital, Maputo.

The power plant and the electricity transmission line are expected to cost $1.2 billion, which money does not yet however exist. With this in mind, EDM and CHB met South African oil company Sasol and international partners on Thursday to define a financial structure for the project.

The 400 megawatts that will be produced in Inhambane and transmitted to Maputo represent almost half the country’s current electricity consumption.

The Minister of Mineral Resources and Energy, Letícia Klemens, this week made public the names of those heading up the two projects. “The transmission line is a public partnership between HCB and EDM, and the power plant will be public-private, involving Sasol and EDM and other partners who might be interested in getting into the project,” she said.

EDM chairman Magala said the power line would be ready six months before the power station, in order to make the plant viable. He said that the project will significantly increase EDM’s revenues.

“With what we have today we can bill about half a million dollars, which means that by adding 400 megawatts, we can raise our revenue to the level of a billion dollars or more,” he explained.

The African Development Bank (ADB) has indicated its willingness to fund the project, but still wants to see if it is profitable before making a final decision. “How much we can invest will depend on the income that this project can bring, in but we are interested in participating in the financing,” AfDB representative in Mozambique, Joseph Ribeiro said. In addition to the AfDB, the World Bank, Norway, the German bank KFW, as well as Japanese and French agencies JICA and AFD are on the list of potential funders.

At the moment, the economic and environmental studies of the two projects are finished and the financial package is closed.

Source: O País