Mozambique: Government and International Agencies update financing terms for LNG
EDM CEO Mates Magala (file photo)
Mozambique’s publicly owned electricity company, EDM, has paid off most of its debt to its main supplier, Hidroelectrica de Cahora Bassa (HCB), which operates the Cahora Bassa dam on the Zambezi river.
Interviewed in Friday’s issue of the independent daily “O Pais”, the chairperson of the EDM board, Mateus Magala, said EDM paid 104 million US dollars of the debt in 2017. This left a debt of 14 million dollars, and Magala said this would be paid off by the end of this year.
He did not reveal exactly where EDM had found 104 million dollars, stating merely that the payment was the result of “the financial engineering found by EDM and HCB”.
Magala said the company’s strategy is based on reducing EDM’s own losses, and finding a balance between its suppliers, leading to “a sustainable cost for the company”. In addition to HCB, EDM buys power from several gas fired power stations in the south of the country, one of which, CTRG at Ressano Garcia, on the border with South Africa, is part owned by EDM.
He was sure that if EDM handled these factors carefully “we will certainly have enough resources to pay off the remaining 14 million to HCB this year”.
Some of EDM’s difficulties arise from the reluctance or inability of many of its clients to pay their electricity bills. Magala put the total client debt at three billion meticais (around 50 million dollars).
This money is owed by private and public institutions, and many of the latter are owned by the Mozambican state.
EDM has launched a campaign to collect these debts, said Magala, and is negotiating payment plans with each of the debtors. Clients who accept this negotiation will continue to receive electricity, but those who were reluctant to pay could be disconnected, he said, “because electricity is not free”.
Magala said EDM is also facing difficulty in obtaining credit for some of its crucial projects. This is because of Mozambique’s unsustainable foreign debt, largely caused by the illicit loans for over two billion dollars which three security-related companies, Ematum, Proindicus and MAM, took out from the European banks Credit Suisse and VTB of Russia in 2013 and 2014.
EDM found that traditional sources of financing are now closed to it. Other sources of funding are available, but would be much more expensive.
“If we accepted these very expensive forms of financing, we would be mortgaging the lives of our childen and grandchildren”, said Magala. “So we ended up not requesting such funding, which certainly limits our possibilities of supplying good quality electricity to Mozambicans”.
EDM’s goal is to guarantee electricity to all Mozambicans by 2030. Currently, however, only around 28 per cent of the population are connected to the national grid (this figure does not include those who draw their power from solar panels).
To electrify the entire country, EDM would have to make at least 450,000 new connections a year, which would cost 500 million dollars a year for the next 12 years. The construction of new power generation and transmission facilities would push the total investment required up to 10 or 12 billion dollars between now and 2030.
Over the last three years, despite Mozambique’s debt crisis, EDM was able to mobilise 1.3 billon dollars in financing, half in grants, and half in soft loans. But this is nowhere near enough for EDM’s ambitious investment programme.
Magala said the money raised does not cover new generation and transmission infrastructures, which can only be covered by loans that EDM currently cannot obtain.
One of the projects delayed is the construction of an emergency power station in the northern port city of Nacala, which could provide 80 megawatts to help relieve the increasing demand for electricity in the northern region.
Magala said this should have been financed by a soft loan from the Japanese government of 80 million dollars, but this has been put on hold because of the country’s debt situation.
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