Mozambique: ENH debt rose to US$3b in 2021 – Carta

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Mozambique: ENH debt rose to US$3b in 2021 – Carta

5:34 CAT | 13 Apr 2023

The debt of Empresa Nacional de Hidrocarbonetos (ENH) and its ten affiliated firms continued to rise sharply in 2021, despite efforts to liquidate it. The Group’s consolidated annual report and accounts reveal that debt stood at US$3 billion (equivalent to 192 billion meticais) in December 2021, against US$2.9 billion (185.6 billion meticais) recorded in 2020.

ENH’s debt continued to grow even after, in February of 2021, the group repaid US$38.4 million (€35 million) to the European Investment Bank, borrowed to finance participation in the gas transport project through the acquisition of part of the capital of the joint Republic of Mozambique Pipeline Company (ROMPCO) venture, which manages the pipeline that pumps natural gas from Inhambane to South Africa.

The high indebtedness means that total liabilities almost eclipse the group’s assets. ENH’s liabilities in 2021 were US$3.2 billion, against US$3 billion in 2020, and total assets were valued at US$3.5 billion, against US$3.3 billion in 2020, leaving a difference between assets and liabilities of only US$300 million. Even so, in 2021, the group generated US$48 million in profits, against a loss of US$15 million in 2020.

Of ENH’s US$3 billion debt, US$2.9 billion (188.7 billion meticais) is accounted for by the financing of assets for the exploitation of natural resources in the Rovuma Basin. This figure includes capital, interest and exchange rate differences, representing costs incurred up until December 31, 2021.

These are project concession contracts for exploration and production in Area 4 Offshore of the Rovuma Basin, signed on December 20, 2006 between the Government of Mozambique, ENI East Africa and ENH, and also in 2006 for Area 1 between the Government of Mozambique, Anadarko Petroleum Corporation and ENH.

According to these contracts, the costs incurred up to the date of approval of the development plan are borne by the concessionaires (ENI East Africa and Anadarko Petroleum Corporation) and by the other participants.

The contracts determine that this financing is only due from the date of signature of the development plan, which occurred in February 2016 for Area 4 and in February 2017 for Area 1. The financing must be paid in US dollars, from the date of commencement of commercial production, and is subject to interest at the LIBOR rate plus one percentage point.

From the consolidated report and accounts for 2021, it appears that, of ENH’s total debt, US$34.3 million (2.1 billion meticais) was borrowed from Standard Bank South Africa (SBSA), to finance participation in the gas transport project through the acquisition of a part of the capital of ROMPCO, a transaction governed by the Acquisition Loan Facility Agreement. The contract resulted in the acquisition in May 2007 of a 9.14% stake in ROMPCO.

Significant among the ten ENH-affiliated companies are Companhia Moçambicana de Hidrocarbonetos (CMH), Companhia Moçambicana de Gasoduto (CMG), ENH Logistics, ENH Rovuma Area 1, ENH Rovuma Area 4 and ENH Investimentos.

By Evaristo Chilingue

Source: Carta de Moçambique