Mozambique: ENH ‘seeking cheaper financing’ for stake in natural gas megaproject

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Mozambique: ENH ‘seeking cheaper financing’ for stake in natural gas megaproject

12:54 CAT | 22 Jun 2020

Photo: O País

The state-owned Empresa Nacional de Hidrocarbonetos (ENH) de Moçambique intends to find cheaper financing than that it is currently using to facilitate its participation in the country’s natural gas project, the government has announced.

“There is an agreement” with the other Area 1 partners – that is, international oil companies led by Total of France – to finance ENH’s 15% stake “in the construction phase”, explained Mozambique’s minister of mineral resources and energy, Max Tonela, on a visit to the site on the Afungi peninsula on Friday.

“But as a company, ENH aims to maximise the return on its investment and, from that perspective, is working with financial advisers … in order to find financing alternatives that allow lower costs of the operation,” he added, without detailing figures. “This exercise is still ongoing.”

“There are no risks to the project” arising from ENH’s need to seek loans to take its place in the consortium, Max Tonela said. “This is an exercise in refinancing your participation in the project, with lower costs”.

Bloomberg reported on Friday that financial advice is being provided by the bank Societe Generale, which is already providing this service to the Mozambique LNG megaproject in Area 1

In November of last year, raising approximately US$1.5 billion (€1.3 billion) for ENH’s participation in Area 1 was the most expensive project presented at an investment forum organised by the African Development Bank (AfDB) in Johannesburg, South Africa.

It was the first presentation by the Mozambican state to international banks and investors after the sovereign debt restructuring agreed with creditors in October 2019, and after financial rating agency Fitch removed the country from its default list, following the case of the State’s hidden debts, worth around €2 billion, which is still making its way through the courts

Akinwumi Adesina, president of the African Development Bank (AfDB) said at the time that supporting ENH’s participation in Area 1 represented a “fantastic” investment opportunity in a “well-structured” project.

Asked in Afungi on Friday whether ENH’s indebtedness and the drop in world demand could swallow the benefits accruing to the state from the megaproject, Max Tonela reaffirmed that the “project is viable” and that “all parties will benefit”.

Economic models of the Area 1 project point to global gains, over 25 years, in the order of US$61 billion (€54.5 billion euros) and “the Mozambican state, through taxes, profit sharing and its ENH participation, will retain just over 50%, about US$31 billion (€27.7 billion)”, he said.

Perspectives for the world’s energy markets “indicate that in the medium, long term, there will be an increase in demand” and that, in this case, liquefied natural gas (LNG) “will have a higher growth rate than other products”.

Minister Tonela says the trend towards cleaner energy will end favouring gas over other sources such as coal – which has hitherto been one of Mozambique’s main export products.

The Rovuma Basin Area 1 project, off the northern coast of Mozambique, is expected to start in 2024 and reach full production (13.12 million tonnes per annum of liquefied natural gas) in 2025.

Source: Lusa