Mozambique’s sovereign guarantee for ENH to enter gas business is worth US$2 bln over 5 years – deputy minister

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Mozambique’s sovereign guarantee for ENH to enter gas business is worth US$2 bln over 5 years – deputy minister

1:56 CAT | 26 Oct 2018

In the case of Area 4, the partners "will finance ENH's share" of about US$500 million in the consortium led by Eni and Exxon Mobil that will produce liquefied natural gas from 2022 on. In relation to Area 1, whose consortium is led by Anadarko, each partner will seek its own financing, ENH having a share of US$2 billion.

The US$2 billion guarantee that Mozambique will issue to enter the gas business will have a five-year deadline, the deputy minister of Energy and Mineral Resources told Lusa.

It is a separate sovereign guarantee in all aspects from the one which was used in the case of the ‘hidden debts’, he added.

“These are totally different things: this one is very well studied” and “we have to find a way to explain it” Augusto de Sousa said, admitting that whenever there was talk of sovereign guarantees there was “panic” among the Mozambican population.

All because the country remains unaware of the fate of the US$2 billion obtained based on guarantees issued by the government without the knowledge of parliament and international partners in 2013 and 2014, in what became known as the ‘hidden debts’ scandal.

This time, the guarantee would be under the scrutiny of all the parties involved and be circumscribed in scope, de Sousa told Lusa.

At stake is the entry of Mozambique’s Empresa Nacional de Hidrocarbonetos (ENH) in the consortia that will exploit natural gas.

In the case of Area 4, the partners “will finance ENH’s share” of about US$500 million in the consortium led by Eni and Exxon Mobil that will produce liquefied natural gas from 2022 on. In relation to Area 1, whose consortium is led by Anadarko, each partner will seek its own financing, ENH having a share of US$2 billion.

“While the other partners have other collateral which they can present to funders, ENH does not,” de Sousa notes, and “as there is no infrastructure on the ground” – since it is still being built – “there is some risk to the banks” financing ENH’s stake in the consortium.

It is in this context that the Mozambican state has assumed the issuing a US$2 billion, five-year guarantee.

“When it reaches the fifth year, the guarantee falls away and the bank can carry out refinancing” based on assets relating to the exploitation of natural gas already on the ground.

“The banks do not finance without scrutinising and, in our case, with the situation we had with the sovereign guarantees, there is every reason to verify that all is well,” de Sousa concludes.

The issue of the guarantee is foreseen in the government’s 2019 Draft State Budget, which will be discussed by the Mozambican parliament before the end of the year.

Source: Lusa