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    14 May, 2010
Mpanda Nkua dependent on South African contract
Maputo, 14 May (AIM) - Construction of a new dam at Mpanda Nkua, on the Zambezi, in the western Mozambican province of Tete, depends on a commitment from the South African electricity company, Eskom, to buy the power that will be generated.

Egideo Leite, chairperson of Hidroelectrica de Mpanda Nkua (HMN), the company set up to manage the future dam, says that to become viable, the dam must be listed in South Africa's energy plans.

Interviewed in Friday's issue of the independent daily "O Pais", Leite said that Mpanda Nkua "is one of the projects competing to be listed in IRP2, which is South Africa's energy plan for the next five years. In June they will announce what projects they will rely on for their energy".

Only then, Leite said, would it be possible to sign a contract for the sale of Mpanda Nkua power to Eskom. And only with such a contract would banks agree to finance construction of the dam. Thus the start of construction in 2011 is entirely conditional on a go-ahead from South Africa.

"Without an agreement, it would be difficult to build a dam at Mpanda Nkua", admitted Leite.

Nonetheless he was confident that South Africa will want to buy electricity from Mpanda Nkua. "We have a great advantage over other projects, because we are almost the only project that will produce clean energy", he said. "The regional market, particularly South Africa, obtains about 90 per cent of its electricity from coal fired thermal power stations".

Not only would Mpanda Nkua tip the balance somewhat towards cleaner energy, but the electricity could be sold at a competitive price. "These are two very important points", said Leite, "the tariffs charged, and the quality of the power".

As for the suggestion, mooted during the recent visit by Portuguese Prime Minister Jose Socrates to Mozambique, that a planned Luso-Mozambican investment bank might finance Mpanda Nkua, Leite said that he has received no official information about this. To date, HMN has been working with Standard Bank (the oldest commercial bank in Mozambique) entrusting it to contact other institutions that might take part in funding the dam.

It has also been repeatedly stated that the Exim Bank of China will finance Mpanda Nkua, as if this is already a done deal. But Leite stressed "We have no information that the Exim Bank has already contacted Standard Bank. If it has done so, that's one more involved. Obviously Standard Bank will assess what is the best money for the project".

Leite stressed that Mpanda Nkua would not be competing with the existing dam at Cahora Bassa, which is 60 kilometres further upstream. Both dams would help make viable the new power line from the Zambezi Valley southwards, which will become the backbone of the entire Mozambican electricity grid.

"The more companies that appear providing energy from Tete province, the better it is for us, since it will reduce the costs of the transmission line", said Leite.

He expected HMN to sell initially 90 per cent of its power to South Africa, and just 10 per cent to the Mozambican electricity distribution company, EDM. In future, the South African share could drop to 80 per cent, and the Mozambican share rise to 20 per cent. It would be up to EDM to decide whether to sell any of the power to Zimbabwe.

The total cost of the dam and power station is now put at 2.9 billion US dollars. This includes the line from Mpanda Nkua to the Matambo sub-station, where it will join the transmission line to South Africa.

The shareholders in Mpanda Nkua are the Brazilian company Camargo Correia, with 40 per cent, Energia Capital (part of the Mozambican Insitec Group), also with 40 per cent, and EDM itself, with 20 per cent.

Leite said that although other companies have shown an interest in buying shares in HMN, the current shareholders have decided not to change the company's structure until all the financial arrangements for building the dam have been completed.
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