Dropping Cahora Bassa debt costs Portugal USD 1.94 billion

22 November 2005

Lisbon, Portugal, 22 Nov – Pardoning the debt of the Cahora Bassa Hydroelectric Dam (HCB) by Portugal, via the transfer agreement of the dam to Mozambique, will cost USD 1.94 billion and this will be absorbed by the Portuguese public deficit within 13 years, says a report from Portuguese business daily Jornal de Negócios.

According to the report, HCB’s debt to Portugal at the end of 2004 was USD 2.89 billion, around three times more than Lisbon will receive as part of the memorandum of understanding with Mozambique, signed in November.

Portugal will receive USD 950 million from HCB in exchange for reducing its stake in the project from 82% to 15%, and becoming a “key shareholder and strategic partner”.

Mozambique will increase its stake to 85% and is expected to sell off part of this to an international investor interested in the operation of the largest dam in Southern Africa.

According to Jornal de Negócios, the amount of HCB’s debt dropped is the equivalent of 1.1% of Portugal’s GDP and will be written off in the public deficit over a 13-year period.

This was the route the government found that would not affect next year’s state budget or the public debt commitments to the European Commission.

The memorandum of understanding between Portugal and Mozambique for transferring the dam stipulates that, “a prerequisite of any agreement that the Portuguese Government will consider satisfactory that the operation will have no negative effect on the national deficit of the Portuguese Republic”.

Macau businessman Stanley Ho is one of the parties considered to have a potential interest in acquiring a part of the stake Mozambique will take on at Cahora Bassa. (macauhub)