Cahora Bassa fails to make first payment to Portugal

21 March 2006

Lisbon, Portugal, 21 March – The Cahora Bassa Hydroelectric dam (HCB) has failed to pay its first installment of US$125 million of its debt to the Portuguese government, and is expected to also default on the next payment due in October, Portuguese financial daily Diário Económico reported Tuesday.

According to the Portuguese Finance Ministry, the non-payment was due to a delay in technical negotiations, which were only concluded Friday, but the paper citing an unnamed source said that “there is a lack of financial capacity to pay any amount at all.”

The memorandum of understanding between Portugal and Mozambique, signed at the end of last year, outlined the payment of US$950 million to Portugal, of which US$125 million were due in January and another installment of the same amount in October.

The remaining US$700 million would be paid by Mozambique within a year from the agreement’s signing.

A Mozambican source told Diário Económico that one of the solutions the Mozambican government had for resolving the issue of payment would be the sale of around 30 percent of HCB, which is being negotiated with South Africa’s Eskom.

The memorandum of understanding outlines that Mozambique will move from having 18 percent to 85 percent of HCB and Portugal will reduce its stake from 82 percent to 15 percent. (macauhub)