Cahora Bassa hydro deal made with Portugal not EU, says Mozambican president

4 October 2006

Bucharest, Romania, 04 Oct – The president of Mozambique, Armando Guebuza has said that when he signed the memorandum of understanding on the future of the Cahora Bassa hydroelectric dam he was negotiating with Portugal and not with the European Union (EU).

Guebuza was speaking to Mozambican news agency AIM in Bucharest, where he was taking part in the meeting of French-speaking countries, and commenting on reports that Eurostat had requested additional information from the Lisbon government about the deal with Mozambique.

The Hidroelétrica de Cahora Bassa, the company that operates the dam, is 82-percent owned by the Portuguese state, while Mozambique owns the remaining 18 percent.

Under the terms of the memorandum signed in November 2005, Mozambique would have an 85-percent share and Portugal 15 percent, in a deal which would net Portugal US$950 million.

However, as the accounting value of the dam is US$2.5 billion, the deal would mean pardoning they majority of the debt, which Eurostat sees as detrimental to Portugal’s national accounts, going against a recovery plan agreed with Brussels.

According to Guebuza the situation is simple as, “we negotiated with Portugal and not with Eurostat and we have nothing to do with that issue.”

The Mozambican government, which was unaware that Portugal may have been violating a community ruling, assumed that after the memorandum of understanding a final agreement would be signed and that control of the Cahora Bassa dam would be in Mozambique’s hands by the end of 2006. (macauhub)