Brazilian group sets up consortium to produce electricity from coal in Mozambique

17 March 2014

The future ACWA Power Moatize Termoeléctrica (APMT) thermo-electric power station, in Mozambique’s Tete province, will be one of the biggest investments in Mozambique’s history, as well as being the first in a wave of new coal-fired power plants.

ACWA Power Moatize Termoeléctrica is a consortium made up of Brazil’s Vale, Japan’s Mitsui, ACWA Power of Saudi Arabia, as well as domestic shareholders Electricidade de Moçambique (5 percent) and Whatana (8 percent), an investment company headed up by Graça Machel, the widow of both Mozambique’s first president Samora Machel and of South Africa’s Nelson Mandela.

“This project with an estimated cost of US$1 billion will be a important step in domestic processing of Mozambican coal, which has so far only been exported,” noted the Economist Intelligence Unit (EIU) in its latest report on Mozambique.

Although this in itself is not enough to justify a review of current projections for Mozambique’s economic growth, thermo-electric power “may significantly drive GDP and exports in the long term,” it said.

The EIU also expects strong growth for the Mozambican economy between 2014 and 2018 driven by investments in extraction of natural resources.

With its 25-year concession contract approved by the Mozambican government at the end of February, the plant will make use of coal “waste” from Vale, the largest mining company operating in Moatize (central Mozambique), which has some of the world’s largest coal reserves.

In an initial phase the plant will produce 300 megawatts of power, of which Vale will use between 200 and 250 megawatts. The remainder will be added to the Electricidade de Moçambique power grid and, in a second phase, capacity may increase to 600 megawatts.

Mozambique expects to produce around 5 million tons of thermal coal by the end of 2014, as compared to 1.5 million tons in 2013.

Mozambique is already one of the region’s largest energy producers.

After approving the contract, Energy Minister Salvador Namburete noted that the project made it possible to increase the availability of electricity in the country – currently around 2,000 megawatts, most of which is produced by the Cahora Bassa Hydroelectric dam (HCB).

The EIU noted that power production in Mozambique may undergo significant transformation over the next few years as “all coal mining companies currently operating in Mozambique are also considering thermo-electric projects,” to a total of 5,000 megawatts of additional generating capacity.

Ncondezi Energy, for example, announced at the beginning of March that it had received four offers for construction of a coal-fired 300 megawatts power plant, also in Tete province, and India’s Jindal Steel has similar plans.

“Even if they (the coal-fired projects under consideration) do not all go ahead the coal may contribute to eliminating the internal supply deficit, whilst also boosting Mozambique’s position as a regional energy exporter,” noted the EIU.

The potential for Mozambique to expand its energy market is even greater within Southern Africa, and particularly South Africa, which has faced an energy crisis over the last few years. (macauhub)