Hydropower projects in Mozambique attract Chinese groups Three Gorges and State Grid

23 June 2015

Mozambique is a target country in the internationalisation of China Three Gorges and China State Grid and two major hydroelectric projects that are being launched are of interest to these Chinese groups and their Portuguese subsidiaries.

Paul Muxanga, chairman of the Cahora Bassa Hydroelectric Dam (HCB), said recently that the long-awaited construction of the northern plant of the Cahora Bassa hydroelectric facility should be initiated soon, a project which, according to the Portuguese financial daily Diário Económico, is “in the sights” of the two Chinese groups.

CTG, in partnership with EDP – Energias de Portugal of which it is the largest shareholder with 21.35 percent, wants to be involved in the future construction of this 1,250 megawatt facility, at a cost estimated by the Mozambican government at US$413 million, said the Portuguese newspaper.

China State Grid, which is the largest shareholder of Portuguese power grid company REN, which owns 7.5 percent of HCB, is positioned as a competitor to CTG in the project.

A spokesman from REN said the project for the northern plant was “very relevant to HCB” and that the company was observing its progress, as a shareholder of the Mozambican hydroelectric company.

REN’s business plan for 2015-18 provides for increased investment in internationalisation to 900 million euros in emerging markets in Africa and Latin America.

EDP ​​has said that Mozambique “is a strategic market” that “can be an important vector of internationalisation” for the company, which “will contribute to the strategic development of the sector in the country, particularly the North Cahora Bassa project, to the extent that the Mozambican government sees fit.”

Another project that is being targeted by China State Grid is the hydroelectric power station of Mpanda Nkua, designed to be the second largest hydroelectric facility in the country and awarded to Brazilian construction companies in 2010, but which ran into funding difficulties.

China State Grid also intends to finance and build the dam and the Mozambican authorities decided to alter the Mpanda Nkua management company’s shareholder structure.

Brazilian construction company Camargo Corrêa was not happy with this move and has demanded compensation for the investment it has made in the project and the return of guarantees provided in return for the concession contract, according to the Mozambican press.

The latest plans indicated that China State Grid would take between one third and 40 percent of the Mpanda Nkua facility, less than the 60 percent it wanted, while South Africa’s Eskom, the plant’s future client would have 20 percent, Électricité de France (EdF) and Brazil’s Eletrobras would have between 10 and 15 percent each, and the rest would be divided between Mozambican state power company EDM and private Mozambican companies.

With an installed capacity of 1,500 megawatts, the power plant is a key asset for the profitability of the transmission line that will be managed by power transmission company Sociedade Nacional de Transporte de Energia (SNTE).

The new transmission line, which will connect the centre to the south of Mozambique, is a partnership between China State Grid, which holds a 46 percent stake and responsibility for financing the project, with REN, which kept a 14 percent stake, while Eskom and EDM have 20 percent each. (macauhub/BR/CN/MZ/PT)