Mozambique prepares to develop Mphanda Nkuwa hydropower project

Mozambique is stepping up its efforts to establish a sustainable energy supply to boost its economy, especially the industrialization agenda. Seeking reliable foreign partnerships, he has already pre-selected a few energy groups for the new $4.5 billion Mphanda Nkuwa hydroelectric dam on the Zambezi River in Tete province, which is expected to generate 2,070 megawatts for the Mozambique. It will be 700 meters long and rise 86 meters above its foundations, with 13 valves.

The tender for the “Selection of strategic partner or investor for the development of the Mphanda Nkuwa hydroelectric project” finally received in December the results of the market study carried out in September on the critical aspects of project structuring, alignment with potential buyers and shareholder involvement. The structure of the transmission line, the methodology for selecting the strategic partner, the implementation schedule, among other relevant issues related to the project transaction.

According to the Malaysian newspaper The Star, the selection process for the seven potential investors took place following an investor conference held in Maputo. He further wrote that there were two individual companies and five large consortia that had already visited the site to understand the natural conditions of the region and to assess the fundamental data to prepare proposals from a technical, economic and financial.

The newspaper estimated the infrastructure cost at $4.5 billion to $5 billion and the capacity to generate 1,500 megawatts, making Mphanda Nkuwa the second largest hydroelectric dam in the country, after Cahora Bassa Hydroelectric (HCB), which generates 2,070 megawatts. With the two power generation infrastructures fully operational, Mozambique hopes to achieve the goal of universal energy access and address the growing energy deficit plaguing southern Africa.

The Director General of Mphanda Nkuwa Development Office, Carlos Yum, predicted that during the construction phase, more than 7,000 jobs will be created and 50% of the energy produced will be exported, contributing to the country’s economy and making thus a regional energy hub. in Mozambique.

The Mphanda Nkuwa project will be a lower-cost power generation option that will position Mozambique as a regional energy hub and contribute to universal access, industrialization, job creation and technical training while generating tax revenue and concession fees. The project is fundamental for the energy transition and decarbonization of the southern region of Africa.

Carlos Yum presented the progress of the Mphanda Nkuwa hydroelectric dam construction project. According to Yun, the project is budgeted at around $5 billion and work will begin in 2024, when funding is expected to be finalized.

The project will take a total of six to seven years. Of the price of approximately US$5 billion, 60% is for the construction of the dam and 40% for the transmission line. At the moment, the development office is preparing to launch public tenders for the update of the project’s feasibility studies.

By December 2022, the office will launch a call for tenders for the identification of the strategic investment partner, whose financial close has been set for a deadline of 2024. In terms of shareholding, the Mphanda Nkuwa project will have the participation of the Mozambican State, through Electricidade de Moçambique (EDM) and Cahora Bassa Hydroelectric[(HCB)withbetween30%and35%ofsharesTheremaining65%willbesecuredfromprivateinvestors[(HCB)withbetween30%and35%ofshares[(HCB)avecentre30%et35%desactionsLes65%restantsserontsécurisésauprèsd’investisseursprivés[(HCB)withbetween30%and35%ofsharesTheremaining65%willbesecuredfromprivateinvestors

Carta de Moçambique also informed that there will be consultants involved – from Brazil, the United States, Sweden and South Africa – to assess possible problems associated with the project according to international best practices, avoiding pitfalls that have tainted previous projects implemented in the province. and in Mozambique in general.

He reported that experts and strategic investors, including the World Bank (WB) and the African Development Bank (AfDB), discussed some important aspects regarding the implementation of the Mphanda Nkuwa hydropower project.

“Overall, we believe this project is very important to the government’s goal of universal access by 2030,” said Zayra Romo, senior energy specialist and head of infrastructure practice at the World Bank in Mozambique. As for the current stage of the project, which consists of finding a strategic partner for the development of Mphanda Nkuwa, Romo indicated that the support of the World Bank would consist in ensuring the greatest possible competitiveness of the project, with a view to select the best entrepreneur or investors who have experience to effectively manage Mphanda Nkuwa.

A press release from the Mphanda Nkuwa Implementation Office specifies that these companies and consortia had responded to the call for tenders launched in December 2021, and submitted their pre-qualification files before the deadline, initially set for February 28 but, at the request from several of the bidders, it was extended until April 18. It is hoped that construction of the new dam (which has been on the drawing board for decades) will finally begin in 2024. Construction will last at least seven years.

According to the press release of the Mphanda Nkuwa Hydropower Project Implementation Office, the main objective is to ensure the coordination of actions for the implementation of the Mphanda Nkuwa project.

Location: The Mphanda Nkuwa Dam will be located in Tete Province, Center Region, on the Zambezi River, 61 km downstream of the Cahora Bassa Hydroelectric Power Station.

Project description: The hydroelectric power station will have a capacity of up to 1,500 megawatts and an electric power transmission line from Tete to Maputo of 1,300 kilometers.

Budget: 4.5 to 5 billion US dollars, of which 60% for the construction of the dam and 40% for the electricity transmission line.

Strategic Importance: The project will position Mozambique as an energy hub in Southern Africa. It will provide lower-cost energy in the country and the region, contribute to universal access to energy in the country by 2030 and support rapid industrialization, with job creation, development of skills and business opportunities (local content). Social and economic benefits, in the form of royalties and revenue from concession royalties for the Mozambican State.

Environmental approach: The project will be implemented in strict compliance with national standards and internationally accepted best practices for the development of projects of this nature, in order to mitigate negative impacts and maximize positive aspects. In this context, the Mphanda Nkuwa Hydropower Project Implementation Office recently signed an agreement with the International Hydropower Association for the sustainability assessment of the project, including training and capacity building.

The Mozambican news agency reported, citing government sources, that there were eight international consortia interested in becoming strategic partners of Mozambique in the construction of the Mphanda Nkuwa dam, with power generation: ETC Holdings Mauritius, Longyuan Power Overseas Investment (Chinese), PowerChina Resources, WeBuild Group, Scatec (Norway), Sumitomo Corporation, EDF and Kansai Electric Power (Japan).

With a population of around 30 million, Mozambique is endowed with rich and extensive natural resources but remains one of the poorest and most underdeveloped countries in the world. It is one of 16 countries that have a collective responsibility to promote socio-economic, political and security cooperation within the Southern African Development Community.

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