Mozambique power project financing ‘aims to attract new infrastructure investments’

Out-Law News | 25 Jan 2018 | 10:45 am | 2 min. read

The International Finance Corporation (IFC) is investing $55 million to support the close of project financing for Mozambique’s first gas-fired power plant to reach commercial operation.

The IFC, part of the World Bank Group, said its financing of the 175-megawatt Central Térmica de Ressano Garcia (CTRG) plant was made together with a syndicated loan of $42m from the Emerging Africa Infrastructure Fund and Dutch development bank FMO.

Proparco, the development financial institution partly owned by the French Development Agency and Barclays Africa group subsidiary ABSA Bank, as arranger, provided parallel loans, the IFC said.

The IFC said the “club of lenders disbursed debt facilities amounted to a total of $189m” – in a move designed to attract additional private capital to help fund the country’s infrastructure needs.

CTRG, some 100 kilometres from Mozambique’s capital Maputo and close to the South African border, is one of the country’s first independent power producers. The IFC said CTRG, which was completed in early 2015, “provides highly reliable and competitively priced power to Mozambique’s national utility Electricidade de Mocambique (EDM) under a 20-year power purchase agreement”.

CTRG is owned by EDM and South African petrochemicals group Sasol, which provided bridge financing for the plant’s construction up to the project financing stage.

Adérito Sousa, the chairman of CTRG’s shareholders general meeting, said the conclusion of the project financing “marks an important milestone not only for EDM and Sasol, but for the entire electricity sector of Mozambique... which is working to attract more private sector capital to fund its substantial needs going forward”.

The IFC said it played “a central role in getting this complex transaction across the line”. IFC director for sub-Saharan Africa Cheikh Oumar Seydi said the organisation was “committed to bridging the infrastructure gap in Africa”.

“CTRG uses Mozambique’s natural gas resources to generate power for the country’s economic growth and to increase access to electricity,” Seydi said. “By supporting projects like CTRG, IFC, Proparco and ABSA Bank seek to encourage other private investors to engage in Mozambique’s power sector.”

In 2012, the World Bank was among organisations that supported the development of a gas master plan for Mozambique (76-page / 1.78 MB PDF). The master plan said: “Power generation can play an important role in Mozambique’s industrialisation, and as such it is critical to conduct an integrated analysis of the power sector not only in Mozambique, but of the entire Southern African Power Pool. The entire energy mix for power generation needs to be evaluated to identify the role of gas-based power in Mozambique for local use and export.”

The World Bank’s biannual 'Mozambique Economic Update' report released in 2017 (40-page / 3.98 MB PDF) said support for the oil, gas and mining industries was "a welcome trend, given the importance of this sector for crowding in investment and creating jobs".

According to the African Development Bank, a proposed new ‘green economy investment fund’, supported by levies on the extractive industries, could help Mozambique boost investment in vital infrastructure projects. The fund proposal was part of a package of recommendations made in the bank’s ‘Transition Towards Green Growth in Mozambique’ report (76-page / 3.55 MB PDF), aimed at supporting sustainable development goals under the country’s ‘Green Economy Action Plan’.