THE Zambezi river and its major tributaries have to some extent been developed for hydro power generation. Hydroelectric schemes have been constructed in Mozambique, Malawi, Zimbabwe and Zambia. There is still however, a substantial potential in the river basin that appears feasible for development.

By far the largest scheme in the Zambezi is the Cahora Bassa hydro power station in Mozambique, which was commissioned in 1975 with an installed capacity of 2075MW. In 1999, Unidade Técnica de Implementação dos Projectos Hidroelétricos (UTIP) – a governmental body established to safeguard Mozambique’s interest in the Zambezi river hydro power potential and to manage its development – commissioned a comprehensive study of hydro power developments downstream of Cahora Bassa.

The study, which was completed in April 2002 and financed by grants from Germany, Norway and France, has been executed by a consortium of international consultants and followed up by UTIP and its in-house consultants, including a panel of experts for the study contracted by UTIP.

The Study has been executed in two phases. Phase 1, which took place from March 1999 to July 2000 and was performed at prefeasibility level, had the objective to define the most economic sequence of new developments, their respective capacities, and operation modes. Based on the resulting Project Definition Report (October 2000), the Government decided to proceed with a detailed study of the selected projects Mphanda Nkuwa and Cahora Bassa North.

During Phase 2 – the feasibility study (October 2000-April 2002) – all main aspects of the two projects were addressed in more detail. The final report of the feasibility study was submitted to UTIP by early April 2002.

Following the studies, a staged development of the hydro power potentials in the Mozambique section of Zambezi was defined. The first stage of this development concerns the 1300MW Mphanda Nkuwa project (previously named Mepanda Uncua), to be developed as a run-of-river scheme.

The estimated total financing requirement of this project, including price contingencies and interest during construction, is in the order of US$2.5B. Considering the size and complexity of the project, coupled with the international trend of power sector reform taking place in Southern Africa, the option for financing of Mphanda Nkuwa is as a private hydro power project with public support, on a build, own, operate and transfer (BOOT) basis. This will be organised in project companies registered in Mozambique. Two companies are envisaged, one for generation and one for transmission. The two companies can have different ownership and financing arrangements, but shall be organised so that co-ordination of project implementation is secured.

Promotion of the project started in May 2002 with an investor conference and circulation of the project promotion document. According to UTIP, the conference, held on 30 May in Maputo, Mozambique, attracted great interest. More than 200 representatives of large energy companies, investment banks, contractors, equipment manufacturers, consultants and government officials participated and four ministers of the Government of Mozambique were among the VIP attendees.

The Conference was opened by the Minster of Mineral Resources and Energy, Castigo Langa. Subsequently, short presentations were made on the investment climate in Mozambique and the technical, environmental, legal and financial aspects of the project.

‘Our government hopes that in the follow up of this conference, a consortium capable of forming the implementing company for Mphanda Nkuwa can be constituted,’ commented Langa. ‘Based on law, the government is prepared to provide appropriate incentives, capable of ensuring the financial robustness of the project and safeguard earnings for all parties.’

The conference marked the launch of the project and investors were invited to pre-qualify for implementation of the project by 1 October 2002. Following review of the pre-qualification documents, a limited number of the candidates considered to be qualified for implementation will be invited for competitive negotiations. Dependent on the response from interested parties, such negotiations are expected to start soon.

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