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Portugal’s Prime Minister Pedro Passos Coelho on Monday signed over half of his country’s remaining stake in the Cahora Bassa Hydroelectric Company to Mozambique, ending protracted negotiations with its former colony.
Signing the deal with Mozambican President Armnando Guebuza, Passos Coelho said it opened “new opportunities for hope and progress for our two countries.”
Mozambique agreed to pay $42 million for 7.5 percent of Cahora Bassa Hydroelectric (HCB) — the company which operates a dam built by Portugal on the Zambezi river — thereby upping its stake to 92.5 percent.
Despite media reports last month after a visit to Lisbon by Mozambique’s energy minister suggesting it would gain 100 percent control in 2014, the remaining shares went to Portuguese electricity company, Redes Energeticas Nacionais (REN) for $50 million.
Passos Coelho promised REN would become involved in developing Mozambican energy infrastructure.
Mozambique’s Energy Minister Salvador Namburete said his government expected REN to invest in a project to build a North-South power transmission line.
The dam built in the early 1970s to sell power to neighbouring South Africa has long been a source of rancour between Mozambique and its former colonial master.
A long-standing issue was the massive debt incurred by Portugal on the project during Mozambique’s 13-year civil war.
With a capacity of over 2000 MW, Cahora Bassa is a major power source for several African countries. South Africa buys 65 percent of its energy output.
HCB began earning a profit for the first time in its history in 2010. However, only an estimated one in five Mozambicans – most in the capital Maputo – has access to a regular power supply.
Mozambique is still recovering from a debilitating civil war and lacks an adequate power distribution system.
The Mozambican government says it is still looking into how to finance the Cahora Bassa deal. Portugal, which is in the midst of a financial crisis, has given Mozambique five months to pay.