Mozambican President Filipe Nyusi on Monday announced that shares in Hidroelectrica de Cahora Bassa (HCB), the company that operates the Cahora Bassa dam on the Zambezi River, will be traded on the Mozambique Stock Exchange.
Speaking in the dam town of Songo, in the western province of Tete, at a ceremony marking the tenth anniversary of the Mozambican state taking majority control of HCB, Nyusi said that the government will put 7.5 per cent of HCB’s shares on the stock exchange, where they can be purchased by any Mozambican citizen, company or other institution.
Currently 92.5 per cent of HCB shares are owned by the Mozambican state, and the remaining 7.5 per cent by REN (National Electricity Networks) of Portugal. The arrangement announced by Nyusi will reduce the state’s shareholding to 85 per cent.
Ten years ago, the Portuguese state was the majority shareholder, owning 82 per cent of HCB, with the Mozambican state holding the remaining 18 per cent. This was the shareholding structure agreed at the time HCB was created in 1975, the year of Mozambican independence, and it remained unchanged until 2007.
In principle, shares should have been transferred from Portugal to Mozambique as the debt incurred in building the dam was paid off. Three years after the debt was paid, HCB should have been fully owned by Mozambique. But it never happened. When the apartheid backed RENAMO rebels blew up hundreds of pylons, HCB was unable to sell power to its main client, the South African electricity company, Eskom.
Instead of paying off the initial debt, HCB just ran up further debts. Eventually the Portuguese government was to claim that HCB owed the Portuguese treasury over two billion US dollars. Such a debt was unpayable, and in the final negotiations over the future of HCB, in 2005, Portugal agreed to write off over half of it.
The deal struck was that Portugal would receive 950 million dollars. 250 million dollars was nominally to pay the remainder of the debt, and 700 million was to transfer 67 per cent of the shares from Portuguese to Mozambican ownership.
The 250 million dollars was paid out of HCB’s own funds, and the government arranged a loan of 800 million dollars from a banking consortium formed of the French bank CA Lyon and BPI of Portugal.
In 2012, Mozambique increased its holding in HCB to 92.5 per cent, as the Portuguese government sold off half its remaining shares, and the remaining 7.5 per cent was transferred to REN. Thanks to the sell-off of Portuguese state assets the largest single shareholder in REN today is the State Grid of China.
The loan from the banking consortium was paid off out of HCB’s revenue from the sales of electricity. Nyusi announced that, thanks to HCB’s healthy financial situation, the debt was entirely paid off by 2016, 18 months ahead of schedule.
The President described the sale of HCB shares on the stock exchange as “a sign of inclusion and innovation”, through which the government hoped to see the company managed “with transparency, respecting the highest international standards”.
“We want Mozambicans and their institutions to be direct beneficiaries of this undertaking”, Nyusi said. “We want to cover the largest possible number of interested national citizens, companies and institutions. We are aware that this decision is not going to benefit everyone who would like to obtain these shares, but it represents a fundamental and motivating step forward”.
He stressed that HCB must operate as a business, and “should comply with its nature as an incorporated company, respecting its fiscal obligations, and maximising dividends for all its shareholders”.
Nyusi announced that, over the next ten years, HCB will invest 500 million euros (about 595 million dollars), most of which wil be spent on rehabilitating the Songo sub-station, equipping it with state-of-the-art technology, aligning the electricity generation infrastructure with the needs of national and international consumption.
“With this technology, HCB will guarantee the sustainable production of clean and reliable energy to supply the domestic and southern African markers”, he said.
The Songo sub-station is regarded as the weakest link in HCB’s electricity generation, since most of the equipment installed there is over 40 years old. It is reaching the end of its useful life, and needs to be entirely replaced.
According to Moises Machava, of the HCB Board of Directors, studies must be made of the equipment to be acquired. An international tender will follow, and then the equipment will be manufactured. Such equipment does not exist ready made, but is produced to order. Once installed, the new equipment should sharply reduce the level of energy losses.
HCB also intends to win new markets. Currently it sells power to Eskom of South Africa, to the Zimbabwean electricity company ZESA, and to Mozambique’s own electricity distribution company, EDM. In the future, HCB also hopes to sell power to Malawi, Zambia and even Tanzania.