Chidenguele — Mozambique's largest energy company, Hidroelectrica de Cahora Bassa (HCB), which runs the Cahora Bassa dam on the Zambezi river, forecasts a decline in its revenue this year of between eight and ten per cent, because of reduced sales of electricity to South Africa.

The South African electricity company Eskom is far and away the largest client of HCB, and normally purchases 1,300 megawatts (out of the total Cahora Bassa generating capacity of 2,075 megawatts).

Speaking to reporters at the southern resort of Chidenguele, where the Coordinating Council of the Ministry of Energy is meeting, the chairperson of the HCB board of Directors, Paulo Muxanga, said that reduced purchases by Eskom were because the Apollo sub-station in South Africa is undergoing rehabilitation.

While this work is under way, the capacity of the sub-station to receive HCB power is reduced. "HCB production is at the same level", said Muxanga, "but it is likely that there will be a small decline in sales because the Apollo sub-station has been undergoing rehabilitation, and we can't send as much power as we would like".

"We had this problem last year, and this year the sub-station has had many interruptions", he added. "If South Africa can't receive the power, then we can't bill them for it".

It is also via the Apollo sub-station that HCB power reaches Maputo and the rest of southern Mozambique. This situation will prevail until a new transmission line is built that will take electricity directly from the Zambezi Valley to Maputo.

150 of the 200 megawatts that HCB sells to the Zimbabwean power company, ZESA, also goes via Apollo. (The other 50 uses the line that goes directly from Cahora Bassa to Zimbabwe).

ZESA still owes tens of millions of US dollars to HCB, although Muxanga declined to give an exact figure. He said that ZESA is paying off the debt at a rate of between 500,000 and 700,000 dollars a week. This is not enough.

"The pace of Zimbabwean payments is still a matter of concern", he said, predicting that ZESA would remain in debt to HCB for a long time to come.

Despite these problems HCB is in a healthy financial position. Its total revenue last year was 257 million US dollars, and it has been able to keep up the schedule of payments to the banking consortium which provided the 700 million dollars the Mozambican government required to purchase a majority stake in HCB from Portugal.

Up until 2007, the Portuguese state owned 82 per cent of the shares in HCB, and Mozambique owned just 18 per cent. After lengthy negotiations, the Portuguese government sold most of its shares to Mozambique, so that Mozambique now owns 85 of the company.

A 700 million dollar loans was provided by a consortium formed by the Portuguese Investment Bank (BPI) and CA Lyon of France. The money was to be repaid out of HCB's profits.

According to Energy Minister Salvador Namburete, 11 payments have already been made to the banks, four of them in advance. He did not reveal the exact sums involved. Mozambique has ten years to clear the debt, but at the current rate, the money will be paid off earlier.

In addition to the 1,300 megawatts pledged to Eskom, and the 200 for ZESA, HCB also sells 400 megawatts to Mozambique's own electricity company EDM, and up to 70 megawatts to Botswana.

Muxanga told the Coordinating Council that hydrological and geological studies would soon begin for building a second Cahora Bassa power station, on the north bank of the river, which would add a further 1,500 megawatts to HCB's generating capacity.

If all goes according to plan, financial resources for Cahora Bassa-North could be raised by the end of 2011, and the power station could begin operating in 2015.