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Cablegate: Cahora Bassa Hydro Dam in Mozambican Control

VZCZCXRO8476
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHTO #1395 3330549
ZNR UUUUU ZZH
R 290549Z NOV 07
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 8254
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHLI/AMEMBASSY LISBON 1291
RUEHLO/AMEMBASSY LONDON 0088
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DOE WASHDC

UNCLAS MAPUTO 001395

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ENRG EINV EFIN PO MZ
SUBJECT: CAHORA BASSA HYDRO DAM IN MOZAMBICAN CONTROL

REF: 06 MAPUTO 1409

1. In an emotive 11/27 ceremony in Tete province led by
President Armando Guebuza, the GRM formally paid the
Government of Portugal the remaining $700 million of a $950
million deal for control of the Cahora Bassa hydroelectric
dam (HCB) on the Zambezi River. Presidents Robert Mugabe of
Zimbabwe, Levy Mwanawassa of Zambia, and Festus Mogae of
Botswana, along with Swazi Prime Minister Barnabas Diamini,
South African Vice President Phumzile Mlambo-Ngcuka,
Portuguese Finance Minister Teixeira dos Santos and even
RENAMO opposition leader Afonso Dhlakama were in attendance.

2. In October 2006, representatives of the Mozambican and
Portuguese governments signed an agreement providing for the
transfer of HCB to the GRM in exchange for $950 million
(reftel), and the GRM made an initial $250 million payment
from its own budget. This past April, the Government of
Mozambique granted an international tender to finance the
remaining $700 million to a joint venture consortium formed
by Portuguese bank BPI and the French investment bank Calyon.


3. With the transfer now completed, Mozambique has 85
percent of the shares of HCB with Portugal retaining 15
percent. The banks will be repaid from HCB's operating
revenue, and the consortium has hired Manitoba Hydro of
Canada to periodically verify the technical performance of
HCB and its continued viability. The financial director of
HCB told EconSpecialist on 11/23 that the company makes USD
22 to 25 million per month from the 350mW supplied
domestically, 150mW to Zimbabwe and 1775mW to South Africa.

4. COMMENT: President Guebuza has referred to the reversion
of Cahora Bassa to Mozambique as a "second independence day,"
underscoring the national pride that Mozambicans feel about
taking control of one of the final, most visible examples of
the Portuguese colonial influence. It is also noteworthy
that the GRM attracted $700 million in commercial financing
for this project, a reflection of the improving business
environment in Mozambique. Significant risks remain,
however. In order for the GRM to repay the loan, HCB
customers have to pay on time, and there is concern that the
Zimbabwean government may not be able to do so, as the GoZ
presently owes USD 20 million to HCB. END COMMENT.

Chapman

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