Representatives from the government of Mozambique, power utility Electricidade de Moçambique (EDM) and its project partners in the Temane Regional Electricity Project (Trep) – Globeleq, eleQtra and Sasol – on Wednesday celebrated the agreement of various grants, loans and guarantees making up the funding required for the transmission line and substation components of the Trep.
The group of development finance institutions that will provide funding for the project include the World Bank, the government of Norway, the Islamic Development Bank, the African Development Bank (AfDB) and the OPEC Fund for International Development (OFID).
The Development Bank of Southern Africa (DBSA) is also finalising its financing agreements with the Mozambique government.
The total funding facility of nearly $543-million for the transmission line and related substations, includes a $300-million grant from the World Bank; a $24-million grant from the Norwegian Trust Fund; a further $33-million grant provided by the AfDB; a $99.7-million lease and loan through the Islamic Development Bank; and a contribution from OFID of $36-million.
The total funding facility is expected to include a $50-million loan from the DBSA, in partnership with the European Union through its Infrastructure Investment Programme South Africa.
The World Bank has also committed a guarantee of $120-million in support for the wider Trep project, the statement said on Wednesday.
The Trep is a priority project for the Mozambique government as it seeks to create a unified electricity grid and improve the country’s energy security, the statement said.
The Trep involves the construction of a 400 kV high-voltage transmission line, stretching from Vilanculos to Maputo, along with three new substations at Vilanculos, Chibuto and Matalane and upgrades to the Maputo substation.
The transmission line will then connect to the new 420 MW gas-fired power plant to be built at Temane, for which a separate financing process is under way.
Gas will be supplied by Sasol and ENH from the PSA gasfield and electricity will be sold to EDM under a 25-year tolling agreement.
Together, the power plant and transmission line will bring in $1.4-billion in new investment into the Mozambican power sector.
World Bank country director for Mozambique Mark Lundell said the facility was “fundamental to developing the Mozambican domestic power system, expanding energy access, and ensuring the secure, affordable and sustainable power supply that is one of the key drivers of Mozambique’s economic and social development.”
EDM chairperson Aly Sicola Impija added that the signing of these financing agreements represented a significant step forward in realising this important project, thereby contributing to the Mozambique government’s goals of universal access by 2030 and the positioning of Mozambique as a regional energy hub.