Mozambique is gearing up for a significant milestone in its energy sector, with the 1,500 MW Mphanda Nkuwa hydropower project on track to reach financial close by the end of 2027. The project, valued at $4.5 billion, is being developed on the Zambezi River, approximately sixty kilometers downstream of Cahora Bassa. A consortium led by Électricité de France, with TotalEnergies and Mozambican public partners EDM and HCB, is driving the project forward. This development is expected to be one of the largest project financings in Mozambique's history outside the gas sector.
The Mphanda Nkuwa project is part of a broader strategy to enhance Mozambique's power infrastructure. The project includes a 1,300-kilometer high-voltage transmission line that will carry power from Tete to Maputo and onward to regional markets. This transmission line is a critical component of the project, enabling the distribution of electricity to both domestic and regional markets. The project's financing architecture is being structured with the support of the African Development Bank, which has been advising on the project.
The African Development Bank played a crucial role in convening government, utility, and implementation office representatives in Maputo this February. The meeting aimed to structure a credit-enhancement facility, including partial risk guarantees that backstop the state utility's payment obligations. This mechanism is essential in converting an emerging-market power project into an asset that international lenders can fund at scale. The project's financing structure involves various layers, including concessional tranches, commercial debt, hedging, and guarantees.
Mozambique's energy sector is experiencing significant growth, driven by various projects. The roughly 450 MW Temane gas-to-power plant is entering service as the anchor of the north-south transmission backbone. Additionally, competitive auctions under the PROLER and GETFiT programs have been adding solar and wind capacity at falling tariffs. Independent power producers already supply close to a fifth of the country's generation. This growth has contributed to a rapid expansion of electrification, from 34% in 2021 to 67% in 2024.
The domestic case for investing in Mozambique's energy sector is compelling. Each new connection creates a customer, a payment flow, and a small business opportunity. Furthermore, the regional case adds a hard currency component, as Mozambique earns export revenues from a region chronically short of power. By becoming a low-cost baseload supplier to the Southern African Power Pool, Mozambique can capitalize on its energy resources.
Financial institutions see an opportunity across the full length of the value chain. This includes structured energy and project finance expertise, guarantees, foreign exchange, and payroll services during construction. Supplier and equipment finance for local firms that build, maintain, and service the assets also present opportunities. This approach is similar to the supplier-readiness playbook being used in the LNG build-out.
Mozambique's energy sector is poised for significant growth, with the coming decade focused on scale, infrastructure development, and deal-making. The institutions involved in the Mphanda Nkuwa project will be financing Southern Africa's grid for a generation. With most of its power already generated from water, Mozambique is well-positioned to expand its energy capacity and become a major player in the regional market.
Key points
- The Mphanda Nkuwa hydropower project aims to reach financial close by the end of 2027.
- The project is expected to be one of the largest project financings in Mozambique's history outside the gas sector.
- Mozambique's electrification rate has expanded rapidly, from 34% in 2021 to 67% in 2024.
