IFC and AfDB to support development of Mphanda Nkuwa in Mozambique

The International Finance Corporation (IFC), the private sector arm of the World Bank Group, and the African Development Bank (AfDB), are to assist Mozambique’s Ministry of Mineral Resource and Energy (MIREME) with the development of the 1500 MW Mphanda Nkuwa hydro project and associated transmission facilities.

The AfDB signed an agreement with Gabinete de Implementação do Projecto Hidroeléctrico de Mphanda Nkuwa (GMNK), the Mphanda Nkuwa Hydroelectric Project Implementation Office, a unit of the MIREME, on 24 May to provide advisory services for the project on the Zambezi river. The agreement was signed on the sidelines of the bank’s annual meetings that were held in Accra from 23 to 25 May by Carlos Yum, Director of GMNK, and Kevin Kariuki, Vice President for Power, Energy Climate and Green Growth of the AfDB, in the presence of President Filipe Nyusi of Mozambique and the president of the African Development Bank, Akin­wumi Adesina.

The IFC, meanwhile, announced on 18 May that it would work in collaboration with GMNK to structure the project, including the review of technical design, environmental safeguards, and commercial and fin­ancial structuring. The aim is to help mobilize competitive private investment to bring the project into commercial operation and support the country’s sustainable energy transition. A tender was launched in early 2022 for a strategic partner to co-develop the project, alongside Mozambique’s state-owned entities Electricidade de Moçambique and Hidroeléctrica de Cahora Bassa (HCB), who will be representing the public sector interest in the project. The strategic partner is expected to be the majority shareholder in the incorporated project development company.

The US$ 4.5 billion project will be located in the Marara District in Tete Province, approximately 60 km downstream of the Cahora Bassa dam and 70 km upstream from the city of Tete. Its current design envisages a 103 m-high concrete gravity dam, the 1500 MW powerplant, and a 550 kV high voltage transmission line, 1300 km long, from the project site to Maputo, the capital of Mozambique. The project is expected to reach financial close by the end of 2024, with commissioning anticipated to take place in 2031. In addition to being a national priority in Mozambique’s National Energy Sector Master Plan 2018–2043, Mphanda Nkuwa is also a priority investment for the Southern Africa Power Pool.

As well as supplying power to meet growing domestic demand and drive economic and social development in Moz­ambique, the project is also expected to be a supplier of competitively produced energy for the southern Africa region, with Mphanda Nkuwa projected to have one of the lowest electricity production costs in the region. The project will also accelerate the transition to clean energy to combat climate change in Southern Africa.

“The partnership with the African Develop­ment Bank further strengthens the capacity of our implementing agency to develop the Mphanda Nkuwa project,” said Yum. “The African Develop­ment Bank will ensure that world class environmental, social and governance and associated standards are adhered to during the development, and that the project is attractive to reputable developers, financiers and investors to ensure competitive and least-cost power for Mozambique and the region”. “Mphanda Nkuwa is poised to contribute to the achievement of the Government’s vision of universal access to electricity by 2030, stimulate industrialization and boost growth through reliable transmission infrastructure and competitive power”, said the Director of the GMNK.

“Clean and sustainable energy is a key driver of economic and social development. We are pleased to leverage IFC’s experience in developing and financing large hydropower projects in Africa and globally to boost Mozambique’s supply of affordable renewable energy and meet the countrys growing demand for power,” Carlos Katsuya, IFC’s Senior Country Manager for Mozambique, said.

GMNK was created by the Ministry of Mineral Resources and Energy in February 2019 to lead on the selection of a strategic partner to implement the project and update existing technical studies all based on competitive procurement processes and following the best international practices.