NEGOTIATIONS OVER THE FUTURE of the Cahora Bassa hydroelectric power station are taking place between Mozambique, Portugal and South Africa.

The three countries have agreed that Portugal should be paid an amount for the settlement of the debt owed to it to ensure the continued viability of the plant after the transfer of the majority ownership to Mozambique. Portugal currently owns 82% of the plant while Mozambique owns the other 18%. The negotiations included inflation-adjusted tariffs that should be paid by Eskom, the South African utility, for electricity from the power station.

Construction of the dam started in 1969 and was completed in 1977, two years after Mozambique gained independence from Portugal. The Frelimo government and Portugal signed an agreement granting the right to operate the dam and sell power to South Africa until the debt was paid. But Mozambique’s long civil strife resulted in power not being sold to Eskom for almost 20 years from 1977 to 1997, while Portugal kept the plant functioning by injecting more money. From an original loan of about US$500M the amount owed to Portugal has grown to an estimated US$2.6B.