VZCZCXRO9774
RR RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN RUEHTRO
DE RUEHTO #1018/01 3050922
ZNR UUUUU ZZH
R 310922Z OCT 08
FM AMEMBASSY MAPUTO
TO RUEHC/SECSTATE WASHDC 9484
INFO RUEHZO/AFRICAN UNION COLLECTIVE
RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHBJ/AMEMBASSY BEIJING 0230
RUEHBR/AMEMBASSY BRASILIA 0138
RUEHBY/AMEMBASSY CANBERRA 0129
RUEHLO/AMEMBASSY LONDON 0270
RUEHMO/AMEMBASSY MOSCOW 0060
RUEHOT/AMEMBASSY OTTAWA 0452
RUEHFR/AMEMBASSY PARIS 0156
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 03 MAPUTO 001018 
 
SENSITIVE 
SIPDIS 
 
STATE PLEASE PASS USAID 
STATE PLEASE PASS USGS 
STATE PLEASE PASS DOE FOR SPERL AND PERSON 
DEPT FOR AF/S, AF/EPS, AND EEB/ESC AND CBA 
 
E.O. 12958: N/A 
TAGS: ENRG EPET EMIN EINV ETRD SENV MZ SF
SUBJECT: CAHORA BASSA HYDRO DAM ENERGIZES SOUTHERN AFRICA 
 
REF: A. GABORONE 818 
     ¶B. MAPUTO 972 
 
¶1.  (U) This cable represents the first in a series in an 
innovative collaboration in energy/resource reporting and 
commercial advocacy between Embassies Maputo and Pretoria. 
Embassy Pretoria Minerals/Energy Officer and Maputo 
Political/Economic officer visited energy/minerals projects 
in northern Tete Province and met relevant government and 
private officials in Maputo October 13-17, 2008. 
 
¶2.  (SBU) SUMMARY: The 2075 MW Cahora Bassa Hydroelectric 
(HCB) dam is the flagship power exporter for southern Africa, 
providing significant power to South Africa, Mozambique, 
Zimbabwe and Botswana.  The dam is emblematic of Mozambique's 
capacity to increase its power exporter status to mitigate 
the regional power shortfall by development of a potential 
combination of expanding HCB and building new hydroelectric 
and coal- and gas-fired facilities (septel).  Realizing these 
projects will require an extraordinary level of cooperation 
between South Africa, its state power utility Eskom, 
different institutions within Mozambique, and potential 
financiers.  Cahora Bassa was able to increase its exports to 
South Africa and the region to help alleviate the power 
shortfall earlier this year.  Some reduction in power 
dedicated to the Mozal Aluminum Smelter in Maputo has 
remained a controversial issue.  The Embassy team visited 
Cahora Bassa on October 14.  END SUMMARY. 
 
------------------------------------ 
Damming the Zambezi - 
And Mozambique's Second Independence 
------------------------------------ 
 
¶3.  (SBU) Cahora Bassa is a mega-project which dams the 
Zambezi River in northern Mozambique.  The 164 meter height 
dam produces a 270 kilometer reservoir and an average water 
flow of 10,000 meter cubed per second.  Five 415 MW 
generator-turbine-rotor units have a theoretical capacity of 
2,075 MW.  The project delivers power to South Africa and 
southern Mozambique by way of a high voltage direct current 
(HVDC) bipolar line running 1,420 kilometers to the Apollo 
converter sub-station in South Africa and via 220 kilovolt 
alternating current (AC) lines to northern Mozambique, 
Zimbabwe, and Botswana.  The Portuguese government (GOP) 
constructed the dam between 1969 and 1975, and maintained 
majority control of operations until November 2007.  Full 
commercialization of the dam was delayed by the civil war in 
Mozambique when the main transmission line was damaged.  The 
dam and power station were maintained, but unable to send 
power anywhere.  The modern version of the facility was 
premised on Eskom providing 900 MW of its 1200-1300 MW 
allocation to the Mozal Aluminum Smelter in Maputo via 
separate company Motraco.  Since November 2007, the dam is 
operated by Hidroelectrica de Cahora Bassa (HCB), which is 85 
percent owned by the GRM and the GOP 15 percent.  Just over 
70 percent of the GRM's share was financed by the Portuguese 
bank BPI and the French investment bank Calyon.  During the 
handover ceremony that reduced the GOP share and increased 
GRM control, President Armando Guebueza characterized the 
moment as Mozambique's "second independence."  Canadian firm 
Manitoba Hydropower has an embedded engineer who monitors the 
day-to-day maintenance and operations of HCB on behalf of the 
consortium. 
 
¶4.  (SBU) HCB CEP Paulo Muxanga greeted the embassy team and 
stressed that his primary mission was to maintain the power 
facility and produce as close to capacity as possible, given 
growing demand in the region.  Two of his senior managers 
accompanied the team to the dam, immense underground 
generator room, and sub-station (where separate lines feed 
Zimbabwe, northern Mozambique, and South Africa, the latter 
by rectifier/converter to HVDC).  On this particular day, two 
of the generator units were under scheduled maintenance, 
simultaneous with servicing of the Apollo sub-station in 
 
MAPUTO 00001018  002 OF 003 
 
 
South Africa.  Muxanga noted that HCB was able to respond to 
the Eskom power crisis, ramping up an incremental 250 MW 
based on using the plant's fifth generator.  He noted that 
this was intended to assure adequate power to Mozal and 
Botswana, but he complained that Mozal was initially 
subjected to the general ten percent industry reduction 
imposed by Eskom.  The reduction was subsequently reduced to 
the current four percent, but the GOM is still seeking to 
regain the full allocation for Mozal. 
 
---------------------- 
Sending Power to Eskom 
---------------------- 
 
¶5.  (SBU) HCB and Electricidade de Mocambique (EDM) officials 
pointed out the following break-down of power deliveries: 
- -  1200-1600 MW to Eskom, including amounts going back to 
Mozal and EDM for southern Mozambique via HVDC 
- -  60-100 MW directly to EDM for northern Mozambique 
- -  100-200 MW to Zimbabwe 
- -  50-70 MW to Botswana 
1600 MW is considered "firm" commitments of HCB and the 
balance is marketed to the short-term electricity market 
(STEM) and priced on a short-term basis to Eskom, Botswana 
Power Corporation, Zimbabwe Electricity SA, and Namibia. 
Zambia has requested up to 100MW more and Botswana has also 
requested additional power as it is forced to be weaned off 
of Eskom (Ref A).  EDM officials said Zimbabwe also 
occasionally takes up to 250MW of "firm8 firm power on a 
"non-firm8 rolling contractual basis, and that Zimbabwe pays 
for electricity, but always with hassle and delay, given that 
HCB has a dedicated line to Zimbabwe which can also service 
Botswana and Namibia.  EDM touted that HCB is the only active 
player in the SADC region STEM market, even though HCB has 
limited unclaimed capacity.  (Note: The Southern African 
Power Pool assures modest interconnectivity, but has been 
unable to set up trading, for lack of excess power.  End 
Note.) 
 
----------------------- 
Potential for Expansion 
----------------------- 
 
¶6.  (SBU) HCB's Muxango was bullish on the possibility of 
expansion of the Cahora Bassa facility to the north bank of 
the Zambezi (all the existing generating capacity is on the 
south bank), which could generate 900-1300 MW, utilizing the 
dam and other existing facilities at the company town of 
Songo.  He said such a project would reach completion in 
about 5 years, costing roughly $870 million, and financing 
would be an issue.  Muxango noted that the company was 
investing in road works around Songo to spruce up the image 
of Mozambique's second strongest company and brand HCB, after 
Mozal.  He hoped that the GOM would eventually be able to 
move on green field hydroelectric and the north-south 
backbone transmission to feed power growth and independence 
in Mozambique (septel). 
 
¶7.  (SBU) The narrow Cahora Bassa reservoir extends 270 
kilometers to the Zambia border.  In Africa, only Egypt's 
Aswan dam is bigger in terms of surface water.  The 
Embassies, team was duly impressed with the scale and power 
of Cahora Bassa, even being able to descend into one of the 
operating units and to be awed at the proximity of the 
power-generating water flow.  Unlike the upstream Karibe Dam 
and Victoria Falls, remote Cahora Bassa is relatively 
undeveloped for fishing and tourism.  Tete Province is dusty, 
dry, and hot and notable for majestic Baobab trees. 
 
--------------------------------------------- - 
COMMENT: HYDROPOWER, MOZAMBIQUE'S NICHE MARKET 
--------------------------------------------- - 
 
¶8.  (SBU) Mozambique's largely undeveloped hydro potential 
and its proximity to power-hungry neighbors in the SADC 
 
MAPUTO 00001018  003 OF 003 
 
 
region mean that developing hydropower generation may be a 
key development strategy for Mozambique.  Building additional 
power generation and export capacity could contribute 
significantly to regional growth and stability while 
enhancing Mozambique's economic development, thereby 
complementing U.S. strategic interests for the region.  TDA 
should strongly consider assisting with feasibility studies 
and technical support, particularly for the Cahora Bassa 
North Bank project, which appears to be the most feasible 
next step in generation capacity enhancement.  Realizing 
future hydro mega-projects will demand extraordinary 
implementation skills in bringing all stake-holders together, 
while the challenges include gaining a bankable power 
purchase agreement from Eskom, and ensuring sufficient 
transmission capacity.  Domestically, Mozal Aluminum Smelter, 
Mozambique's leading export company, hopes for additional 
power to expand its facilities.  Looking to the future, 
domestic manufacturing, tourism, and agriculture sectors 
could see accelerated growth if inexpensive power is 
guaranteed by increased generation capacity.  South Africa 
has found that cheap power to drive energy-intensive projects 
may be a thing of the past, but Mozambique may still be able 
to leverage its abundant hydropower potential. 
Chapman