Moza LNG is deal of the year

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Mozambique’s liquefied natural gas (LNG) Area 1 project and the African Development Bank have jointly received the prestigious Global Multilateral Deal of the Year 2020 Award by Project Finance International (PFI).

The LNG Area 1 project is the single largest foreign direct investment in Africa to date, with a value of over US$24 billion. It will exploit Mozambique’s immense offshore natural gas reserves, which can potentially transform global energy markets.

The AfDB signed an agreement for a US$400 million senior loan to finance the project in July 2020.

In signing the loan agreement, the AfDB joined a global syndication of commercial banks and export credit agencies that are providing financing for the project. This financing includes direct loans, as well as export credit agency-covered loans with 16 and 18-year tenors.

The project is implemented by an international consortium of energy developers and operators led by Total of France as the operator of the project. Others include, Mitsui, Oil India, Bharat Petroleum, PTTEP, Oil and Natural Gas Corporation (ONGC) and Mozambique’s national oil and gas company, Empresa Nacional de Hidrocarbonetos (ENH).

The consortium is providing the balance of financing through equity. Financial closing on the project is expected this year (2021).

With LNG Area 1, Mozambique will become one of the world’s largest LNG exporters, thereby clearly overtaking Nigeria and Angola.

The country’s gas represents an important source of LNG supply diversification. The project will boost the country’s ability to meet energy demand through gas-fired electricity, and will support its ambitious goal to provide universal access to energy to its citizens by 2030. The project can also potentially feed downstream industries that use natural gas, such as fertiliser and electricity producers.

It can thus become an engine for agricultural development and trade across the Southern African Development Corporation (SADC) region.

PFI is the leading source of intelligence on global project finance. In its award announcement, it noted that the LNG Area 1 project had faced many challenges in securing financing, including the COVID-19 pandemic.

“I still find it remarkable how so many project financings were transacted this year,” including the Mozambique LNG deal, said PFI’s editor Rod Morrison.

He said, the multilaterals played a key role in getting the project financed. In addition to the African Development Bank, PFI cited the participation of United States Export-Import Bank (US EXIM), and Japan Bank for International Cooperation (JBIC) as critical.

In addition to loan financing, the AfDB played a lead role in ensuring the project’s compliance with strict environmental and social standards. It also invested in strengthening the capacity of small and medium enterprises (SMEs) to enter the project’s supply chains and promote good standards of governance and transparency in Mozambique.

Dr Akinwumi Adesina, the AfDB president, said: “This great recognition reinforces the African Development Bank’s leadership and role in helping to structure financing and attract investments to Africa. The US$24 billion project, which was structured at the Bank’s Africa Investment Forum, is Africa’s largest foreign direct investment.

“We will work with all partners to ensure that this project helps to unlock greater economic growth for Mozambique and benefits millions of people in the country, while building climate resilience,” Dr Adesina said.

He said, overall, the project aligns with a number of the AfDB’s strategic goals and its country strategy for Mozambique and for Southern Africa. These goals include boosting employment, expanding universal electricity access and leveraging natural resource development for investment in sustainable infrastructure, he added.

Fernando Balderrama, chief investment officer with the AfDB, said the project would spur growth and industrialisation opportunities for the Mozambican population.

“The African Development Bank will continue to play a convening role to facilitate and assist with the suitable implementation of this investment, advocating for international best practice, small and medium enterprise development and diversification, women’s empowerment, job creation, and other critically important considerations,” Balderrama said. – business a.m.

 

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‘Terror won’t stop gas project’

 

Caroline Moyo

Harare - Researchers at advisory firm FitchSolutions say they see Mozambique scaling up exploitation of liquefied natural gas (LNG) in Cabo Delgado Province despite fears over Islamic militant attacks in the region.

In its Southern Africa Monitor report, Fitch also projected Mozambique’s GDP to rebound by 3,6 percent this year after slipping by 0,7 percent in 2020.

The Mozambican government has deployed troops to protect private sector oil interests in Cabo Delgado as militants claim they want to establish a caliphate in Southern and Central Africa.

Fitch said the government’s move to beef up security in the region had given investors the impetus to press ahead.

The militants briefly seized control of parts of Mocímboa da Praia and Quisanga towns last year. In August, they took the strategic Port of Mocímboa da Praia before invading villages in neighbouring Tanzania.

“Despite heightened insecurity, our core view remains that the development of new major LNG projects in the province will move forward,” said Fitch. “Offensives targeting the LNG sector so far have only involved attacks on vehicles belonging to sub-contractors, suggesting that the militants still lack the weaponry and organisational capacity necessary to threaten well-defended project sites. Projects are usually guarded by hundreds of security forces, including government troops and private security contractors, and the government has reportedly been sending more troops to Palma, the town closest to Total's onshore Mozambique LNG project, after signing a security agreement in August with the oil major.”

The firm went on: “That said, if not contained the militant group will stage larger and more frequent attacks and pose a more significant threat to the project sites in the coming years. Moreover, the port of Mocímboa da Praia was used for cargo deliveries to the Mozambique LNG project before it was captured. This has forced Total to build its own port facilities.”

The report also projected marked GDP rebounds across SADC this year, with Mauritius notching the biggest recovery of six percent after last year’s 11,2 percent contraction.

Fitch sees SADC’s governments rolling out growth stimulating measures throughout 2021, as the region implements strategies to contain COVID-19 and its impact.

The report paints a sombre picture of SADC’s 2020 economic landscape, when all seven of the 15 regional economies studied by Fitch reporting steep downturns after implementing lockdowns to limit COVID-19 contagion.

Fitch projects that South Africa, the region’s biggest economy, will see GDP expanding by two percent this year following an eight percent contraction in 2020; while Botswana will rise by 5,2 percent in 2021 from a 10 percent slowdown.

Oil-rich Angola is seen pushing up its GDP by 1,7 percent despite production cuts by the Organisation of Petroleum Exporting Countries.

Fitch last week said Harare would recover to post 1,3 percent growth in 2021 after falling 12,9 percent last year; and Zambia is seen emerging from a 1,9 percent downturn to expand by almost three percent.

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