Energia de Mocambique Lda (ENMo)

cancelled

Mozambique’s Minister of Mineral Resources and Energy awarded a 20 year concession to a consortium of ElectroTec (Mozambique) and Rural Maintenance and Siemens (South Africa) to generate, distribute and sell electricity in the rural areas of Inhambane and Sofala province. The concession area includes the towns of Vilankulo, Inhassaro and Nova Mambone of Inhambane province and Machanga of Sofala Province. Earlier the power systems in Inhambane province was operated by ElectroTec under a management contract (since 1999). However, the terms of the management contract did not provide enough incentive for ElectroTec to improve collection rates and connect new customers. Therefore the need to replace the management contract with a concession specifically designeds to expand access to electricity in rural areas. The concession was based on output based aid subsidies to close the gap between new infrastructure costs and what households are willing and able to contribute. Payment of the subsidy was contingent on physical verification of households being connected and were financed through an International Development Association credit. The concession agreement was formally signed in June 2004 and the private consortium took over the operations by the end of 2004. The concession was awarded through an international competitive bidding process and the bidders bid on the tariff at which they would supply electricity given a fixed subsidy payable for each new residential connection. According to the concession, the concessionaire paid a concession fee of 2.5 percent of gross revenue billed to the government and received US$ 400 subsidy for each new residential connection made. The concession was expected to deliver 3,000 new connections. The total project cost was estimated at US$5.8 million by the South African Development bank, the funding entity. The concessionaire had exclusive generation rights for 10 years and exclusive distribution rights for 20 years. The government terminated ENMO's contract in August 2007 for a series of contractual violations. On 7 November ENMO suddenly announced it was closing down immediately and tried to shut down the system, disconnecting consumers throughout the three districts. To prevent this, the government immediately took over operations.