A consortium led by Saudi Arabia’s Acwa Power has signed a 25-year concession contract with the Mozambican government for the development of an independent coal-fired power project (IPP) in the East African country.  

The deal is a sign of the increasing interest from Middle Eastern companies in investing in sub-Saharan Africa.

Known as the Moatize IPP project, it will be built in the Tete Province, 1,500km north of Mozambique’s capital city of Maputo. The first phase will provide 300 megawatts (MW) of power.

The total investment cost of the project is approximately $1bn and will be built on a build, operate, own and transfer (BOOT) basis.

It is expected to be Mozambique’s first large-scale greenfield power project to be funded with project finance. A number of bankers active in the Middle East say they are increasingly looking at certain Sub-Sahara African projects to support, given the relatively limited number of project finance deals currently in the regional bank market.

ACWA’s consortium also comprises the Brazilian mining firm Vale and the Japanese trading house Mitsui. The Mozambican state-owned utility, Electricity de Mozambique and the local investor Whatana Investment Group will be minority shareholders in the project.

South Korean contractor GS Engineering & Construction has won the engineering, procurement and construction contract for the power plant.

Around 250MW of the total capacity of the plant will support Vale’s mining operations in the country, while the remaining 50MW will be fed into the national grid to meet Mozambique’s growing demand for power.