Hidroeléctrica de Cahora Bassa (HCB) clarified yesterday to Lusa that the 225 million euro credit available for investments will only be used if necessary and within the scope of good management practices.

The amounts "may be disbursed if the company needs and deems necessary during the implementation of the Vital Capex," a package of modernization projects.

HCB "has the capacity to finance itself and make the investments, however, the use of a combination of equity and debt capital is recommendable and is a good management practice", he added.

There may be advantages in creating reserves with equity "that can be used to leverage the expansion of the energy matrix through participation in the construction of more clean energy production plants," he exemplified.

The clarifications come after the Centre for Democracy and Development (CDD), a Mozambican NGO, requested that the state provide information on the "indebtedness of 247 million Euros" of HCB and on how they will "affect the financial situation of the company, the income of the state and of Mozambicans in their capacity as shareholders.

The company clarified that this is 225 million euros of credit that may or may not be used, provided by the African Development Bank (AfDB) and the French Development Agency (AFD), and 22 million euros donated by the European Union (EU).

The credits mobilized appear as "security or 'backup' and are based on the good financial health of the enterprise, because it inspires confidence in the financial institutions that have approached HCB to grant credit facilities", he indicated in response to questions posed by Lusa.

"The compliance and due diligence levels of both ADB and AFD only allow financing to entities that meet a set of acceptable requirements, one of which is financial strength and the ability to generate revenue to service the debt," HCB pointed out.

The company gives as an example a loan of about 700 million dollars (643 million euros) that supported the reversion of the hydroelectric plant from Portugal to the Mozambican state, on November 27, 2007, and that was paid "in full and well in advance.

Faced with CDD's request, to disclose the financing agreements, HCB explains that there are "confidentiality clauses", usual in this type of business documents, referring the justification of the investments to the statements that the president of the company has made.

"The third phase of the Songo substation rehabilitation and the second phase of the rehabilitation of the southern hydroelectric plant will improve performance levels and extend the useful life" to more than 25 years, increasing the 2075 MW of production by another 5%, Boavida Muhambe announced.

The CDD also questioned the political timing of the funds announced for HCB, as a company majority owned by the state, at the beginning of an electoral cycle.

The hydroelectric company answers that "management decisions strictly observe the rules of corporate governance" in a "transparent, responsible and judicious" way following the Commercial Code, the concession contract and the best international practices.

"HCB has a concession contract with the Mozambican state under which it punctually pays a concession fee of 10% of revenues to the treasury," he concluded.