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

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

HCB "has the capacity to finance itself and carry out investments, but using a combination of equity and debt capital is recommended and is good management practice," he added.

There can be advantages in creating reserves with equity "that can be used to leverage the expansion of the energy matrix by participating in the construction of more clean energy production plants," he said.

The clarifications come after the Center for Democracy and Development (CDD), a Mozambican NGO, asked the state to provide information on HCB's "debt of 247 million euros" and how it will "affect the company's financial situation, the income of the state and Mozambicans as shareholders".

The company clarified that this involves 225 million euros of credit that may or may not be used, made available 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, as it inspires confidence in the financial institutions that approached HCB to grant credit facilities," he said in response to questions posed by Lusa.

"The levels of compliance and diligence of both the ADB and the 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," said HCB.

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

In response to the CDD's request to disclose the financing agreements, HCB explains that there are "confidentiality clauses", which are customary in this type of corporate document, and refers the justification for the investments to the statements made by the company's chairman.

"The third phase of rehabilitation of the Songo substation and the second phase of 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 start of an election cycle.

The hydroelectric company replies that "management decisions strictly comply with the rules of corporate governance" in a "transparent, responsible and careful manner" following the Commercial Code, the concession contract and international best practices.

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