Mozambique takes cautious approach to raising funds for gas project

Mozambique has put on hold plans to raise funds for its portion of Anadarko Petroleum’s $20bn gas project, as the government tries to limit its debt sales following a default about three years ago.

Empresa Nacional de Hidrocarbonetos (ENH), the national oil company, will revive efforts to raise $2.3bn for the liquefied natural gas project probably later in 2019, after Anadarko starts implementing it, ENH CEO Omar Mitha said. That will help reduce risk and result in better terms, he said.

“We’ll go back to the market to seek funding” when conditions become more attractive, Mitha said on Wednesday.

ENH picked Lion’s Head Global Partners to advise on the financing.

Anadarko expects the Mozambican project to become one of the largest global LNG suppliers, at the same time helping to transform the economy of one of the world’s poorest countries. The project could also help the government recover from a debt scandal that forced it to restructure bonds.

Each partner, including ENH, is pursuing its own path to fund its equity share of the project, Anadarko said in an e-mailed response to questions. “This is independent of, and has no impact on, the debt that the project is raising,” it said.

The government has approved a guarantee for ENH to raise the funds and now awaits additional endorsements from legislators and the attorney-general, finance ministry spokesperson Rogerio Nkomo said.

Approvals related to sovereign debt became more rigorous in Mozambique after the IMF discovered in 2016 that the government failed to declare $1.2bn in loans.

In May, the authorities agreed with a core group of bondholders to reorganise $726.5m in bonds by September 1 under terms that will no longer require payments to be tied to the nation’s future natural gas revenue.

Sovereign debt is expected to be one of the political campaign issues ahead of Mozambique’s general elections scheduled for October.

The government’s debt profile probably made it difficult for ENH to raise money from the global markets, even with a sovereign guarantee, Darias Jonker, Africa director at Eurasia Group, said.

“It makes sense that they will wait a while and restructure the debt so the country’s credit rating can improve and then refinance on more favourable terms,” Jonker said. “It’s one less reason for them to move fast.”

Bloomberg