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The Government has approved the financing structure that will allow the National Hydrocarbons Company (ENH) to secure its participation in the Coral North FLNG project, currently under development in Area 4 of the Rovuma Basin, in Cabo Delgado.
The decision was taken by the Council of Ministers and includes the terms and conditions of the project’s direct financing agreement, as well as the equity financing component required to ensure the participation of the Mozambican state-owned company.
The Government also authorised the establishment of ENH Coral North, S.U., S.A., a company whose share capital will be fully owned by ENH Rovuma Area 4, S.A.
According to Government spokesperson and Minister of Planning and Development Salim Valá, the structure will allow ENH to participate in the project through an affiliated company, reducing the direct exposure of the parent company to the financial risks associated with the investment.
“This approval will allow ENH, as the State’s representative in the project, to participate through its affiliate, ENH Rovuma Area 4, S.A., isolating the risk associated with the direct participation of its parent company in projects with a complex financing structure,” Salim Valá explained.
The minister added that separating investments into different legal entities follows international practices used in large-scale projects.
“It is more efficient and viable to separate these investments or projects into distinct legal entities in order to limit the financial exposure of each business to the risks of the others,” he said.
Coral North FLNG is one of the main natural gas projects currently being developed in Mozambique and is expected to operate through a floating gas production and liquefaction facility offshore Cabo Delgado.
The project is led by Eni in partnership with other Area 4 concessionaires, including ENH, which represents the interests of the Mozambican State.
The project is expected to produce around 3.6 million tonnes of liquefied natural gas per year, increasing Mozambique’s export capacity following the start of operations at Coral South FLNG in 2022.
Approval of the financing structure represents another step towards ensuring ENH’s effective participation in an investment expected to require several billion dollars during its implementation.
The Government has not yet announced the exact amount to be financed to cover ENH’s participation or the final costs associated with the financing.
The decision, however, establishes the legal and financial framework required for the state-owned company to maintain its position in the project and participate in the future economic benefits generated by gas production in the Rovuma Basin.
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