Essar ports $275 million coal project in Mozambique sails into rough weather

Essar Port Ltd’s $275 million port project in Mozambique runs into troubled waters as climate change, and energy transition issues hold up the financial closure of the coal terminal at the port, close to five years after a deal was signed.

“The project now looks difficult as banks are not comfortable in lending. it does not fit into the environmental, social, and governance (ESG) framework of lenders,” said a banking source briefed on the matter.

Rajiv Agarwal, Chairman of the Board and Managing Director, Essar Ports, confirming that the financial closure for the project has been delayed, reassures that as of now the Mozambican government has neither “terminated” the concession agreement nor has Essar Ports “exited” the project.

 “Talks are going on for the financial closure but there is no certainty that the fund tie-up will happen soon or will happen at all”, the banking source mentioned earlier said.

 The port project no longer features on the website of Essar Ports.

The multi-user coal terminal was expected to give a big boost to Essar Port’s third-party cargo handling plans. 

Mozambique coal Terminal

Essar port in August 2017 penned down a 30-year concession agreement with the Government of Mozambique to develop a new coal terminal at Beira Port, as part of a public-private partnership (PPP) project, through a subsidiary New Coal Terminal Beira, SA (NCTB SA), a joint venture between Essar Ports with 70% stake and the Mozambican state port and rail authority, Portos e Caminhos de Ferro de Moçambique (CFM) with 30% stake.

Mozambique, a major coal exporter with an estimated reserve of over 23 billion tonnes of coal, is well placed to cater to the international steel and power industries, especially in India, China, Japan, and Korea. The said project was designed to raise the coal handling capacity of Mozambique by 20 million tonnes per annum (MTPA) in two phases of 10 MTPA each.

The NCTB has dedicated rail connectivity to Mozambique’s coal mining belt in the Tete region, which CFM enhanced to a capacity of 20 MTPA.

The $275 million first phase of the coal terminal will entail developing dedicated berths, along with modern, mechanized, and environment-friendly systems.

The new terminal, If and when constructed will more than double the coal export capacity from Beira Port, where the Beira coal terminal established in 2012 by mining giants Vale and Rio Tinto has the potential to export up to 6 million tonnes of coal annually.

Mozambique coal terminal envisages unlocking the untapped potential of its coal exports through Beira port. The prime function of NCTB is to serve as the evacuation point for exporting coal from the Tete / Maotize region of Mozambique to cater to the increasing coal demand, especially from the Indian markets, given the notably lower voyage costs as compared to Australia, South Africa or Indonesia.

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