Mozambique’s ENH to Woo Investors for $1.5 Billion Gas Financing

(Bloomberg) --

Mozambique will court investors for $1.5 billion of financing for a giant natural-gas project run by Total SA.

State oil company Empresa Nacional de Hidrocarbonetos will kick off a funding roadshow in Johannesburg next week before moving on to London, said Chief Executive Officer Omar Mitha. The project -- potentially transformative for Mozambique's ailing economy -- includes the development of the Golfinho and Atum fields and the nation's first onshore liquefied natural gas plant.

ENH, which has a 15% stake in the project, is seeking $1.5 billion to finance its share of development costs. The company previously resorted to a “backstop option” to have its partners fund the stake, Mitha said in an interview in Cape Town. It “was a kind of bridge funding from our partners with the proviso that ENH would go to the marketplace” to seek better terms and relieve them of the debt, he said.

France's Total operates the project with a 26.5% interest, after snapping up Anadarko Petroleum Corp.'s African assets earlier this year. Mozambique, one of the world's poorest countries, is counting on the $23 billion development to revive its economy after struggling to service its debt in recent years.

The so-called Area 1 LNG project will generate about $38 billion of revenue for the government over its lifetime, according to a Finance Ministry forecast. And that'll be supplemented by sales from an even bigger LNG project planned next door, in Area 4.

ENH also has a stake in that development, led by Exxon Mobil Corp., but the cost of its share is still being discussed as project expenses have increased, according to Mitha. A final investment decision is expected by April.

Once gas production starts at the projects, “the risk factor will be reduced and we'll have some kind of enhancement” in terms of funding, Mitha said, adding that ENH is targeting all banks as well as private equity.

The Exxon and Total projects, located near the Tanzanian border, will both allow gas to be exported to world markets. Yet they face the threat of attacks in an area where a shadowy insurgency has reportedly killed hundreds of people and destroyed homes.

Mitha said the security situation is likely to improve, citing “efforts by the government” and an agreement signed with the developers to ensure safe operations. He declined to provide details, saying arrangements are confidential.

--With assistance from Matthew Hill.

To contact the reporter on this story: Paul Burkhardt in Johannesburg at pburkhardt@bloomberg.net

To contact the editors responsible for this story: James Herron at jherron9@bloomberg.net, Amanda Jordan

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