INTERVIEW

Nacala Railway andPort Infrastructure Projectin Mozambique and Malawi
Supporting a stable supply of mineral resources to Japan
Interview with Deputy Director Shun Hanagata and Nana Suzuki of Division 2,
Mining and Metals Finance Department, Energy and Natural Resources Finance Group*

JBIC signed, in November 2017, a loan agreement forproject financing with two corporations in the Republicof Mozambique and two corporations in the Republic ofMalawi, in which Mitsui & Co., Ltd. (Mitsui) , and ValeS.A. (VALE) , a major mining company in Brazil, hold anequity stake. This project is internationally co-financedby the African Development Bank (AfDB) and private
financial institutions in Japan and elsewhere.
The project is to construct and operate theNacala railway, which will connect the Moatize coal minein Mozambique to the port of Nacala, as well as a coalshipping terminal and other infrastructure. The projectis expected to boost the quantity of coking coal exportedto Japan.

Investment and participation by aJapanese company in a mine, railway
and port project

Deputy Director Hanagata

Miss Suzuki

Nacala Railway and Port
Infrastructure Project
The Japan Bank for International
Cooperation (JBIC) signed, inNovember 2017, a loan agreement
for project ﬁnancing amounting up
to USD1,030 million (JBIC portion)with two corporations in theRepublic of Mozambique and twocorporations in the Republic ofMalawi, in which Mitsui & Co., Ltd.,and Vale S.A., a major resources
company in Brazil, hold an equity
stake. The purpose of the project isto construct the 912 km Nacalarailway which connects Tete in
inner Mozambique, where theMoatize coal mine is located, to thePort of Nacala through a part ofMalawi, and build a coal shipment
terminal at the same port.
This project is aninternationally co-ﬁnanced project(USD2,730 million in total) by theAfrican Development Bank (AfDB)
and private ﬁnancial institutions,including Sumitomo Mitsui Banking
Corporation, Mizuho Bank, Ltd.,Standard Chartered Bank, Nippon
Life Insurance Company, MUFG
Bank, Ltd., as well as Sumitomo
Mitsui Trust Bank, Limited. The
ﬁnancing provided by the private
ﬁnancial institutions will be coveredby insurance from Nippon Export
and Investment Insurance (NEXI)
and the Export Credit Insurance
Corporation of South Africa SOC
Ltd (ECIC).
*The titles are at the time of theproject approval

Mozambique is located on the east coast of Africa. The
country is noted for its abundant natural resources,
including coal and natural gas. Moatize coal mine, locatedin Mozambique, is one of the worldʼs most prominent
production sites for high-quality coking coal suitable foriron and steel. The mine started production in 2011, andis being expanded to achieve optimum output. As themine is located inland, Moatize coal was being shippedfrom the port of Beira, located approximately 600 km
south. But the expansion of production capacity
necessitated a new means of transport.
Shun Hanagata noted when giving an overview ofthe project, “VALE and Mitsui hold interests in theMoatize mine. They constructed and maintained a 912
km Nacala railway through their joint venture companies
in Mozambique and Malawi. The existing line is 682 km
long, and the new line added 230 km. It connects themine in western Mozambique to the port of Nacala at theeastern end of the country. The companies also built acoal shipment terminal at the port of Nacala. In addition,
the railway features a heavy-duty Japanese rail suitable
for transporting heavy loads.”

Supporting a stable supply of coking
coal for JapanJBIC provided support from the early stage of theproject, including discussions on the finance scheme. InJanuary 2015, after the participation of Mitsui, JBIC
was officially requested to provide financing,full-fledged discussions began.
Nana Suzuki explained, “Japan is totallydependent on imports of coking coal, and about half of
those imports come from Australia. This project ishighly important for the diversification of coking coalsources. In addition, the Japanese government isaiming to provide high-quality assistance to the African
region in the form of public-private partnerships
through the sixth Tokyo International Conference on
African Development (TICAD VI). JBIC also places
importance on providing support for investments inAfrica. The Facility for African Investment and Trade
Enhancement (FAITH) was launched in 2013, as wehave since established FAITH 2 to further reinforce it.
“Because this is a cross-border projectencompassing Mozambique and Malawi, we worked
hard to prepare the financing documentation whilereferring to the different legal systems of the twocountries. We also conducted due diligence, including
the assessment of political risks in both countries.”
Shun Hanagata said, “It took two years tofinalize the loan. We were assigned to this project at
the final stage, and we faced a number of challenges

before we could reach the signing of the agreement. We
met with the multiple parties in London on several
occasions for many discussions. There was also a time
when we spent two weeks in the lawyerʼs office finalizing
the terms in detail. We also had conference calls every
week with co-financing banks in each country, including
the one in Africa.”
Finally, the financing agreement was signed on
November 27. It was followed by a grand signingceremony in Mozambique, attended by three ministers
from the Ministry of Mineral Resources and Energy, theMinistry of Transport and Communications, and theMinistry of Economy and Finance.

JBICʼs largest financing commitment
in Africa
Shun Hanagata stated, “The dialogues we had with thegovernments of both Mozambique and Malawi made usaware of their great expectations for this project fromthe time we started discussing the loan. This is ameaningful project for JBIC as well, because it is ourlargest financing commitment in Africa. Also, it is our
first project with AfDB in seven years, and the first everwith the Export Credit Insurance Corporation of SouthAfrica SOC Ltd (ECIC) providing co-financing. In
addition, it is the first time in 16 years to provide project
financing for Sub-Saharan Africa.
“The Nacala railway will not only benefit theeconomic growth of Mozambique and Malawi, but also it
will allow the surrounding land-locked countries such asZambia and Zimbabwe to access Mozambique, thegateway of Africa. It is attracting attention from other
African nations as well.
“JBIC will continue to support projects involving
Japanese companies that will lead to the economic
development of Africa.”
Nana Suzuki said, “This project will likely result in
an increase of the quantity of high-quality coking coalexported from Mozambique to Japan. I feel I was able totake part in a meaningful project that will contribute tosecuring a stable supply of mineral resources to Japan.
JBIC has provided financing for multiple projects
involving VALE, and I believe we were able to further
strengthen our collaborative relationship. As a Japanesepublic institution, we hope to provide financial support
for the securing and acquisition of mineral resources byJapanese companies through our close relationships
with valuable partners such as VALE.”