South32 Flags FY25 Impairment as Mozal’s Electricity Deal Nears End

Mozal’s Electricity Supply at a Crossroads

South32 Limited has issued a cautionary update regarding the future of electricity supply to its Mozal Aluminium smelter in Mozambique. The current power agreement, primarily sourced from the hydroelectric generator Hidroeléctrica de Cahora Bassa (HCB), is set to expire in March 2026. Despite six years of negotiations involving the Government of Mozambique, HCB, and Eskom, an affordable and secure electricity tariff remains elusive.

Historically, Mozal’s electricity needs have been met predominantly through HCB’s hydroelectric power, with Eskom stepping in when HCB’s capacity falls short. However, recent drought conditions have raised concerns about HCB’s ability to consistently supply sufficient power, adding a new layer of uncertainty to Mozal’s operational outlook.

Financial Implications and Operational Uncertainty

In light of these challenges, South32 is preparing to recognise an impairment expense in its FY25 financial results. While the exact amount remains undisclosed pending a full assessment, the impairment reflects the heightened risk to Mozal’s asset value due to uncertain future electricity supply. This development signals a material impact on South32’s financial position and underscores the critical role of power availability in aluminium smelting economics.

Moreover, the company is reviewing its production guidance for FY26, acknowledging that unresolved electricity supply issues could constrain output. Mozal Aluminium is a significant contributor to Mozambique’s economy, accounting for roughly three percent of national GDP and providing thousands of jobs, which amplifies the broader economic stakes of this power supply impasse.

Negotiations Continue Amid Regional Energy Challenges

South32 remains engaged with all stakeholders to secure a viable electricity agreement that supports Mozal’s continued operation beyond March 2026. The outcome of these talks will be pivotal not only for South32’s strategic asset but also for Mozambique’s industrial landscape and regional energy dynamics. The involvement of Eskom, a major South African power utility, further highlights the cross-border complexities of energy supply in Southern Africa.

As the situation develops, investors and market watchers will be closely monitoring updates on the impairment quantum and any revisions to production forecasts. The resolution of Mozal’s power supply challenge will be a bellwether for South32’s operational resilience and the broader sustainability of aluminium production in the region.