Mozambique's first privatelyoperated concession to generate, distribute, and sellelectricity is now up and running in a rural area ofInhambane Province isolated from the country's maintransmission grid. The contract was won through competitivebidding by a Mozambican and South African consortium andleaves the private operator free to develop the power systemin the concession area in the way most cost-effective.Designed to tackle the extremely low levels of connectivity,the concession uses output-based aid subsidies to close thegap between what new infrastructure costs and whathouseholds are willing and able to contribute. Payment ofthe subsidies, made available through an InternationalDevelopment Association credit, is contingent on physicalverification of households being connected. Encouraged byearly success with the concession arrangement, thegovernment is identifying areas for similar schemes.