Portugal agreed on Wednesday to turn over a major power dam in Mozambique to the African nation and will be paid $ 700 million under a preliminary deal. Portugal and its former southern African colony signed a memorandum of understanding that will give Mozambique 85 percent of the Cahora Bassa dam and Portugal 15 percent.

The agreement is a step toward resolving a dispute over control of the Zambezi River dam that has lasted since the early 1970s. The fate of the plant is crucial to luring investors to Mozambique, which is suffering a severe power shortage. Portugal now has 82 percent of Cahora Bassa and Mozambique the rest. The memorandum calls for talks on the restructuring and handover to be finished by the end of December. Portuguese Finance Minister Fernando Teixeira dos Santos and Mozambican Energy Minister Salvador Namburete signed the agreement. A copy was made available to Reuters.

One of the deal’s sticking points had been payment Portugal wanted from deeply indebted Mozambique for building and maintaining the dam. Lusa news agency put the amount at $1.8 billion. Under the memorandum, dam-operating company Hidroelectrica de Cahora Bassa will pay off $ 250 million in debt to Portugal next year. The rest of the debt will be forgiven. Mozambique will pay Portugal $ 700 million for the 85 percent stake once the deal is completed, the text said. A final accord depends on Portugal ensuring that the deal will not hurt its budget deficit, now the widest in the euro currency zone.