The Cabora Bassa Dam regulates the discharge of the lower Zambezi. Its principal output, hydroelectric energy, sold under a bulk supply contract with the Republic of South Africa, brings little direct benefit to the people of Mozambique. The Mozambican authorities are limited in their ability to influence the operation of the dam both by the terms of the power contract and by various technical, economic and political constraints. Hydrological models indicate the practical effects of such constraints and show the extent to which the project's operation is influenced by river regulation upstream. The difficulty of optimizing its operation to provide additional outputs would be increased by the construction of the North Bank Power Station. The characteristics of the scheme, and of the surrounding regions, restrict the establishment of alternative markets for Cabora Bassa's energy within Mozambique and in neighbouring countries. In the long-term, the accumulation of sediment in Lake Cabora Bassa and the project's social and environmental impacts are likely to become increasingly significant in determining the value of the project. The complex and far-reaching changes induced by the construction of the Cabora Bassa Dam will have considerable influence over the future development of the lower Zambezi valley. The options open to Mozambique are restricted by the constraints of the system and the information and resources available, but some benefit could be gained through co-operation with other basin states. The general lessons provided by the Cabora Bassa Project are applicable to large water regulation projects in other under-developed regions.