(Updates with injuries, power outage, details on Bazaruto)

By Charles Mangwiro

MAPUTO, Feb 22 (Reuters) - A powerful tropical cyclone with winds of up to 270 kph (170 mph) surged ashore in southern Mozambique on Thursday, ripping through buildings, knocking out power and raising fears of new flooding.

Cyclone Favio, the strongest to hit the southern African country, was then heading towards the Zambezi River valley where it was likely to worsen floods that have already killed some 40 people and driven 120,000 from their homes.

The category-four storm hit Vilanculos, some 800 km (500 miles) north of the capital Maputo, early on Thursday, damaging the tourist town's court, prison and market and destroying homes.

Roads were swamped with rain and blocked by uprooted trees, and there was no power in the town as of 1805 GMT.

"I can't do anything because all the roads have been blocked by falling trees and it's even impossible to try and rescue the people whose homes have been hit because there is no access," Sulemane Amugy, the town's mayor, told Reuters by telephone.

Twenty people were injured, according to officials in Vilanculos.

Sulemane, however, noted the toll may rise as some 720 people were in the town's hospital and jail when the cyclone hit. Both buildings suffered extensive damage.

The National Meteorology Institute, INAM, said Favio's strong winds and rains were concentrated in the province of Inhambane but were felt as far away as Xai-Xai, the capital of nearby Gaza province.

TOURISTS

The storm was moving north towards the central Zambezi River valley, which is already struggling with severe flooding after weeks of heavy rains.

"It's still very strong and heading towards the port city of Beira, Manica and lastly Zimbabwe, but it will reach there a little bit weaker that it is now," INAM spokesman Helder Sueia said.

Officials have said the storm could cause widespread damage to power grids, industry and other key parts of the impoverished nation's small but fast-growing economy. Another cyclone devastated Mozambique in 2000.

Its impact has already been felt at the holiday resort of Tofo Beach, a favourite of backpackers and scuba divers, where it uprooted palm trees and destroyed electric pylons, Radio Mozambique said.

The storm also cut off communication with the Bazaruto islands, which are home to a number of upmarket tourist lodges.

There are growing fears that Favio would bring more misery to flood-ravaged central Mozambique, where tens of thousands of people live in temporary shelters with scant food or water.

Officials said the problems could multiply in the coming days as Favio dumps its rains in Zambia, Malawi and Zimbabwe, further swelling the tributaries that feed the Zambezi.

Mozambique's worst disaster in recent memory occurred in 2000-2001 when a series of cyclones compounded widespread flooding in southern and central parts of the country, killing 700 people and driving close to half a million from their homes.

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