The African Trade Insurance Agency (ATI), through its Regional Liquidity Support Facility (RLSF), will provide a liquidity guarantee for the 60 MW Salima Solar PV plant in Malawi. The revolving liquidity guarantee that can be drawn following any payment delays by the national offtaker – Electricity Supply Corporation of Malawi Limited (ESCOM).
This is the second project in the country to benefit from RLSF, the first project being Phase 1 of the Nkhotakota Solar Power Plant, with an initial installed capacity of 21 MW.
Construction for the Salima Solar project is almost finalized, the facility will be the first solar PV in Malawi to connect to the grid. The Salima Solar PV plant is due to start operations in August 2021. The energy generated, at an estimated annual average of 154 GWh, will be sold exclusively to the Malawian utility, ESCOM, under a 20 year Power Purchase Agreement (PPA).
The 60 MW Salima Solar PV plant, being one of the most advanced projects, will be instrumental for Malawi’s underdeveloped electricity sector which has an installed generation capacity of around 439 MW.
ATI, through RLSF, will provide cover for an amount of USD 4.4 million against the risk of delayed payment by ESCOM; the RLSF policy will be for an initial tenor of up to ten (10) years. The liquidity cover being provided via RLSF will enable up to USD 78 million of total project financing.
The solar energy plant was developed by JCM Matswani Solar Corp Limited, a Malawian Special Purpose Vehicle (SPV) owned by the Canadian Independent Power Producer (IPP) JCM Power and InfraCo Africa Limited; the latter is part of the Private Infrastructure Development Group (PIDG). Construction equity was provided by JCM Power, the Dutch Development Bank FMO, and InfraCo Africa Limited
Project to diversify Malawi’s energy mix
Over 90% of this capacity comes from hydro power plants on the Shire River in the southern region; this heavy reliance on hydro is often constrained by drought and low water levels. Moving forward, there is high potential for solar and new hydro technologies to enter into the power market, thanks to reforms by the Government that have led to the establishment of a viable electricity market for private sector participation in generation expansion.
Malawi’s energy sector has recently gone through sector restructuring efforts with the goal of increasing the availability of reliable electricity supply in the country. This includes the unbundling of ESCOM and the establishment of the Electricity Generation Company of Malawi (EGENCO).
More recently, ESCOM has been further unbundled with the introduction of Power Market Limited (PML), which will become the Single Buyer in the energy sector – taking over PPAs signed between ESCOM and IPPs. Additional restructuring of Malawi’s power market is underway, with strong investor interest and political will for IPPs to enter the market.
ATI’s CEO, Manuel Moses, noted “The Government of Malawi views private investment as critical to achieving its goals for the power sector. This is evidenced by ESCOM’s recent positive track record in meeting its payment obligations to Malawi’s only operational IPP in a timely manner as recorded by ATI’s Transparency Tool. We remain confident that ESCOM’s payments to JCM Matswani will follow the same trend. In addition to the two transactions that we have supported under RLSF, we look forward to providing similar support to eligible renewable energy IPPs in Malawi and indeed across the rest of the African continent.”