The Transparency Tool, launched in 2019 by African Trade Insurance Agency (ATI), and KfW, successfully collected and recorded payments for 22,578 MWh of electricity supplied to Malawi’s national utility, the Electricity Supply Corporation of Malawi Limited (ESCOM) in 2020. The system made timely payments to Mulanje Hydro Limited (MHL), Malawi’s sole operational renewable energy Independent Power Producer (IPP), for power produced by the Ruo-Ndiza Hydroelectric power plant.
ESCOM is delighted to be part of the success story in as far as timely payment of bills to MHL, is concernedClement Kanyama, Acting Chief Executive Officer, ESCOM
The Transparency Tool is an online platform that collects and provides information on the payments of national power utilities to Independent Power Producers (IPPs) across sub-Saharan Africa.
“We are excited to be in a position to publish the first country report from the Transparency Tool. The tremendous efforts made by the Government of Malawi along with various external stakeholders in improving the investment climate in Malawi’s power sector is bearing fruit as evidenced by ESCOM’s track record in meeting its payment obligations in a timely manner and the number of IPPs that are at an advanced stage in their development and construction,” said Manuel Moses, Chief Executive Officer, ATI.
Malawi’s first IPP
The Ruo-Ndiza hydro power project is an 8.2 MW Run-of-the-River plant in south-eastern Malawi at the foot of Mt. Mulanje. Owned and managed by Mulanje Hydro Limited, it was conceived and built by Nyangani Renewable Energy (Pvt) Ltd, Zimbabwe’s largest IPP. The IPP has been supplying electricity to the grid since reaching its Commercial Operations Date (COD) in May 2019 and in 2020 delivered 22,578 MWh into the national grid. This is 1% of Malawi’s electricity generation equivalent to approximately 40,300 households. Electricity consumers in the Mulanje area have commented very favourably on the improved grid stability as a result of the project location adding diversity to the National power Grid. The project was developed on the site of an existing small powerhouse, first installed in 1934, that supplied power to a tea farm and the surrounding areas.
“Mulanje Hydro Limited have found ESCOM to be a very competent and reliable counterparty. The Ruo-Ndiza power station is the first IPP to come on line in Malawi and for ESCOM it is the first renewable electricity generator to have been commissioned into the national grid for many years.,“ says Mulanje Hydro Limited MD, Ian McKersie. ESCOM has complied in full and on time with all their payment obligations as enshrined in the PPA. As an operator of other renewable generators in the region, it is gratifying to have an offtaker in ESCOM that fully understands and adheres to the terms of the agreed commercial contract,” he added.
The payments by ESCOM to Mulanje Hydro, for electricity generated and supplied between 1st January and 31st December 2020, were made on average 28 days after the invoicing date – within the 30 day credit period provided in the Power Purchase Agreement (PPA) entered into between the two institutions. This is particularly remarkable given the challenges faced by power utilities in the region following the COVID-19 pandemic and will hopefully send a positive message to potential investors in Malawi’s electricity sector.
Opening up the power sector for private investment
Acting Chief Executive Officer at ESCOM, Mr Clement Kanyama said the recent power sector reforms in Malawi have opened up participation of private investment in Power Generation, and Mulanje Hydro Limited (MHL) is the first IPP to become operational with a long term PPA.
“It is our intention to maintain the good payment record to MHL and other upcoming IPPs. As an off-taker, we appreciate the contribution that the MHL plant is making to the Malawi power Grid. The positive impact of the MHL plant to the local Grid, with extended contribution to the entire National Grid, is quite significant. MHL plant is contributing to reduced system losses, as it feeds directly into the Distribution Network, close to consumers. Its contribution to the national GDP is ten-fold comprising taxes, salaries and spending on local goods, services and works. Malawi electricity industry is open,” Kanyama concluded.