In Malawi, the African Trade Insurance (ATI), through the Regional Liquidity Support Facility (RLSF), will provide insurance cover for an amount of $4.4 million against the risk of delayed payment by ESCOM for the 60MW Salima Solar PV.
The RLSF policy will be for an initial tenure of up to ten years. The liquidity cover being provided via RLSF will enable up to $78 million of total project financing.
Salima Solar PV plant is due to start operations in August 2021. This will be the first solar PV in Malawi to connect to the grid. The energy generated, at an estimated annual average of 154GWh, will be sold exclusively to the Malawian utility, ESCOM, under a 20-year Power Purchase Agreement (PPA).
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 21MW. With project construction almost finalised, Salima Solar will be the first solar PV in Malawi to connect to the grid.
The 60MW Salima Solar PV plant will be instrumental for Malawi’s underdeveloped electricity sector, which has an installed generation capacity of around 439MW. Over 90% of this capacity comes from hydropower plants on the Shire River in the southern region. This heavy reliance on hydro is often constrained by drought and low water levels.
Reforms by the government have led to the establishment of a viable electricity market for private sector participation in generation expansion. These reforms enable a high potential for solar and new hydro technologies to enter the power market.
Malawi government: Private investment is critical to achieving our goals for the power sector
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.”