Almost four years after it commenced operations, Electricity Generation Company (Egenco) does not own assets, a development legal experts say is risky.
The status quo follows the inconclusive unbundling of the Electricity Supply Corporation of Malawi (Escom), which government embarked on in 2015 to separate the power generation function and leave the organisation with transmission and distribution functions.
In essence, the development means on paper Escom still owns the property which Egenco—a limited liability company incorporated under the country’s Companies Act on September 7 2016—is using because it still holds the title of assets.
Currently, Egenco which started operations as an independent company on January 1, 2017, runs the country’s four hydro power stations namely Nkula, Tedzani, Kapichira and Wovwe in addition to managing thermal power plants in Lilongwe, Mzuzu and Blantyre. It has a total installed generation capacity of 372.64 megawatts (MW) with 350.94MW from hydro power plants and 21.7MW from hired standby diesel power plants.
A legal expert Maziko Sauti Phiri said lack of political will has for a long time also been one of, if not the major, constraint to transforming the country’s electricity sector.
He said: “An affordable and efficient electricity sector is a critical enabler for the country to achieve its development goals of job creation, poverty reduction and improved productivity.”
Sauti Phiri said a legal title to an asset confers a person a right to use that asset, include it in his or her balance sheet, or use it as collateral.
Agreeing with Sauti Phiri, an energy and mining law expert Ahmed Mussa observed that in the absence of a legal title of assets, Egenco cannot legally use the assets in management of its business.
“In the current situation, Egenco is operating without a legal ownership and control over the assets … [and in its current status] does not have the financial and institutional capacity to meet the demands of Escom,” said Mussa.
“There is need to conclude the unbundling process so that Egenco can assume ownership of the transferred assets.”
University of Malawi Dean of the Faculty of Law Sunduzwayo Madise observed Egenco’s current status is risky although in practice the dangers might not be felt immediately.
“This may become a serious issue should something ensue like a case to do with insurance.”
Agreeing with Sauti Phiri, he said the development shows lack of genuine willpower by those who initiated the unbundling process to establish Egenco and ensure there is proper transfer of property.
Three weeks ago, Vice-President Saulos Chilima revealed when he met Egenco and Escom management that the two public firms were facing serious financial and asset challenges, among others due to delays to conclude the unbundling process. It was revealed that Escom owes Egenco about K50 billion. The organisation has agreed to start paying Egenco with the first payment of K11.7 billion concluded by December this year.
But Sauti Phiri noted the incomplete unbundling may also have been as a result of the delay the country has experienced in implementing the National Energy Policy which was first adopted in 2003.
“This policy sought to answer several critical elements for establishing a reliable and liberalised electricity market. This strategy included an ownership structure that reflects or defines the separation of the roles between those that generate, transmit and distribute electricity,” he said.
Sauti Phiri suspected the dispute between Escom and Egenco over money the former owes the latter was about incompleteness of the separation of assets that should be held by Egenco.
“As a stakeholder I welcome the reforms and, particularly, the political will to implement the long overdue changes in the entire electricity sector, not just Escom,” he concluded.
Egenco public relations officer Moses Gwaza attributed the incomplete unbundling to the complexity of the process which involves determining assets boundaries between the two public institutions.
“Indeed the process has delayed. This is mainly due to the fact that the original Escom was a very complex organisation and there was need to carefully unbundle the entity so that electricity generation and supply is not interrupted because of the processes.
“There were also a number of stakeholders that needed to be constantly engaged throughout the processes some of whom were not always available.”
Gwaza also said the other cause of the delay was the need to benchmark with other utilities that had undergone similar processes across Africa.