In June 2016, Parliament passed the Electricity Amendment Bill which, among others, resulted in the unbundling of the Electricity Supply Corporation of Malawi (Escom) into two entities; the Electricity Generation Company (Egenco) and Escom (residual]. This is part of the $32 million Power Sector Reform Project (PSRP) being implemented by government with funding from the United States (US) through the Millennium Challenge Corporation (MCC). In this interview WILLIAM LIABUNYA, Egenco Chief executive officer talks about progress made so far on the energy sector reforms and how the Malawi Compact’s reform Project is supporting the institution to increase power generation in the country.
Currently, how does generation match up with prevailing growing demand for electricity across the country?
Electricity demand has been increasing every year and Egenco, which started operations on January 1 2017, is poised to increase its generation capacity so as to match the demand in the country. Egenco has aligned a number of power development projects which we are looking at and we have already signed contracts for other projects like the Tedzani IV project and the 30MW peaking diesel plant for Blantyre and Lilongwe.
Looking ahead, Egenco has signed two major partnerships with Mitsubishi Corporation of Japan, Techfab Diesels of India and Sinohydro of China to increase power generation to 1 000 megawatts [MW] by 2022.
Now that Egenco is a separate entity, away from the residual Escom, what benefits would the power sector in Malawi yield or accrue from Egenco being a separate company?
Egenco will add value to the Malawi energy sector because it will direct its efforts solely to power generation, ensure continuous generation of the existing power plant and increase capacity through development of new power plants.
MCA-Malawi is currently rehabilitating, modernising and upgrading Nkula A hydropower plant and strengthening the infrastructure that allows for the transmission and distribution of power. Why was it also important to reform the institutions involved in the power sector?
Institutional reform was necessary because without reformed and strengthened institutions, you wouldn’t be assured of continued good performance even with good rehabilitated and new infrastructure. Sustainable business management and growth would be ideal for the nation as opposed to just having good infrastructure.
Can we state that reforms are key in attracting investors in the power sector? And from Egenco’s perspective, why is it important to bring in new investors in the energy sector?
The reforms are key indeed to attracting Independent Power Producers [IPPs] into the country because they came to be implemented after the revision of the Electricity Act which in a way opened up for IPPs to enter the market. It is important for IPPs to enter the power sector in Malawi because they would complement Egenco’s efforts in increasing generation capacity in the country.
Now that the Malawi power market is liberalised in the wake of a new Electricity Act and the allowing of IPPs to participate in the market. Is Egenco ready to compete with others?
Egenco is ready for any competition coming from IPPs as they will be complementing our efforts. Egenco also has an edge over the IPPs as we are already on the market and we are the choice for the single buyer—at the moment. We would also benefit from such competition as Egenco will have to cope with doing business as a private entity to catch up with demands of the single buyer but to also keep continuous production.
While there has been significant progress made by Egenco and partners to increase generation, what else needs to be done to ensure that investments made thus far are maintained and built upon to allow more customers to access electricity?
While efforts are there to improve on capacity and the standard of quality of the infrastructure, there is need for consideration by the regulator to bring about a cost reflective tariff that will allow for proper maintenance of the plant. A tariff should allow the operator or investor, Egenco in this case, to further invest and therefore increase capacity.
What are the top priorities for Egenco in the years ahead? How will these priorities impact the public?
We are in the process of developing our strategic plan but priority is in diversifying our energy sources. Diversifying away from hydro as well as from the Shire River to mitigate against the climatic changes currently being experienced. We are developing a diesel-peaking plant of 36MW capacity, 20MW in Blantyre, 10MW in Lilongwe and 6MW in Mzuzu. These are expected to be commissioned within the next 10 months. Apart from that we are looking at Solar PV. We are, at the same time, sourcing funds for the development of our hydro potential in the country like Mpatamanga Gorge, Lower Fufu and Kholombidzo Falls.
Transfer prices (of purchasing electricity) between Egenco and Escom have not been established and currently your board and that of Escom have been using an interim revenue sharing arrangement that expired on July 1 2017. First, how is this affecting your revenue stream? Second, when are a set of Power Purchase Agreements (PPAs) expected to be introduced?
The revenue sharing methodology has worked in the interim although it had its own shortfalls. The Revenue Sharing model entails that Egenco shared in the distribution and transmission losses which in normal business environment Egenco should not have been party to. In a way, that would make Escom not put extra effort in dealing with such losses as it was not having a direct impact to their cash flow. PPAs are now under negotiation for the current year and are expected to be completed by August 2017.
What should Malawians expect in months and years to come with regards to the availability and reliability of electricity?
There is a better outlook to the nation in the medium to the long-term from Egenco. We expect that through the unbundling and the PPAs under negotiations, our revenues would improve which would in the process allow us to make good investment in maintenance and invest in other power generation sources. With a good revenue base, Egenco will be able to invest back into further power generation.