State-owned power utility Electricity Supply Corporation of Malawi (Escom) says it will not abandon its plans to borrow K30 billion from commercial banks to finance its K55 billion deficit despite protests from other quarters, including Parliament’s Budget and Finance Committee.
In an interview yesterday, Escom board chairperson Thom Mpinganjira said the overall objective behind the move is for the good of the country.
He said: “If we are to stop to borrow from banks now, then Escom will have to shut down. But we at Escom have the mandate from the laws of Malawi as permitted by government so we will continue to do what we are mandated to do until the same government tells us to shut down.”
The Budget and Finance Committee, Consumers Association of Malawi (Cama) and Malawi Economic Justice Network (Mejn) objected to Escom’s planned commercial borrowing while the Institute for Chartered Accountants in Malawi (Icam) backed the plan, saying it is critical to rescue Escom from going under.
In an interview on Wednesday, Parliament’s Budget and Finance Committee chairperson Rhino Chiphiko said his committee will not recommend to Treasury, which earlier rejected Escom’s bailout request, to guarantee the K30 billion loan.
The committee learnt on Tuesday that Escom—already mired in financial liabilities in excess of over K80 billion with local and foreign institutions—plans to raise the remaining K25 billion from a proposed tariff hike which the Malawi Energy Regulatory Authority (Mera) is yet to approve.
Escom chief executive officer Allexon Chiwaya told the Budget and Finance Committee of Parliament on Tuesday that Escom expects to repay the bank loan over a period of five years at the rate of K800 million per month. He said the repayment schedule was affordable.
Basic calculations show that at the rate of K800 million per month, over a period of five years or 60 months, Escom will have paid the banks an equivalent of K48 billion.
In the financial year ending June 30 2018, Escom made K8 billion loss after making a K6 billion profit in the 2016/17 fiscal year.
As of July, Escom owed about K28 billion to Egenco, K2.7 billion to Mera and K40 billion to various suppliers, local and international.
Chiphiko said the committee believes that if Escom collected all its debt, in excess of K20 billion of which K16 billion is owed by the private sector and K4 billion by government ministries, departments and agencies (MDAs), the borrowing would not be necessary.
Escom has attributed the loss of billions to the unbundling of the parastatal to form Electricity Generation Company (Egenco) in 2017 as an independent power producer. The unbundling meant that Escom entered into a power purchasing agreement with Egenco at tariffs which Mera approved.