Minister of Energy Newton Kambala says government will soon decide whether to curtail or renew a power deal with Aggreko Power Solutions on diesel-powered generators.
In an interview yesterday, the minister said the Tonse Alliance administration will have to make a cost-benefit analysis to come up with a final decision.
Said Kambala: “We will have to study the benefits of curtailing that contract considering that the equipment is already here, and also look at the benefits of letting them continue and we will choose the best option.
He said: “We will make a decision very soon as to how we will manage that issue to ensure we don’t keep losing money.”
The minister said he is scheduled to visit Aggreko’s Mapanga establishment, Escom and Egenco head offices in Blantyre as well as other energy investments in the country next week.
He added: “The tour will help me make some informed decisions for the benefit of Malawians. It is not business as usual anymore.”
In the deal, Aggreko—which is an Independent Power Producer (IPP)—is leasing 84 generators with a combined capacity of 78 megawatts (MW).
The generators are stationed at Chichiri in Blantyre (30MW), Kanengo in Lilongwe (25MW) and Chinyama in Kasungu (23MW).
In January this year, the ousted Democratic Progressive Party (DPP) administration renewed the Aggreko contract which expires on January 21 2021.
But some stakeholders in the energy sector criticised the contract renewal, saying the power deal is unreasonably expensive with very little impact On addressing the country’s power challenges.
Meanwhile, Consumers Association of Malawi (Cama) executive director John Kapito has described the Government/Aggreko contract as a “rushed deal” which has neither benefitted Malawians nor the economy.
He said in an interview yesterday the deal has negatively affected the electricity distribution value chain, stressing that it has substantially increased the price of electricity for consumers.
Said Kapito: “This was a bad deal. The returns are zero and it was intended just to benefit a few individuals and not all Malawians.”
Last year, the Parliamentary Committee on Energy, Mines and Natural Resources recommended that the contract for generating electricity using generators should be given to Egenco, which it said had proved that it could execute power generation responsibilities the same way Aggreko does.
A copy of an Emergency Power Tariff Impact Analysis done in November 2017 shows that generation cost of a unit of energy using diesel powered generators was K195 ($0.26) per kilowatt hour (kWh) while Escom was selling electricity to consumers at K84.40 kWh, making a loss of about K110.6.