Malawi and United States of America (USA) have finalised a $36.7 million (about K28 billion) loan facility to finance the construction of a 26 megawatts (MW) solar power plant in Nkhotakota.
The financing is a loan from the Overseas Private Investment Corporation (Opic), a self-sustaining US Government agency that helps American businesses to invest in emerging markets.
The US Embassy Public Affairs Section in Lilongwe said in a statement that by reaching the agreement on international financing for the project, Malawi Government will unlock the potential of up to $1 billion (about K760 billion) in future private sector investment projects.
“The multi-million dollar deal demonstrates Malawi’s openness to foreign investment and marks a positive step away from development assistance and towards sustainable private sector led growth,” reads the statement.
The solar project, according to the statement, leverages the modern power grid and power sector reforms that were part of the US Government’s Millennium Challenge Corporation (MCC) first compact in Malawi.
The compact, signed in April 2011 and entered into force in September 2013, invested $350.1 million (about K266 billion) into the modernisation of Malawi’s archaic power sector infrastructure.
“The Nkhotakota solar power facility will be one of the first two projects spearheaded by independent power producers [IPPs], a private sector breakthrough in Malawi and a top goal of the MCC’s first compact,” says the statement.
The statement quotes US Ambassador Robert Scott as having said that the financing of the deal has the potential to attract more private sector investments from international finance institutions.
“The US private sector is committed to Africa. Whether US firms are exporters to the continent, source goods and services from Africa or invest in its burgeoning markets, they are in this relationship for the long haul,” he said.
Malawi continues to experience power supply challenges with Electricity Supply Corporation of Malawi (Escom) load shedding for up to six hours daily due to reduced generation capacity by the main supplier, Electricity Generation Company (Egenco).
Demand for electricity in the country continues to grow owing to population growth and development of various projects in the construction, mining and manufacturing sectors.
In February this year, Escom signed a Power Purchase Agreement (PPA) with a United Arab Emirates-based solar energy developer for the Nkhotakota solar project. The company, Phanes Energy Renewables Nkhotakota Limited, indicated then it would run for 20 to 25 years after which it will be able to make adjustments to the plants to enable it produce power more effectively and efficiently.