Taxpayers to bear cost of Mozambique electricity

The prospect of spending a colossal K9.8 billion every month on imported electricity has unsettled Malawi, prompting government efforts to renegotiate terms of its power deal with Mozambique.

Under the current Power Purchase Agreement, signed three years ago, Malawi is obliged to pay $5.5 million (about K9.8 billion) monthly for 50 megawatts (MW) of electricity, regardless of actual consumption.

Part of the Malawi’s power grid.

In addition, the country must provide a power payment security of $16.8 million (about K29 billion) before supply begins.

In an interview on Thursday, Principal Secretary in the Ministry of Energy Elvis Thodi admitted the arrangement is financially burdensome.

“The power payment security required before we start receiving power is unaffordable, and we have been engaging the Mozambican Government to delay or reduce it. We’ve also been discussing with them to review the $5.5 million monthly payment.”

While the ministry is willing to tap power from Mozambique, government will also work with utilities to explore alternatives and increase generation at the Electricity Generation Company (Egenco) to meet growing demand.

Natural Resources Committee of Parliament Chairperson Tiaone Hendry questioned the cost, saying Malawi would continue making the monthly payment even when the 50MW is not delivered.

She said importing power is unsustainable given the economic challenges the country is facing.

Hendry said the power deficit could be addressed locally, arguing that importing electricity amid foreign exchange shortages would place an additional burden on Malawians.

Meanwhile, Egenco chief executive officer William Liabunya told the Committee that rehabilitation of Kapichira Phase I would require $23 million and would restore 64MW of generation capacity.

He said rehabilitation of Nkula B would require $95 million to restore units capable of generating 10MW.

Liabunya said bids for the rehabilitation works have been submitted and that the projects are expected to help reduce blackouts, with the current situation expected to ease by December.

Malawi University of Business and Applied Sciences (Mubas) senior energy lecturer, Dr. Sugzo Kaunda, said the deal is expensive for Malawi, which has faced forex challenges for years.

“Some other services that require forex will be affected. Cumulatively, Malawi will pay huge sums of money that would have built a new power station in 10 years. Therefore, we should use this electricity from Mozambique for productive purposes, producing goods and services for sale or export, so that buying electricity from Mozambique makes economic sense,” said Kaunda.

Another energy expert, Kandi Padambo, said the deal had previously failed because it involved agents, making it unaffordable for Malawi.

He said the agreement should make economic sense and called on government to negotiate more affordable terms.

“Initially, years ago, the interconnector deal failed because of skewness of terms against Malawi, even in the long term, because the line would only be used for importation. I do not know whether this issue has been resolved. At that time, Hidroeléctrica de Cahora Bassa was owned by Portugal-based businesspersons. But later the facility was transferred to the Mozambican Government. I am sure that remains the case and one would expect the terms to be more equitable in the spirit of SADC,” said Padambo.

The Electricity Supply Corporation of Malawi (Escom) says electricity demand is expected to reach 508MW this year, while available generation capacity stands at 374.6MW.

Escom also says 199 transformers have been vandalised, leaving about 6 000 customers without electricity.

Egenco supplies 444MW to the national grid from hydro, diesel and, more recently, solar plants.

Hydropower accounts for 390MW, diesel generators for 53MW, while solar contributes 1.3MW.

The post Taxpayers to bear cost of Mozambique electricity appeared first on Nation Online.