Malawi seeking a strategic investor for 350 MW hydropower plant

17th January 2020 By: Marcel Chimwala - Creamer Media Correspondent

The Malawi government is seeking a strategic investor for a 350 MW hydropower plant to be built on the Shire river at an estimated cost of $472-million.

Ministry of Natural Resources, Energy and Mining principal secretary Patrick Matanda says Cabinet has decided to implement the planned Mtapamanga hydropower station as a public–private partnership. He adds that the Malawi government has signed a joint development agreement with the World Bank’s private-sector arm, the International Finance Corporation (IFC).

“To raise more of the required capital, the Malawi government and the IFC want to identify a strategic sponsor for the development, financing, construction, operation and maintenance of the project. The strategic investor will be selected through a competitive tender process,” says Matanda.

The Malawi government’s Public Private Partnership Commission is scheduled to hold a prebid conference in the commercial capital, Blantyre, in February.

The selected investor will be required to establish a special-purpose vehicle (SPV) to build, own and operate the power plant before transferring it to government at the end of an agreed concession period.

“This arrangement gives a unique opportunity for potential sponsors to build, own and operate a hydropower project that will bring much-needed power to Malawi, while being environmentally and socially sustainable,” says Matanda.

The project will be located between the existing Tedzani and Kapichira hydropower plants and will comprise a main dam, which will be a 309 MW daily peaking facility, and a regulating dam, which will be located about 6 km downstream and will provide an additional 41 MW of baseload capacity.

The regulating dam will minimise downstream impacts.

Matanda explains that significant progress has been made with respect to the technical, environmental and social aspects of the project, including technical due diligence on a feasibility study carried out in 2018 by German firm Fichtner and the development of a preliminary environmental- and social-impact assessment study. The final design and further optimisation will be undertaken by the future project sponsor.

Construction is expected to take four to five years, with commissioning set for 2025.

The World Bank’s International Development Association will partly fund the project’s capital costs, including the Malawi government’s equity contribution, the transmission line, some of the civil works and equipment, and a technical assistance component – all with a view to lowering the tariff to be charged by the SPV.

The Malawi government, through the State-owned Electricity Generation Company, will hold a minority stake in the SPV. The IFC has an option to make a minority investment in the project company and may transfer part of that option to third parties, including to Norway’s SN Power, which provided technical assistance for the IFC during the development period.

The project will significantly increase Malawi’s current installed capacity of less than 500 MW, helping the country to end load-shedding and meet the growing demand for electricity.

It will also support government plans to increase electricity access to 80% of the population by 2035.

According to World Bank statistics, an average of only 11% of Malawians have access to electricity. The access rate is 38% in urban areas and 4% in rural areas.