Mining & Trade News

Electricity Generation Company of Malawi (Egenco) has described effects of deforestation as the major hindrance to uninterrupted generation of electricity in hydro-plants on the Shire River where Malawi generates 98% of its power.

Speaking at the Role of Trees, Forests and Resilience Symposium in Lilongwe, CEO for Egenco William          Liabunya said effects of deforestation including soil erosion, aquatic weeds and trash disrupt the work of turbines in the reservoirs at the power stations.

“The suspended silt particles lower the volume of the reservoirs and reach the turbines to choke power production operations. They also block the cooling water system machines for the generation units,” Liabunya said.

Liabunya also said climate change related problems such as floods are a big threat to power production saying this year floods that hit the lower Shire affected many generating power stations resulting in power outages for almost a week in the month of February.

He said such occurrences are a stumbling block to the Government in the implementation of the Energy Policy which aims to improve efficiency, reliability and affordability of energy supply systems for socio-economic growth.

Liabunya, therefore, urged the Forestry Department to scale up implementation of the National Forest Policy which aims to control deforestation and promote sustainable management of forests in order to enhance socio-economic development.

He explained that if both the Energy Policy and National Forestry Policy are seriously implemented and harmonized with other policies namely Agriculture and Food Security Policy; National Land Policy; Land Resources Management Policy; Water Policy; Climate Change Policy and National Environmental Policy; deforestation can be prevented which would help EGENCO in sustaining uninterrupted power production.

In its reforestation drive, in January this year EGENCO launched a trees planting exercise at Chibwana Village Traditional Authority Sitola in Machinga district.

By the end of this rainy season, EGENCO plans to plant 25-thousand trees along Shire River and tributaries.

Meanwhile, the Department of Energy Affairs says deforestation is a major concern in Malawi because the country lacks affordable and reliable alternatives to biomass, which is a major source of energy in the country catering for over 80% of the requirements.

Biomass energy is mainly used in water heating (cooking), tobacco curing, brick kilning, wastage in terms of charcoal residues, and in extreme cases of lighting.

In a presentation made at the Trees, Forests and Resilience Symposium in Lilongwe, Principal Energy Officer for the Department Cornwell Chisale observed   that almost all wood fuel and charcoal used for domestic requirements in Malawi is from natural forests which take long to regenerate and also due to frequent harvesting, regeneration is actually impossible.

Chisale, however, said the Department is promoting   alternative sources of energy including electricity (grid electricity and off-grid options including mini-grids), Gas (Liquid Petroleum Gas, natural gas and biogas), Bio-ethanol and Briquettes whose utilization will keep the country free from carbon emissions.

He explained that the drive to promote the alternative energy sources involves sound policy direction; lobbying for tax waivers for clean energy generation equipment, curriculum change to accommodate pro-clean energy subjects; introducing regulations that support clean energy use; and training communities, extension workers and institutions on alternative fuels.

He said the department is also conducting awareness campaigns on biomass utilization technologies through radio advertisements, cleaner cooking camps, open air functions, symposia and panel discussions.

The Department has, meanwhile, embarked on projects to promote alternative energy sources including         Malawi Rural Electrification Program (MAREP) which is extending the national electricity grid to rural areas, National Cook Stove Initiative to disseminate 2-million cook stoves by 2020; and increasing clean and affordable decentralized energy services to selected vulnerable areas of Malawi project which is to promote clean energy mini-grids as a means of electrifying rural areas.

Malawi is, currently, importing 3MW of power from Mozambique through Mandimba to Mangochi and 20MW from Zambia through Chipata and Mchinji.

The country is in discussions with Tanzania to import gas through Karonga to support the development of a 100MW Gas Fired Power Plant either to be operated by EGENCO or an IPP.

Malawi has engaged the Commonwealth Secretariat to provide technical assistance in developing the upstream petroleum sector following encouraging results that have emerged in oil and gas exploration across the country.

Multinational firms are conducting exploration for oil and gas in Malawi focusing on the country’s stretch of the African Rift system, which is an area with proven potential for oil and gas discoveries.

Government demarcated the stretch into six prospecting blocks and awarded Block 1 located in Chitipa and part of Karonga to South African firm EFORA Energy formally SacOilHOldings, Block 2 and 3 in Karonga, Rumphi, Nkhatabay and NKhotakota to Hamra Oil, Block 4 and 5 located further South covering Dedza, Ntcheu, Mangochi, Machinga, Mulanje, Phalombe and Blantyre to RakGas MB45 and Block 6 located in the Lower Shire Valley area to Pacific Oil and Gas.

Results from exploration work by Hamra Oil and RakGas have indicated great potential for oil discovery in Malawi.

“As a nation, we are very excited with the incoming results from oil exploration work being conducted by these tenement holders.  The likelihood of finding commercial petroleum discoveries in these potential sites is high with average values in the range of 16.8% – 20%, exceeding the typical international oil industry threshold of 10%,” says Head of Oil and Gas Desk at the Department of Mines in the Ministry of Natural Resources, Energy and Mining, Cassius Chibambo.

Chiwambo says the government has, therefore, resolved to re-engage the Commonwealth Secretariat to provide technical assistance in the development of a regulatory framework that will ensure that there is a win-win situation between Malawi as a country and the investors when oil is discovered.

He says a delegation of the Commonwealth Secretariat already visited Malawi for a scoping mission which was conducted from January 28 to February 1, 2019 as a first step in responding to Malawi Government’s request to provide technical assistance for the Oil and Gas upstream sub-sector.

The Malawi Government, specifically, requested for technical support in the following areas: Review of            Petroleum (Exploration and Production) Act of 1983;finalisation of the development of Petroleum Policy; developing a model petroleum sharing agreement (PSA); re-negotiation of the PSA that it signed with RAKGAS; development of a community engagement strategy; and capacity building.

Delegates from the Commonwealth Secretariat led by Victor Kitange, an Economic Advisor and AlacheFisho, a Legal Advisor held meetings with officials from the Oil and Gas team led by Chiwambo who briefed them on the status of the activities in Malawi.

They also met the Minister of Natural Resources, Energy and Mining AggreyMasi and other officials from his Ministry, and also officials from Department of Mines; Geological Survey Department; Ministry of Finance, Economic Planning and Development; Ministry of  Justice and Constitutional Affairs; Environmental Affairs Department; National Oil Company of Malawi (NOCMA); Ministry of Foreign Affairs and International Cooperation; and Ministry of Trade and Industry.

“In all the meetings conducted, participants were requested for their inputs in order to make the scoping mission comprehensive enough for successful implementation of the technical assistance,” says Chiwambo.

Some of the issues raised during the scoping mission include the need to have robust environmental management framework as most of the citizens have fears over Oil and Gas exploration and production activities.

It was also observed that there is lack of relevant work experience since the petroleum sector is just new in the country, as such there is need for trainings to enable civil servants and other stakeholders manage the petroleum sector.

“On the issue of reviewing legal framework, it was stressed that the essence is to ensure best practices in the sector so that the country is fully benefiting from the petroleum operations,” he says.

Some of the issues that are being reviewed in the Act include; licensing procedures, PSAs, and environmental management.

Chiwambo says that after the Petroleum Policy is developed, drafting sessions for the Petroleum Act will be intensified and the Ministry of Justice will need some support from Commonwealth.

He explains that though the Petroleum Policy is in the final development stages, the Petroleum Act will address issues stipulated in the policy as such the policy has to be finalized before drafting the new Act.

Previously, the Economic and Legal Section of the Commonwealth Secretariat provided technical assistance for the development of the Draft Petroleum Policy, which started with a situational analysis of the country’s Oil and Gas Sector.

Secretary for the Ministry for Natural Resources, Energy and Mining PatrickMatanda is quoted in the Draft Policy as saying that through this expert analysis, the problems and gaps in the upstream petroleum sector were identified, which assisted in the drafting of the policy.

“The draft policy was formulated through reviewing of policies from other countries particularly those sharing similar geological setting as Malawi, extensive consultations with various stakeholders including other government institutions, local authorities, private oil companies, civil society organisations and the academia,” says Matanda.

Among other grey areas identified in the Draft Petroleum Policy is the failure by the government to recruit the Commissioner for Petroleum Exploration and Production.

The Policy reads: “The current Petroleum (Exploration and Production) Act provides for the Minister for Natural Resources, Energy and Mining toappoint a Commissioner for Petroleum Exploration and Production within the Ministry to administer the Act. The post has never been filled and the functions of this office have been performed by the Commissioner for Mines and Minerals and the Department of Mines.”

“Thus, the oversight, development and delivery of an upstream petroleum policy in Malawi fall within the remit of these offices. But when it comes to the broader energy policy, the Commissioner for Mines and Minerals and the Department of Mines would work with the Department of Energy.”

The Draft Policy also points out the need to clarify the role of the National Oil Company of Malawi (NOCMA) which was established under an Act of Parliament and empowered to promote upstream and downstream petroleum activities.

“There would be need to clarify the exact functions and powers of NOCMA to ensure that they are not in conflict with those of the Geological Survey Department regarding oversight of petroleum exploration,” it reads.

The new law is expected to give NOCMA the mandate to manage government’s interest in oil production investments with preliminary proposals indicating that the parastatal will have at least 20% shareholding in the investments.

In a meeting with the Commonwealth delegation, CEO for NOCMA, Gift Dullah, recommended that relevant personnel from his organization, GSD and Departments of Mines acquire necessary training by, among other things, visiting countries that are doing well in the oil and gas field like Norway and Nigeria.

He said it is important that Malawi works on capacity building in the subsector to ensure the investment decisions are done properly in the field so that adequate returns are accrued for the nation.

Dullah also stressed the need for local content by ensuring that the oil ventures are buying local resources and where possible employing capable local people.

He said NOCMA is, currently, working with Malawi University of Science and Technology to introduce relevant courses in the field of petroleum.

Comsec is also expected to initiate communication with other countries to help in terms of training.

The Draft Policy has a section on local content which it highlights as a path to development through petroleum activities in addition to a sound fiscal regime that ensures sufficient revenue collection.

“Oil and gas companies, when purchasing goods and services for their operations, should be required to give first preference, at comparable quality, delivery schedule and price, to goods produced locally and services provided by Malawian citizens, or businesses, subject to technical acceptability of the relevant goods and services in the country,” reads the Policy.

It also calls for the participation of Malawians and Malawian companies in oil exploration, exploitation and related sectors.

The Policy provides opportunities for local companies to buy stakes in oil ventures and NOCMA to buy additional shares in the oil investments.

The Draft Policy also recognizes the need for the oil companies to carry out corporate social responsibility (CSR) programmes and sign community development agreements (CDA)with the communities in their respective project areas.

The Policy statement reads: “Government shall include CSR and CDA requirements in all contracts and in the petroleum legislation, encourage CDAs between the oil companies and affected communities, consider CSR history of companies when awarding contracts and encourage the participation of civil society organisations in oil exploitation issues.”

It says government shall also train or hire monitors to oversee the fulfillment of CSR and CDA obligations, impose stiff penalties for non-compliance, and engage international experts in the development of minimum requirements for CSR and educate local communities on the companies’ responsibilities.

In the drafting session, the Ministry will need capacity in the following areas; legislation drafting or second eye, vetting of the drafted legislation, and contract negotiation.

Government says the US$12-million Wovwe Power Station expansion project will more than double production from the station’s installed capacity of 4.5 MW to 10MW.

Public Relations Officer for the Department of Energy in the Ministry of Natural Resources, Energy and Mining, Saidi Banda, told Mining &Trade Review that such a development will help minimize the gap between demand and supply of power in the country.

Electricity Supply Corporation of Malawi (Escom)   supplies power sourced from Wovwe to Karonga, Chitipa, Rumphi and some parts of Mzuzu.

Electricity Generation Company (EGENCO), which operates the power station, engaged German firm, Fichtner in May 2018 to conduct a feasibility study for the expansion project with funding from the German Government, which is expected to last 18-months.

“The project will improve plant reliability as well as   extend its life to ensure that the people in the designed areas have sufficient and reliable energy for their needs,” says Banda.

Wovwe offers a diversified source of power for Malawi as the rest of EGENCO’s power stations are located on the Shire River.

Banda explains that after completing the feasibility study, Government and EGENCO will identify an Engineering Procurement and Construction (EPC) contractor for the expansion project.

Wovwe is designed to either connect to the national power grid or operate on off grid to only supply power to northern region districts.

The power station is located in Karonga District on Wovwe River, upstream of Wovwe Rice Scheme.

Besides the ongoing Wovwe Power Project, EGENCO is in the middle of soliciting funds for other       impending power projects including 138MW Kholombidzo hydro-power project on Shire River to cost US$11.5-million and 180MW Songwe Hydropower Scheme to be constructed on Songwe River based on a cooperation agreement between Malawi and Tanzania.

Malawi is experiencing power supply shortages due to environmental problems including decreasing water levels of the Shire River which has seen EGENCO reducing its production from the installed capacity of 351MW to about 200MW against a pick demand of 500MW.

EGENCO’s other power stations include Nkula, which was the first major hydro power station in Malawi and   comprises of Nkula A with three machines, each rated 8MW, and Nkula B with five machines each rated 20MW.

There is also the 92.7MW Tedzani Hydro Power Station located on the Shire River, 7km downstream of Nkula Hydro Power stations and comprises of three Power Stations: Tedzani I, Tedzani II and Tedzani III.

The other power station is Kapichira which has an installed capacity of 129.6MW.

Results from the on-going exploration for hydrocarbons that multinational firms are carrying out across Malawi have revealed encouraging preliminary prospects for the discovery of commercially viable petroleum and gas reserves.

Making a presentation titled “STATUS OF OIL AND GAS IN MALAWI AND OPPORTUNITIES” at the 2018 Alternative Mining Indaba that was held in Mangochi last month, AmiduMakwinja, an officer from the Mines Department’s Oil and Gas desk said that based on exploration results collected so far,    preliminary prospects for petroleum in the country are good and promising.

Makwinja explained that the outcome of geophysical and geological mapping exercises conducted by exploration companies in target areas such as Chitala and Mpatsanjoka in Salima, Dulombale and Golomoti in Dedza, Lake Malombe in Mangochi, Dwangwa in Nkhotakota and Vua in Karonga is positive.

“The likelihood of finding commercial petroleum discoveries in these potential sites is high with average values in the range of 16.8% – 20%, exceeding the typical international oil industry threshold of 10%,” he said.

The results have emanated from Phase I exploration work which has involved desk studies, airborne surveys, seismic surveys and data interpretation, geomapping for blocks on ground, and Environmental and Social Impact Assessment (ESIA).

The companies are now geared to move to Phase II which requires importation of drilling equipment to start preliminary drilling of exploration wells for determination of availability of hydrocarbons.

Assumptions are that the Oil and Gas reserves could be in the same range as those discovered in Ethiopia, Uganda and Kenya since Malawi lies in the East African Rift Valley System.

Makwinja said if Malawi makes Oil and Gas discoveries in the same order of magnitude as comparator countries, potential oil revenue estimates can be many times more than the current export earnings.

The country is using a comparative analysis of economies which have recently discovered oil reserves within the African Great Rift Valley to analyze its hydrocarbon potential.

The revenues are estimated assuming a long term oil price of US$ 60 per barrel as World Bank anticipates that   all three major benchmark oil prices, Brent, West Texas Intermediate (WTI), and Dubai, will continue to increase after 2020 to reach $70 per barrel by 2030.

Currently, Malawi’s macro-economic environment over-depends on the rain-fed agricultural sector which has proven to be unreliable due to fluctuating weather pattern.

This has led government to embark on hunting for potential alternate and complementary economy drivers, by going on over-drive promoting other sectors such as the Extractives Industry.

Within the Extractives Industry, government aims to develop the Oil and Gas subsector into one of country’s complementary economic spinners if commercially viable discoveries are made hence the demarcating of oil    prospecting area into Six (6) Blocks and subsequent issuing of Exclusive Prospecting Licenses (EPL) to four multinational firms.

Block 1 was awarded to Efora Energy (formerly SacOil Holdings Limited), Block 2 and 3 to Hamra Oil, Block 4 and 5 to RAKGAS MB45, and Block 6 to Pacific Oil and Gas.

However, Efora and Pacific Oil and Gas have since relinquished their licences.

Environmental and Social Impact Assessment for Hamra Oil’s Blocks 2 and 3 were completed and approved by Malawi’s Environmental Experts in the Department for Environmental Affairs paving way for Phase 2 exploration which requires drilling of exploration wells.

Makwinja said it is imperative that on-going petroleum activities are supported on a sustainable basis to achieve successful oil and gas discoveries which he said if well managed, its economic impact is likely to accelerate economic growth and development thereby reducing poverty.

Presently, all Oil and Gas exploration operations are based onshore and government has pledged that modern environmental management practices and methods will be implemented to minimize and mitigate against any disturbances to the environment.

Until Malawi builds its own regulatory and financial    capacity, government says the first phase for petroleum operations will focus on onshore including along the lakeshore.

Meanwhile, the Department of Mines is reportedly at an advanced stage in the process of formulating a Petroleum Policy that will among other things address issues of good governance for upstream petroleum subsector, promote balanced fiscal regime, good revenue management, and environmental sustainability as well as maximise local content.

“Currently, the draft policy is still undergoing intra and inter-ministerial polishing to ensure consistency with other policies before approval and adoption,” Makwinja said, adding that with the help of international experts like Commonwealth Secretariat, the review aims to meet international standards.

The Petroleum (Exploration and Production) Act of 1983 is also under review to reflect the current global petroleum issues.

Review meetings were conducted with several stakeholders and instructions from the meetings were submitted to the Ministry of Justice and Constitutional Affairs which is preparing the initial Petroleum Bill of the revised law.

Among other pertinent issues, the new law will put in place measures that will enable community members to take part in choosing kinds of projects befitting their areas as part of community development agreements.

The government has also partnered with the Exploration Companies in facilitating establishment of Oil and Gas courses at Malawi University of Science and Technology (MUST) and University of Malawi’s Polytechnic to enhance high human capacity and expertise in the petroleum subsector.

Malawi has already started benefiting from upstream petroleum activities having so far received significant developmental contribution both industrial and social since exploration companies were awarded the exploration licenses.

The benefits include supply of clean and safe water, interventions during disasters such as floods and supply of medicine and associated medical equipment.

The firms have also funded provision of sanitation and hygiene facilities such as toilets, construction of school blocks and provision of school material as well as promotion of sporting activities, which includes the establishment of Surestream Academy in Blantyre by UK prospector Surestream Petroleum.

Makwinja said government will continue putting more efforts to the current exploration activities until results are obtained on the status of petroleum resource potential in the country so that the country and its citizenry benefit from the imminent exploitation of the prized endowment.

“If Malawi can restrict exportation of Crude Oil and ensure refining of the same in the country, more jobs will be created, and it will make petroleum products readily available at a cheaper price,” he said.

By Modester Mwalija

There is substantial progress in a number of energy projects that are being implemented in Malawi in order to increase availability of power in the country, which will help a number of mining projects currently struggling to roll out operations due to lack of power to pass the feasibility test.

This is outlined in the 2023/2024 annual economic report published by the Ministry of Finance and Economic Affairs.

The report says that the government handed over the Kam’mwamba Coal-Fired Power Project to the Electricity Generation Company (EGENCO), after unfulfilled expectations from the EXIM Bank of China. EGENCO has since revised the feasibility study, estimating the project cost at US$600-million.

“The project’s completion, anticipated by 2030, is dependent on securing a joint venture for EGENCO to partner with a 50:50 possible share of the project cost between EGENCO and the joint venture partner,” reads the report.

The report highlights that despite some setbacks, the Mozambique-Malawi 400kV Interconnector Project is now expected to come online in October this year.

The report reads: “The progress achieved at the end of the 2023/24 financial year include compensation pay-outs for Project Affected Persons on the Malawi side and the revision of the Power Purchase Agreement with Electridade de Mozambique (EDM), which will increase power imports from 50MW to 120MW when the project is completed.”

The report also notes that in the period under review, ESCOM and Zambia Electricity Supply Corporation Limited (ZESCO) initiated a joint feasibility study, including Environmental and Social Impact Assessments and a Resettlement and Compensation Action Plan, on the Malawi-Zambia Interconnector which is aimed at integrating Malawi into the Southern African Power Pool (SAPP) by connecting to Zambia’s electricity grid.

“The initial phase will inject 50MW into Malawi’s grid, with the potential for future increases. Both companies have signed the Project Implementation Framework, marking a critical step towards realizing this project,” reads the report.

The report also says that the government is implementing the Mpatamanga Hydropower Project, set to deliver 361MW of clean energy under a Public-Private Partnership (PPP) arrangement.

The achievements in the 2023/24 financial year include incorporation of Mpatamanga Hydro Company Limited; ongoing negotiations for Power Purchase Agreements; Completion and approval of the Project Freeze Designs, continuation of environmental studies; and development of Resettlement Action Plans scheduled for completion by May, 2024.

The report says the government is also prioritizing the rehabilitation of the Kapichira Hydropower Station, which suffered extensive damage from Tropical Storm Ana in January 2022.

Funded by a $60 million World Bank grant, EGENCO successfully repaired all four damaged machines, restoring 129.6MW of power.

The report reads: “Phase I of the restoration is nearly complete, paving the way for Phase II, which will involve constructing a more resilient structure to protect against future storms. This project is crucial for safeguarding Malawi’s energy security, with completion expected by May 2027.”

On integrating solar energy into the national grid, the report says Malawi is implementing a 20MW Battery Energy Storage System (BESS) at the Kanengo substation in Lilongwe. The project, funded by a US$20-million grant from the Global Energy Alliance for People and Planet (GEAPP), reached financial closure in July 2023.

It says installation is expected to be completed by March 2025, providing essential additional services to stabilize the grid.

Furthermore, the report indicates that EGENCO is advancing the Nanjoka Solar Power Plant in Salima, a project expected to contribute 50MW to the national grid by 2029. Following the completion of feasibility studies and environmental assessments, construction began with the installation of an initial 10MW. The project, which had its groundbreaking ceremony in November 2023, marks a significant step towards diversifying Malawi’s energy sources.

 As detailed in the report, EGENCO also plans to double the capacity of the Wovwe Hydropower Station from 4.5MW to 9MW. In 2023, the Malawi Environmental Protection Authority (MEPA) approved the extension.

“Negotiations for the Power Purchase Agreement are nearing completion. Once finalized, construction will commence using EGENCO’s internal resources, further strengthening the country’s energy resilience,” states the report.

These projects represent a crucial investment in Malawi’s energy future, addressing both immediate needs and long-term sustainability goals. The successful completion of these initiatives will significantly enhance the country’s power generation capacity, reduce reliance on imports, and improve the overall stability of electricity.

The Ministry of Energy expects planned investments of approximately US$3.5 billion in order to meet the estimated energy demand by 2040.

By Wahard Betha

The Ministry of Mining says it is finalizing the polishing of the draft Petroleum (Exploration and Production) Bill in order to formulate a new Act to manage the upstream petroleum subsector, which is currently governed using the Petroleum (Exploration and Production) Act 1983 currently considered outdated.

Director General for Mining and Minerals Regulatory Authority Samuel Sakhuta told Mining and Trade Review that Government is fast-tracking the drafting process to create a better legislative environment in the subsector which continues to attract interest from investors.

Government demarcated Malawi’s part of the Great African Rift Valley geological zone, which has potential for hydrocarbon prospecting into six blocks. The blocks were awarded to various multinational firms that later relinquished their licences due to the prevalence of the Covid-19 pandemic which made it difficult for them to mobilise staff and equipment to conduct the exploration work.     

Sakhuta said the Ministry has included a provision for re-demarcation of the existing big blocks in the new Bill to create room for more investors interested to conduct hydrocarbon exploration.

He said: “We have a draft bill that we are to submit to parliament at some point once polishing of the document is finalized.”

“Looking at the pressure that we have now from the investors who are interested in the sector, recently I presented a memo on the same to the Principal Secretary.”

“We are saying we want to come up with a solid and revised Act. In terms of re-demarcation, once the controlling officer gives a nod to that, we are much ready to re-demarcate.”

 “By demarcating, we will give a chance to many investors and have a high probability of getting what we are looking for very quickly.”.

Coordinator for Chamber of Mines and Energy Grain Malunga commended the move saying the subsector still carries weight in terms of energy sources.  

“Oil and gas will never be completely abandoned as a source of energy. There is a need to encourage exploration and development of the same,” said Malunga.

In a separate interview, Programs Coordinator for Natural Resources Justice Network (NRJN) Joy Chabwera also commended the Malawi Government for the move but further urged for full implementation of the laws.

Chabwera said: “The Ministry reviewed the petroleum policy last year which was a good move and hearing that they are now drafting a bill is progressive since the 1983 Act is long outdated.

“However, having good laws is not enough if there is no implementation and political will to see rule of law at work in this country.”

Chabwera also asked the Malawi Government to conduct due diligence on the companies applying for licenses and finalize the legal framework before rushing to grant any company a license.

By Modester Mwalija

The Malawi government says it is seeking a strategic partner to invest USS76.2 million to develop the Chiweta Geothermal Power Generation Project in Rumphi, which will be developed in a public and private sector partnership arrangement.

This is highlighted in Malawi Investment Projects Compendium Volume published by the Malawi Investment and Trade Center.

The project will generate up to 10 MW of electricity, contributing significantly to the national grid and supporting the country’s industrialization goals.

The report says that the government’s preference is to develop the project through an Independent Power Producer (IPP) following a Build, Own, Operate and Transfer (BOOT) model with a 30-year concession period.

“A Special Purpose Vehicle (SPV) will be established to oversee the project’s implementation, ensuring efficient management of the development phase and future operations,” reads the report.

It says pre-feasibility studies conducted reveal that the project is technically, economically, financially and environmentally viable.

“This project is aligned with the government’s energy sector and economic development goals as outlined in the National Energy Policy and the Malawi Growth and Development Strategy,” the report reads.

The project’s key benefits include provision of additional power to the national electricity grid, thereby improving access to electricity for both households and industries. Employment opportunities will also be created during and after the construction phase of the project.

In addition to boosting local electricity supply, there is potential for Malawi to export surplus power generated from the project to generate foreign exchange revenue as government plans to connect to the Southern African Power Pool (SAPP).

The project will involve drilling to install a fluids conveyance system, power plant construction and construction of transmission line.

“Geoscientific investigations, including geological, geochemical, and geoelectrical surveys, have confirmed the feasibility of the project. These studies have enabled experts to develop a conceptual model of the geothermal field and outline its main characteristics, suggesting the project's technical and financial viability,” reads the report.

The project site is underlain by biotitic gneisses of the Basement Complex, covered by clastic sediments of the Karoo System and by a thin level of Quaternary deposits.

In a related development, the Malawi Government is seeking a strategic investor to develop the Fufu Hydropower Project on South Rukuru River in Rumphi district.

The Malawi Investment and Trade Centre explains in the compendium that Fufu is designed as a storage power plant through the reservoir formed by a 114m high RCC dam.

It, therefore, offers the possibility to be operated in base mode, following the load and responding to the instant changes in power demand. The guaranteed generating capacity of the station is 146.3 MW and the total installed capacity is 261 MW. The objective of the project is to increase the supply and reliability of power in the country.

“The geographical location of the power plant is very ideal for system voltage stabilization as it is situated in the northern region of Malawi which has no generating station rendering it prone to power quality issues due to long transmission distances. A feasibility study on the Fufu Hydropower Project is available,” reads the Compendium.

A Bankable feasibility study conducted for the project reveals that the investment cost for the project is US$702.5 million and the specific investment cost is US$2,700 per kW. The project Internal Return of Return (IRR) is approximated to be 12.1% and the levelized electricity cost is 3.5 US cents/kWh. Additionally, the project’s Net present Value is US$123 million.

The report says the project which proposes a 350MW hydro-power plant is technically, economically and environmentally feasible.

The Compendium reads: “The project is financially feasible and sustainable. The financial internal rate of return (FIRR) for the project ranges from 12% to 17.5% and a Net Present Value of between US$110.5 million and US$ 356 million respectively depending on the scenarios.”

“Additionally, the Cost-Benefit results of the project are very promising ranging from 1.03 (where construction is delayed by one year and the construction cost increased by 10%) to 1.35 where the construction cost is decreased by 10%.”

 “These results show that the project is financially viable as the revenues from the project are sufficient to cover its capital costs and operating costs and to provide the investor with adequate profit.