Mining & Trade News

Despite the prevalence of the coronavirus (Covid-19) pandemic, Malawi’s publicly listed conglomerate Press Corporation Limited (PCL) says it has registered a profit of K38.22-billion largely buoyed by the energy and financial sectors.

In a summary of audited results for the year ended December 31, 2020, signed by Group CEO George Partridge and Chairman Randson Mwandiwa, the Group says the energy sector comprising ethanol producers PressCane and Ethco delivered excellent results registering 116% growth in its profit after tax.

It says: “The performance was driven by the improved margins following the agreement of a new pricing model with the Malawi Energy Regulatory Authority (MERA).”

“Results were further buoyed by an upside from the production of hand sanitizers, a new product line, in the wake of Covid-19 pandemic, supported by the availability of additional feedstock carried over from the previous year.”

In the financial sector, PCL subsidiary National Bank of Malawi delivered strong results with a 31% growth in its profit after tax. The results were driven by a 17% growth in non-interest income and a 27% and 6% growth in customer deposits and the loan book respectively.

‘’The Bank’s efforts to improve the quality of the loan book saw a 45% reduction in net impairment losses. Going forward, the focus is to reduce the level of Non-performing Loans to be within the bank’s risk appetite,’’ state Partridge and Mwandiwa.

However, poor performance of brewer Castel Malawi negatively affected the growth of the conglomerate with the Directors concluding that it would be in the best interest of the Group to divest PCL’s remaining 20% stake in the company.

“Negotiations to that effect have now been concluded at a price of USD12 million, and the proceeds will be realized in 2021,’’ reads the statement.

In the consumer goods segment, PCL’s subsidiary PTC also continued to make losses mainly due to working capital constraints which is also undermining the implementation of the revised strategic plan.

‘’The board is considering several strategic options to improve the wellbeing of the company by inviting other new investors into the group,’’ the statement reads.

On the macroeconomic outlook, the statement reads that with the presence of Covid-19 vaccines, Directors of PCL envisage improved economic prospects for 2021 with GDP growth of 3.5% projected up from the 0.6% achieved in 2020.

It says: “Management is confident of delivering planned results. The prevailing foreign currency shortages and the related impact on exchange rates, however, remain a major downside risk. The significant increase in public debt poses another major challenge to economic growth.”

‘’The Group continues to search for profitable investment in the power segment. Negotiations for a Power Purchase Agreement are underway. Leveraging on its position in the market, the Group is well positioned for continued growth.’’

Independent Power Producers (IPPs) pursuing solar power generation projects are expected to add about 121 MW to Malawi’s power grid by the end of this year, it was learnt in Parliament.

In a ministerial statement, Minister of Energy Newton Kambala informed the house that 60MW Salima project and 20MW Golomoti project both owned by JCM Matswani will be ready by April and December respectively while the 20MW Atlas Kanengo Project and the 21MW Phanes Energy Nkhotakota Project are expected to be functional by September.

“Malawi Government through Electricity Generation Company (EGENCO) is diversifying its energy sources and is pursuing installation of a solar PV plants in Salima, Nkhotakota, Lilongwe and Dedza which are at advanced procurement stage.”

“The Single Buyer, Power Market Limited, has approved the projects to be implemented. The projects will commence in the second half of the year 2021,” Kambala said.

Currently, EGENCO generates about 300MW of electricity from the installed electricity generation capacity of 508MW against projected demand of 719MW from the growing population and industry.

If the solar IPPs successfully commission the power plants, the country will raise the energy generation bar to 421MW by the end of this year.

Power Purchase Agreements (PPAs) have been negotiated with Power Market Limited as the licensed agent for buying power from all the producers.

The single buyer, independent as required, was still housed in Electricity Supply Corporation of Malawi (ESCOM) hence, the PPAs were signed by ESCOM as the single buyer at the time of amendment of the Electricity Act.

In the statement, Kambala also said despite opening up of the power sector to the IPPs, Government continues to participate in the market through the state owned company Electricity Generation Company (EGENCO). 

Kambala said: “In order to sustain the power supply from the existing power plants, there are maintenance and rehabilitation to existing power plants.”

“The plants that have recently been rehabilitated include Tedzani 3 and currently work on the rehabilitation of Tedzani 1 and 2 is in progress. EGENCO has also rehabilitated Nkula A.”

“Apart from the maintenance and rehabilitation, new projects are being planned and executed. One such project is the 18MW hydro power plant at Tedzani which started in 2018 and is expected to finish in 2021 with funding from the Japanese Government.”

Though Malawi’s new energy policy advocates for diversification of sources of power, hydro power remains the most attractive source considering its least cost operating cost despite its high investment cost.

EGENCO is currently planning to construct the Mpatamanga Hydro Power Plant, expand the Wovwe Power Plant, and set up the Kammwamba Coal Fired Power Plant.

Malawi’s Ministry of Energy says it is making progress in preparations for recruitment of energy officers in all the country’s districts.

The officers will, among other things, be responsible for presiding over energy related activities at district level including the Malawi Rural Electrification Program (MAREP).

Spokesperson in the Ministry of Energy Saidi Banda has told us that so far the Ministry of Energy has put together concept notes for the implementation of the initiative.

“The concept note contains the roles that District Energy officers are expected to perform in the districts, the initiatives Budget, and roadmap of activities to be carried out in implementing this initiative, among other things,” Banda said.

According to Banda, currently the Ministry is engaging Ministry of Local Government and Rural Development and other stakeholders to agree on how this initiative will be implemented.

The Ministry has therefore assured the general public that everything will fully be implemented by the end of 2021/2022 financial year.

“Since the implementation of this initiative is a huge process, the Ministry is hopeful that the implementation of this initiative will be completed in all districts within the 2021/2022 financial year which also covers the period that our Minister indicated,” he said.

According to the Ministry, individuals who will be qualified as Energy Officers are those that hold at least a Bachelors Degree in Renewable Energy or related fields, coupled with extension work skills.

Meanwhile, Banda has disclosed that their Ministry is struggling to discharge its duties due to the complications resulting from Covid-19.

As the tree planting season is still underway, Minister of Energy Newton Kambala took part in a tree planting exercise at Chitukula Community Day Secondary School in Area 25, Lilongwe.

This year’s tree planting season runs from December 15, 2020 to April 15, 2021, according to Ministry of Forestry and Natural Resources.

Kambala said in an interview he is interested in tree regeneration understanding that trees play a major role in conservation of water which is the main source of energy in the country.

He said: “That is why I was interested to encourage people to plant trees. We have planned to plant about 500 trees today and this is the beginning. We want to be doing this every year.”

“We want to encourage people in the country to participate in planting trees as illustrated by our President that we need to replace trees lost through firewood and charcoal.”

The Minister urged the members of the community to take care of the trees and ensure that no trees are lost due to poor management.

“We have engaged the Senior Chief to lead his subjects in taking care of the trees,” he said.

Kambala also announced that his Ministry has organised a series of tree planting exercises in Kasungu District this month.

In his remarks, Senior Chief Chitukula hailed the Minister for leading in the tree planting exercise in the area saying this will encourage the people to take care of the trees.

 “These trees will help the entire community in various ways including as a source of firewood and also protect the school blocks and houses from heavy winds,” said Chitukula.

Malawi loses nearly 30,000 hectares of forests annually while average national soil loss rate hovers at around 29 tonnes per hectare each year mostly due to increasing forest degradation, according to the Ministry of Forestry and Natural Resources.

Players in Malawi’s mining sector have expressed mixed reactions over African Development Bank’s (AfDB) stand against coal fired power generation.

AfDB President Akinwunmi Adesina this week called for a stop in the use of coal power across the continent and recommended a switch to renewable energy sources.

Speaking during United Nations (UN) climate talks on Monday during the Climate Change Summit (CCS) in Manhattan, India, Adesina called for a halt in operations of coal fired power plants and said AfDB will support the building of the largest solar zone in the world in the Arid Sahel belt.

He said renewable energy is sustainable and has the potential to benefit future generations.

He said in 2020 AfDB rolled out a US$500 million green baseload scheme which will assist African countries to shift from coal and fossil fuel to renewable energy.

But Minerals, Geology, Environment and Corporate Affairs Consultant Grain Malunga said the development would not affect the local coal mining industry, which is dominated by the private investors.

“AfDB’s wish to stop the use of coal as energy source will not have any impact to Malawi considering that local coal mines are not government owned, but are owned by private investors whose incomes do not go into government purse,” said Malunga.

While admitting that the coal industry is among the main atmospheric pollutants, MD for Rukuru Coal Mine Bruno kloser said while considering an outright shift to renewable sources, Malawi will still need coal in its energy mix in the short to medium term to power industries.

“Malawi just like many developing countries will still need coal for some time, while investing in alternative forms of energy like solar and wind,” said Kloser.

Ministry of Mining spokesperson Sangwani Phri said AfDB’s ban on the use of coal as energy source which was imposed in 2013 to fight global warming is not bearing fruits since the Bank is failing to assist poor countries to successfully develop to middle income status through adequate investment in renewable sources of power such as wind and solar.

He, therefore, said it could be helpful if the Bank had adequately invested in the alternative sources before the ban was affected.

“There are roughly 1.6 million people in developing countries and about 7 million in Africa with the remaining 500 million in South Asia who are keenly looking for cheaper energy sources. Local restrictions on blocking companies from mining coal will be a big blow to them, as well as their economies,” said Phiri.

The oil exploration and production subsector is considered as one of the industries with the potential to uplift Malawi’s economy. Mining & Trade Review’s Wahard Betha engaged Minister of Mining Rashid Gaffar to seek clarification on topical issues in the subsector. Excerpts:

1. There are concerns by some stakeholders on the size of Oil and Gas exploration blocks saying they are too big, and that they need to be re-demarcated. What is the government’s position?  Will you demarcate them?

Firstly, let me acknowledge that the Blocks are indeed big. However, this is the case because when the Blocks were being demarcated in 2009, the country did not have a substantial bank of data on the prospects of Oil and Gas. As a result of this, Malawi had to demarcate large Blocks which would help prospecting companies to study Geology of the country at large whilst trying to identify potential areas for Oil and Gas discovery.

Now that there has been exploration work going on with acquisition of some geological information and data, Government will consider re-demarcating the Blocks. You might also wish to know that during consultation meetings for review of Petroleum (Exploration and Production) Act of 1983, such issues were being raised and best international practices were being proposed by key stakeholders to be adopted in order to have sizable Blocks rather than what we currently have.

Should Government wish to re-demarcate the Blocks today, the process will only be applicable to the vacant Blocks and not those with active licences.

2. Following the relinquishment of oil and gas blocks 1 and 6, when should we expect the ministry to release advertisements of the blocks for investors to acquire the tenements?

You might be aware that the Ministry is working on revision and formulation of a number legal and regulatory frameworks. One of the key instruments is the Petroleum Exploration and Production Policy which had already gone through a number of review processes. It is the wish of Government to call for interested investors to make applications once the Policy is approved.

There are a number of issues that are outlined in the draft Policy designed to benefit local Malawians which Government is willing to implement. In this regard it is considered very important to wait for approval of the Policy which is expected to be done very soon then advertisement of the Blocks will be made.

3. I remember under the previous administration, there was an arrangement to review the Petroleum Sharing Agreement signed with Rak Gas because the existing agreement did not present a win-win situation between the investor and the nation. What is the position of the current administration? Are you going ahead with the review position?

It is the Government’s wish that all mining and petroleum contracts are anchored at the interests of Malawians at large. Re-negotiation of the signed Petroleum Sharing Agreement (PSA) started some years ago but it was put on hold pending finalisation of the draft model PSA. This was done so to ensure that the outcome of the re-negotiation should reflect the interests of Malawians as captured in the model PSA.

Currently, there is a draft model Petroleum Sharing Agreement (PSA) which the Ministry is working on with the Ministry of Justice and Constitutional Affairs to have it finalised. Once this is completed, Government will fast-track re-negotiation of all contracts that are deemed not properly signed.

4. There was also an arrangement to develop a standard petroleum sharing agreement for Malawi. How far have you gone with the process?

As alluded to in the above statement, there is a draft model PSA which was developed in consultation with the Ministry of Justice and Constitutional Affairs. There are also international development partners that are helping to review the draft model PSA to provide relevant expertise from international best practice perspective. Currently, the Ministry has planned a number of activities to have the model PSA finalised as soon as possible.

5. All in all, what is the position of the new government on oil exploration? Do you support oil exploration ventures?

The Tonse Government has total support for Oil and Gas exploration. As you are aware that currently, there is no any Oil and Gas discovery made. However, the sector has huge potential to boost economic status of the country if well managed when discovery of deposits of economic value is made. This is one of the sectors that many Malawians can be actively involved in their socio-economic activities ranging from businesses to employment.

Considering all economic benefits that the country can realise from the sector, Government is rendering all support it can in order to create an enabling environment for investment of both multinational Oil and Gas companies and local entrepreneurs.

6. Please provide any information you feel is important to enlighten Malawians on the reforms that government is undertaking in the upstream petroleum subsector. You may also provide any information that shades more light on the issue of oil prospecting in Malawi.

In preparation for the future Oil and Gas discoveries, Government is in support of the major reform areas in the sector. These include review of the Petroleum (Exploration and Production) Act of 1983, formulation of the Petroleum Exploration and Production Policy, formulation of model PSA and review of relevant laws such as Taxation Act to create a conducive environment for investors whilst ensuring maximum benefits to Malawians.

Malawians may also wish to note that the companies that have been operating in the country have been reporting good progress in terms of the Geology of the country in relation to Oil and Gas occurrence. There are target areas with high potentials which have been identified for further studies. Such developments are giving hope in search for Oil and Gas from the time the country did not have such information and data to present. Government is willing to support the investors until such a time breakthrough is achieved in the upstream petroleum sector.

Let all Malawians be assured that the Ministry is striving hard to have up to date legal and regulatory frameworks which aim at ensuring that Malawians are involved in the Oil and Gas cycle and they are benefiting from activities happening in the sector.

The construction of a solar power plant to supply Likoma Island with 24 hours of uninterrupted electricity has earned the Electricity Generation Company (EGENCO) praises.

Before the solar energy supply, Likoma and Chizumulu Islands were powered by 14-hour long diesel generated electricity.

Speaking during the opening ceremony of the power plant at Likoma, Traditional Authority (TA) Mkumbwa III thanked EGENCO saying that the new electricity supply plant will go a long away in developing Likoma Island.

He stressed the need for business people and even the government to invest in Likoma through the construction of hotels and other businesses so that the island develops through tourism.

CEO for EGENCO William Liabunya said that the power utility constructed the solar powered plant to do away with the high environmental risk associated with diesel generated electricity as well as to avert the danger of using and storing diesel.

“It was costly to bring diesel to the Island. The logistics of getting the diesel in drums, into a ship then offloading and floating them to land. It was very costly and dangerous.” he said

Liabunya remarked that the coming in of the 24 hours’ solar electricity has improved the socio-economic life of the people of the two islands while ENGECO has reduced the costs of managing diesel engines.

ENGECO was using 17 million Kwacha every month to supply electricity to the islands for 14 hours only.

EGENCO has invested K3.2 billion in the solar project but Liabunya said that the project is worth the investment as the power plant will operate for many years.

Energy Minister Newton Kambala said that his ministry is commitment to supply energy to the nation and that he was very happy to supply Likoma Island with 1000 kilowatts while Chizumulu Island has received 300 killowatts.

Kambala acknowledged the developments activities that the power supply project has triggered for the islands and has since promised to liaise with the Ministries of Public Works and Transport, Tourism, Education and Health to coordinate on development activities for the islands.

He said Likoma Island is a beautiful place that can bring a lot of revenue to the country through tourism and hence the government will ensure that it develops.

“This is a very good place where we can attract a lot of tourists if we can invest in proper infrastructure in terms of hotels and good roads, this can bring into the country the much needed forex,” he said

EGENCO has so far pleaded with the people of Likoma to take care of the power plant and not to vandalize the panels in order to ensure a sustainable power supply. TA Mkumbwa has since said that the Chiefs of the area will see to it that the power plant is safeguarded.

The 3.2 billion project started in August 2019 and was expected to end in July 2020 but was delayed by logistical complications related to the Covid-19 outbreak which restricted some technical teams from coming to the country. The solar plant was constructed by NR Electricals, a Chinese Contactor.

Minister of Energy Newton Kambala says the Malawi government is working on scaling up energy production through a diversification drive from overdependence on hydropower to embrace various sources of energy.

The Minister said this at a press conference held Saturday by the Ministry in conjunction with power utilities the Electricity Supply Corporation of Malawi (Escom) and Electricity Generation Company (EGENCO) to give an update on the country’s efforts to ensure adequate supply of electricity across the nation.

The minister clarified that government has plans to connect people without electricity to the national grid using power generated through hydro, fuel, solar, gas among other sources of energy.

“The energy situation is currently progressing well since when the grid is fully loaded, it only remains with a deficit of about 50 MW,” Kambala said.

He said as the demand for electricity continues to grow, government is coming up with more interventions to deal with the demand and take care of any inefficiencies.

He said there is progress on the construction of a coal fired plant at Kammwamba in Neno, which is meant to give the country about 300 Megawatts of electricity and Mpatamanga Hydropower Plant that is to provide 350 Megawatts.

“Once done, these projects have the capacity to generate in excess of a gigawatt,” he said stressing; “with this, we will see more investors coming to the country.”

Kambala said that his ministry has plans to decentralize the Department of Energy’s activities for more efficiency on the ground.

To achieve an efficient decentralised structure, the minister said that there are plans to recruit energy officers who will be placed in each and every district of the country with an aim of meeting goals of Malawi Rural Electrification Program (MAREP).

“These officers will fill an existing void where the rural areas do not have qualified personnel responsible for determining where to connect electricity,” said the minister assuring the nation of accountability and transparency in the process of accessing electricity.

The Public Private Partnership Commission (PPPC) says construction of the 350 MW Mpatamanga hydro-power plant will start mid-next year.

PPPC Acting Executive Director Audrey Mwala said procurement of a prospective investor for the new hydro-power plant on Malawi’s biggest and longest river, the Shire, is currently underway.

“We rolled out the procurement exercise mid-2020 and we are hopeful that everything will be completed by the end of the year,” Mwala said.

She explained that upon completion of the procurement process, the selected investor will have six months to identify a contractor with expertise and capacity to construct the power plant as planned.

Mwala said PPPC is committed to speeding up the processes in an effort the rid the country of the intermittent power outages it continuously faces and boost its trade and industrial sectors.

Construction of the Mpatamanga power plant site is expected to last for not more than four and a half years.