Mining & Trade News

The Electricity Supply Corporation of Malawi (ESCOM) and the Electricidade de Mozambique E.P (EPM) are inviting sealed bids from eligible bidders for the construction of a power interconnector from Matambo Substation in Mozambique to Phalula substation in Balaka, Malawi.

The assignment will be financed by the World Bank administered Norwegian Trust Fund, the World Bank, the European Union, and Germany Technical Cooperation through KFW.

Bidding will be conducted through international competitive procurement using a Request for Bids (RFB) as specified in the World Bank’s Procurement Regulations and is open to all eligible bidders as defined in the Procurement Regulations.

The deadline for submission of bids is September 22, 2020.

The US$127-million project entails the construction of a 218 km power interconnector, thus 142 km in Mozambique side and 76 km in Malawi side.

The project will interconnect Malawi and Mozambique’s transmission systems to enable them to engage in bilateral and regional power trade through the Southern African Power Pool (SAPP).

Mozambique expects electricity exports to Malawi to begin in 2022 and the Tete-Phombeya line will also to be used to supply electricity to towns and villages located along its route in Mozambique.

Malawi’s interest in buying electricity from Mozambique was formalised in 1998 with the signing of a memorandum of understanding in its capital city Lilongwe.

This project will fund Malawi’s first interconnection to the SAPP, which is the first and the most advanced power pool in the continent providing an alternative to domestic electricity generation to improve energy security.

The interconnector will help address Malawi’s sectoral challenges, including chronic electricity supply deficits and ensure security of supply as well as reliability and affordability of electricity through imports from Mozambique and, in the future, other SAPP members.

It also reduces the potential for a power crisis based on droughts affecting the Shire River which produces up to 99% of Malawi’s electricity and addresses the need for back-up in the form of diversified external sources of power.

Malawi has prequalified a consortium comprising SN Power Invest Netherlands B.V and Electrite De France SA (SN Power and EDF SA) as a strategic partner for the construction of the 350MW Mpatamanga Hydropower Project on Shire River.

Malawi’s Public Private Partnership Commission (PPPC) Acting CEO Audrey Mwala says in a Press Statement that after successfully passing the prequalification stage, the consortium has subsequently been invited to submit a proposal.

“During the next and final phase of the tender process, the bidder will be required to submit a proposal that demonstrates, to the Government’s satisfaction, the bidder’s capability and commitment to implement a project that is reliable and affordable for the people of Malawi,” says Mwala.

The Malawi Government intends to develop the 350MW hydropower project under a Public Private Partnership (PPP) project finance development model which will require the selected investor to form a special purpose vehicle to build and operate the power plant.

The strategic partner is expected to have 70% shareholding in the project while state-owned Electricity Generation Company (EGENCO) will retain 30%.

Mwala says a total of the 15 firms submitted expressions of interest for the project but the two European energy firms were prequalified after they teamed up and submitted a joint bid as a consortium.

The Project will consist of two hydro power plants: a main power plant, main dam and reservoir with daily storage capacity capable of generating 309MW of electricity on a peaking basis; and a regulating dam with a hydro power plant capable of generating 41MW of base load electricity, downstream from the main reservoir and power plant.

The Malawi Government partnered with the World Bank’s International Finance Corporation (IFC) as co-developer to undertake early stage development activities for the Project, including the preparation of Project Agreements, technical, environmental, and social studies and reports.

A comprehensive World Bank-financed feasibility study for the project was completed in 2018.

The Malawi Government conducted the PPP feasibility study under the PPP Act, whose report was approved by the Ministry of Finance on October 31, 2019.

The Malawi Government says procurement of an Engineering, Procurement and Construction (EPC) contractor for the Mozambique-Malawi power interconnector will be finalized by December 2020.

“Under the Malawi-Mozambique Interconnector Project, the two power utility companies, ESCOM Ltd and EDM of Mozambique negotiated   and   signed   commercial agreements, including the Power Purchase Agreement. The procurement of the EPC Contractor is underway and is expected to be finalised by December, 2020,” said Minister of Finance, Economic Planning and Development Joseph Mwanamveka in his presentation of the 2020/2021 national budget.

Mwanamveka said preparations for feasibility studies for the construction of the Zambia-Malawi Power Interconnector are also underway on the Zambian side and will be used to update the feasibility study report on the Malawian side which was done a few years back.

The Malawi Government is also developing a 350MW hydropower project at Mpatamanga gorge on the Shire River under a Public Private Partnership arrangement.

Mwanamveka said currently, the process of identifying the main private investor is in progress and is expected to be completed by September, 2020.

He also said in the 2019/2020 fiscal year, Government established a new company called Malawi Power Market that will replace ESCOM as a single buyer of all generated electricity.

“This company will enable other players to enter into the power market as distributors,” he said.

He said in the near term the sectors that will drive growth include Agriculture; Wholesale and Retail trade; Mining and Quarrying; Electricity, Gas and Water; Information and Communication; and Financial and Insurance Services.

The Ministry of Finance and Economic Development has allocated K61.4 billion to boost operations of Energy, Industry and Tourism sectors representing 3% of the total budget in the 2020/2021 fiscal year.

Malawi’s 2020/2021 budget is titled “Economic Recovery, Mitigation and Building Resilience” and its priority areas include Economic growth, job Creation and Infrastructure Development.

In the Budget, the Minister has pegged country’s expenditure for the year 2020/2021 at K2.023 trillion representing 28.3% of GDP and an increase of 9.9% over the 2019/2020 midyear revised estimate.

The Electricity Generation Company (EGENCO) says it is recording tremendous progress in the Chizumulu and Likoma Islands solar electrification project despite the challenges posed by the coronavirus (Covid-19) pandemic.

Senior PRO for EGENCO Moses Gwaza says currently overall progress of the work is at 39% for Likoma and 31% for Chizumulu.

“We are making progress, the Islands Solar Power Supply project is taking shape despite logistical challenges posed by the pandemic,” he says.

Gwaza explains that, among other things, Covid-19 affected manufacturing and shipment of some components needed in the plants.

“At some point in time, the progress of the project was at a standstill as contractors’ site officers were locked down in China and were in self quarantine upon arrival in Malawi,” says Gwaza.

He says, further to that, the project faced the challenge of flooding of the sites due to heavy rains as well as delays in tax waiver approval for equipment and other materials.

The solar project is being solely funded by EGENCO to the tune of about US$4-millon.

The project started on August 15, 2019 and was scheduled for completion by July 15, 2020 but Gwaza says the contract duration may be extended due to the logistical challenges posed by the global pandemic, which has forced airlines to suspend international flights and many countries to close their boarders.

Once completed, the solar-diesel hybrid plant is expected to supply electricity for the whole day to the people of Chizumula and Likoma who were having only 14 hours of electricity per day.

The Electricity Generation Company (EGENCO) says construction of Tedzani IV Hydropower plant is ahead of schedule despite coronavirus disease (COVID-19) woes.

EGENCO says in a statement posted on its Facebook page that boarder restrictions imposed by a number of countries as a containment measure against the pandemic is making it difficult for the company to import equipment for the project.

However, EGENCO states that if the situation improves and equipment starts flowing into the country smoothly, the project will be completed way ahead of time.

“Currently, 84% of the works at the Tedzani hydropower plant have been finished, and the contractor is engaged in final power house civil works, continuing spiral case and turbine installations,” reads the statement from the power utility.

The project is scheduled to be commissioned in September 2021 but EGENCO says with the outstanding progress being made, the 18MW plant may be commissioned in February 2021, all things being equal.

The project is being financed using proceeds of a Japanese grant of US$52-million while EGENCO is contributing US$4.8-million.

Japanese contractor Mitsubishi Corporation is executing the civil works for the power plant in a joint venture arrangement with Calik Enerji of Turkey.

The Ministry of Natural Resources and Mining says it has finalised working on the draft upstream petroleum policy, and the document will soon be submitted to Cabinet for final deliberation and approval.

Head of Oil and Gas Desk at the Ministry Cassius Chiwambo told Mining & Trade Review that the draft Petroleum Policy has already been approved by the Principal Secretary’s Committee on Natural Resources and Mining.

Chiwambo said: “Government with technical support from the Commonwealth Secretariat conducted a series of consultative meetings in the country that attracted views from the public that were used as key instructions for the development of the draft policy.”

“Meanwhile, the Government finished working on the Draft Policy and we are just waiting for the Ministry’s wish that the Draft Policy be tabled by the Cabinet Committee as soon as the Committee meets.”

To ensure that the Draft Policy meets both domestic and international standards, Chiwambo explained that the Government conducted further review and legal consultations on policy issues that seem to be in conflict with entire Laws of Malawi and international best practice.

Chiwambo said the Policy has been crafted to ensure that there is a win-win situation between Malawi and multinational oil exploration and production firms.

“The Draft Petroleum Policy cites quite a number of national fundamental principles such as Resource Ownership and Development, Local Participation, Local Content (Proposing for a Local Content Policy) issues; including Corporate Social Responsibility, Environmental Standards, Transparency Issues and Measures, Capacity Development and many others,” he said.

Chiwambo said in the drafting process, the Ministry considered the Triple Bottom-line Principle as per the technical and legal advice submitted to Government of Malawi by the International Atomic Energy Agency (IAEA) Special Resource Classification Team in 2015.

He said the technical and legal advices focused on the three axis of Geological, Socio-Economic Development and Feasibility.

“Looking at some of the areas which are considered in the Policy, we can see that both Multinational Cooperatives (MNCs) and Malawians will benefit a lot. It is the desire of Malawi Government to ensure a win-win take as supported by the African Mining Vision (AMV) and the Agenda 2063 of Sustainable Development Goals (SDGs),” he said.

Malawi’s part of the Great African Rift Valley is classified as a potential area for oil exploration following the discovery of oil in countries such as Rwanda, which are part of the geological set up.

The Malawi Government divided the area into six oil prospecting blocks that were awarded to multinational exploration firms. The government awarded Block 1 located in Chitipa and part of Karonga to Efora Energy formerly SacOil, Block 2 and 3 located in Karonga, Nkhata Bay and Nkhotakota to Hamra Oil, Block 4 and 5 located in Dedza, Mangochi, Balaka and Machinga to Rak Gas and Block 6 located in lower shire to Pacific Oil and Gas.

However, Efora Energy and Pacific Oil and Gas later relinquished their licenses. Chiwambo said government will issue the licenses for the two blocks to interested investors in line with the international best practices and desirable standards that were proposed by Malawians during the consultative forums and many other information sourcing streams.

“The Ministry plans to release another advert to identify new investors for these blocks once it is ready,” he said.

The Ministry is also working on reviewing the Petroleum (Exploration and Production) Act of 1983 which is considered outdated as it was drafted before the country planned to go into petroleum exploration and production.

Chiwambo explained that the process of reviewing the Act commenced some years back, and the Ministry is now at an advanced stage in executing the process.

He said: “The Ministry with technical support from Commonwealth Secretariat conducted a diagnostic assessment of the current Act to identify gaps in it, and several issues were identified for reform in light of the Policy (Draft) and international best practices.”

“The new Act will ensure harmonization with the principles enshrined in the Policy (Draft), the African Mining Vision and international best practices for the sustainable management of natural resources. These principles are capable of supporting the government to achieve the Sustainable Development Goals (SDGs) and the Agenda 2063.”

He said in the coming Act, resource ownership will be vested in the state of behalf of the people on Malawi while in the existing Law of 1983, it is vested in the Life President on behalf of the people of Malawi.

“In the new Act, the entire property of petroleum, in, under or upon any land or waters in Malawi will be vested in the Republic; but without prejudice to the exercise of any right under or pursuant to the Act.”

The new Petroleum Act will also address issues to do with transparency and accountability, good governance, balanced fiscal regime, maximization of local content and environmental sustainability among several other issues.

EGENCO says it is uncertain on when one of its four machines at Kapichira Power Station will get back online as its spare parts are failing to find a flight through which they can be shipped from Germany due to the Corona Virus outbreak, which has culminated into the suspension of many international flights.

This was revealed on Friday March 27 during a familiarisation tour of the power Station by the newly appointed Minister of Energy Atupele Muluzi.

Egenco CEO William Liabunya said the power generation company is currently maintaining two machines at Kapichira site that contribute 64.8MW to the national grid but spare parts for one of the machines are failing to arrive in the country from Germany where they were manufactured due to cancellation of flights amidst COVID-19 pandemic.

Liabunya said: “The company ordered some spare parts to be manufactured in Germany, and we are told that they are ready, but due to the pandemic it has been difficult to transport the parts into the country, and we were also anticipating commissioning engineers for these parts to come from Germany whose travel depends on the COVID-19 situation,” he said.

“The pandemic has also affected the country’s power construction projects including Likoma and Chidzumulu Island Solar hybrid projects which have been halted as the contractor is from China and is failing to ship in some required equipments.”

However, Liabunya said EGENCO is, currently, installing repaired parts of one machine that underwent specialized repairs in South Africa and arrived in the country on Wednesday March 25.

“At least we are on course of installing repaired parts for one of the machines that have arrived in the country before movement restrictions were effected in South Africa and we are expecting to complete this task within the next 10 days, where upon its completion 32.4MW will be added to the national grid,” he said.

Meanwhile Egenco is set to review its quarterly strategic plan, in which among others, it is to table various power projects including Salima Solar and Kamwamba Coal fired.

Muluzi commended EGENCO’S efforts made to install and repair malfunctioning machines which he said will help to mitigate load shedding.

“It was extremely important as a Minister of Energy to ascertain what is really causing continued blackouts in the country but good news is that parts are in, being fitted and an additional 32.4MW will be added to national grid in the course of a week or so,” he said.

Muluzi reiterated that his Ministry is also working with ESCOM and other key stakeholders to find long lasting solutions to load shedding as well as ensure more reliable power.

In the wake of the Covid-19 outbreak which has prompted countries to close boarders in so doing disrupting imports of essential commodities, the Malawi Energy Regulatory Authority (MERA) saysMalawi has sufficient internal fuel stock cover for approximately two months.

In a statement issued on its Facebook page, CEO for MERA Collins Magalasi explains that the country has sufficient petrol stock cover equivalent to 43 days and diesel of up to 83 days.

Magalasi says: “MERA would like to inform the public that the country continues to receive Liquid Fuels and Gas (LFG) from the ports of Beira, Nacala and Dar es Salaam without restraint; and stakeholders in the fuel supply industry are alert to ensure an effective and efficient response to any impending disruption to LFG supply.”

He says although the country has not registered any case of Covid-19, the pandemic requires a strategic approach in preparedness, management and recovery of a potential fuel and gas supply disturbance.

Magalasisays as one way of fighting the virus, MERA has activated the National Emergency Response Plan that will involve working with the National Liquid Fuels and Gas Emergency Management Committee and Operations Management Group which are provided in the response plan.

He applauds all key stakeholders and players in the fuel sector for their rolein facilitating sufficient fuel stock in Malawiwhile the country is under the threat of the pandemic.

“MERA thanks all fuel importers, transporters, oil marketing companies, retailers, government ministries and departments, banks and all stakeholders for the great coordinated approach that has been taken and resulted in our country having healthy fuel stocks at a time that the world is under the coronavirus threat,” he says.

Magalasipledges to continue updating the public of the fuel supply situation in the country when necessary.

The COVID-19 pandemic has resulted in the declining of fuel prices on the international market forcing countries like Malawi to lower its fuel prices.

MERA recently slashed diesel prices from K924 per litre to K887 per litre while the price of paraffin was reduced from K710 to K693 per litre but that of petrol has been maintained at K930 per litre.

The Authority stated that the changes in the prices of diesel and paraffin were in line with the Automatic Pricing Mechanism (APM) where the two fuel’s landed costs were beyond the plus minus five percent trigger limit. 

Malawi Government’s strategic fuel reserves have a storage capacity of 60-million litres translating to 60 days’ stock cover, and there are plans to raise the capacity to 90-million litres thus 90 days of fuel stock cover.

Electricity Generation Company of Malawi (EGENCO) has contracted German Company Fichtner GmbH to execute consultancy services to review and update the feasibility study for Kammwamba Coal Fired Power Plant in Neno.

EGENCO says in a statement that Fichtner emerged a preferred consulting firm for the assignment after submitting a Unit Price for the contract of 925,536 Euros.

The Company says unsuccessful bidders wishing to request for a debriefing session may submit their request in writing before March 24, 2020.

The Kammwamba project, which is expected to utilize coal imported from Mozambique’s Moatize Coalfield, is designed to produce 300MW of electricity.

Fichtner is the leading independent engineering and consulting company for the energy and technical infrastructure projects in Germany.

Fichtner technical discipline includes completing in-house engineering of hydropower plants of all types and capacities, comprising feasibility studies, design, procurement and site supervision both Greenfield and rehabilitation among other activities.

Initially, Government tried to engage China Gezhouba Group of company to construct the coal fired power plant with funding from Export and Import (Exim) Bank of China.

Currently EGENCO operates four hydro power stations, Nkula, Tedzani, Kapichira and Wovwe.

It has total installed capacity of 372.64MW with 350.94MW from hydro plants and 21.7mw from standby diesel powered plants.

EGENCO was established following the unbundling of Electricity Supply Corparation of Malawi (ESCOM).