By Bester Kayaye
Mchenga Coal Mine is scouting for strategic investors in the development of its 100MW Rukuru Coal Fired Power Plant, which is expected to be constructed close to the M1 Road in Rumphi within the vicinity of the coal mining site.
Mchenga Coal Mine GM Lincoln Bailey is quoted in the Malawi Investment and Trade Centre (MITC) Investment Projects Compendium Volume 4 as saying that they are seeking equity partners to invest in development of the plant which will comprise two power generating units (each with a rating capacity of 50 MW) fuelled by coal largely from the Mchenga Mine mixed with coals from other mines.
Bailey explains that the project which is planned to supply power to the national grid will be executed in two phases, with the initial 100MW capacity representing the first phase of a targeted 250MW plant.
“Critical to the project’s success is the construction of the new Bwengu Substation, situated 65 kilometers south of the project site, adjacent to the M1 Road, and a 132kV outgoing transmission line linking the power plant to the new Bwengu Substation,” he says.
A feasibility study conducted by leading engineering consulting Fichtner indicates that the project can be effectively integrated into the national power grid, pending the negotiation and signing of a Power Purchase Agreement (PPA) with the Electricity Supply Corporation of Malawi (ESCOM).
Bailey says: “The CPL-Mchenga coal mining operations, a key supplier of coal for the Rukuru Power Plant, are situated in the Livingstonia Coalfield in Rumphi District, approximately 20 kilometers north of Mzuzu, Malawi’s northern capital. The power plant itself will be strategically positioned just 500 meters from Lake Malawi, making it a significant contributor to the region’s power needs.”
“The Rukuru Power Plant project aligns with the government’s objectives of economic development and energy security. Malawi currently grapples with a severe power deficit, hampering its economic growth and development. By supplying firm baseload power to the national grid, the Rukuru Power Plant aims to address these issues and meet the escalating demand for electricity in the country.”
“The project is not only economically viable but also promises numerous social benefits, including improved electricity supply reliability. It is poised to contribute substantially to the nation’s energy security, fostering a conducive environment for business growth and prosperity.”
He says in order to bridge the project’s funding gap, the project promoters are seeking a term loan of US$146.4 million while equity and strategic investors are also being courted to support the endeavor’s financial needs.”
Meanwhile, the Rukuru Power Plant project has already achieved significant milestones, including signing of a Memorandum of Understanding (MOU) with the Malawi government and an Engineering, Procurement, and Construction (EPC) Contract with Power Construction Corporation of China.
“Additionally, a Memorandum of Understanding and Power Purchase Agreement Term Sheet has been agreed upon with ESCOM,” says Bailey.
The project has undergone rigorous feasibility assessments, including a bankable feasibility study, financial model development, and an Environmental and Social Impact Assessment (ESIA). While a Partial Risk Guarantee from the African Development Bank (AfDB) was initially secured, it was later withdrawn due to pressure from the AfDB’s European and American funders who have imposed bans on coal-related funding.
The Rukuru Power Plant project demonstrates a promising Internal Rate of Return (IRR) of 10.2%, a Net Present Value (NPV) of US$27,893,761, and a Payback Period of 10.8 years.
In a related development, a locally registered firm Lone Star Energy is also scouting for investment partners to embark on the construction of a coal fired power generation plant in Rumphi district.
Listing on the Malawi Investment and Trade Center (MITC) investment projects compendium volume 4, the company is seeking a minimum investment of $90-million to fund the procurement and installation of a state-of-the-art power plant in the picturesque district of Rumphi.
MD for Lone Star Energy John Swira says the ambitious endeavor, which is poised to transform the energy landscape in Malawi, offers a unique opportunity for investors to engage in a low-risk venture with promising annual returns.
Swira explains that Lone Star Energy has already demonstrated its commitment by investing over $10-million to date and has received the green light from the Malawi government to conduct a comprehensive feasibility study.
He says: “The project has now reached a pivotal stage where it can extend its hand to new investors, offering them the prospect of owning a substantial share of Lone Star Energy Ltd, a Malawian registered company poised to revolutionize the energy sector in the region.”
“The ownership stake on offer ranges from 40% to 60%, providing investors with a significant influence on the company’s direction and future profitability.”
“One of the most significant beneficiaries of this venture will be the government of Malawi itself, as it has been earmarked as the primary buyer of the electricity generated by Lone Star Energy. This initiative is anticipated to address the acute shortage of electricity in the country, acting as a catalyst for economic growth across all sectors.”