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(MENAFN – African Press Organization) NAIROBI, Kenya, November 5, 2020 / APO Group / –
COVID-19 has highlighted the magnitude of the critical energy gap in Africa, where diversification is needed to ensure more stable and broader access to energy; Malawi’s Nkhotakota solar power plant, backed by an international consortium, is expected to set a regional standard and significantly reduce the country’s energy deficit; This is the second renewable energy project supported by ATI’s Regional Liquidity Support Service (RLSF), designed to cover late payment risks for publicly owned power companies.
The COVID-19 pandemic has demonstrated the urgency of increasing access to energy and diversifying the existing energy mix in many African countries. In sub-Saharan Africa, access to electricity is only 43%, or about half the global access rate. While challenges remain, COVID-19 is also revealing the importance of increasing more affordable renewables within the energy mix. A recently announced US $ 67 million solar power project in Malawi, backed by an international consortium, is leading the charge.
The Nkhotakota Solar Power Plant, one of Malawi’s first commercial-scale independent solar power projects, is expected to add 37 MWac of clean energy to national capacity, currently estimated at 362 MWac. The solar plant, which is being developed in two phases of 21 MWac and 16 MWac, is the second renewable energy project supported by the Regional Liquidity Support Facility (RLSF) of the African Commercial Insurance Agency (ATI). ATI, through the RLSF, provides liquidity coverage for a term of up to 10 years. The completed project will supply electricity to up to 150,000 homes in Malawi.
The first project to benefit from RLSF was a partnership with Gigawatt Global on Burundi’s first private grid-connected solar plant, which was the country’s first permanent power plant in 30 years. RLSF encourages investments in renewable energy in ATI member countries through a unique and innovative guarantee product that protects Independent Power Producers (IPP) against the risk of late payments from national electricity companies.
The Nkhotakota solar power plant is part of the Malawian government’s plan to lift the country out of its dependence on hydroelectric power, which currently represents more than 90% of its energy mix. Hydropower has left the country vulnerable to frequent power outages in times of drought. The solar power plant aims to provide a more sustainable solution for stable and constant energy access.
The project stems from Malawi’s first competitive tender in the energy sector that resulted in a 20-year Power Purchase Agreement (PPA) signed between the project company and Malawi’s national utility Electricity Supply Corporation of Malawi Limited (ESCOM), in February 2019. The successful bidding process demonstrates global best practices and serves as a potential model for the region in attracting critical foreign direct investment to the sector.
The international consortium behind the project is made up of two project developers, Kenya-based responsAbility Renewable Energy Holding (rAREH), the main equity partner providing equity financing, and UAE-based Phanes Group. The two developers are collaborating with the U.S. Development Finance Corporation (DFC), formerly Overseas Private Investment Corporation (OPIC), which is contributing to debt financing, and Natsons, which is the partner of local development.
In 2017, ATI and the German Development Bank, KfW, with funding from the German Federal Ministry for Economic Cooperation and Development (BMZ), launched the RLSF. The Fund was created to help address climate change and attract investment by supporting renewable energy projects in ATI member countries. RLSF has an initial capacity of 63.2 million euros and supports small and medium-scale renewable energy projects with an installed capacity of up to 50 MW (and in exceptional cases up to 100 MW) protecting developers against the risk of delays in public buyer payments to ensure more projects reach financial closure.
IPPs located in countries that sign the RLSF Memorandum of Understanding (MoU) can access the Facility. To date, seven countries have signed in Benin, Burundi, Côte d’Ivoire, Madagascar, Malawi, Uganda and Zambia, with several others pending, including Ethiopia and Ghana. ATI is actively encouraging other countries to join as a way to provide clean and more cost-effective energy solutions.
QUOTE from Benjamin Mugisha, ATI Underwriting Director
‘COVID-19 has exposed the link between social infrastructure and economic development. Access to adequate electricity supports both. This project shows that there are still opportunities and demand for renewable energy projects in Africa. ATI is excited to be a part of this potentially transformative project, particularly now when it is so important to show the world that it is still possible to build strong renewable energy projects that can make lasting change.
QUOTE from Dr. Thomas Duve, Director – Southern Africa, KfW
“The investments required to meet the growing African demand for sustainable energy based on renewable energy are much greater than the funds available from public sources. But African governments and their development partners can facilitate the private sector investments needed to close this gap. Together, we can build stable and predictable enabling frameworks and we can offer specific risk elimination instruments. KfW’s support with funds from the German Federal Ministry for Economic Cooperation and Development (BMZ) to the RLSF demonstrates our commitment to this process and to the development of a sustainable energy market in Africa. Only with that in place can we tackle the fundamental challenges of energy access, energy security and climate change.
QUOTE from Martin Haupts, CEO, Phanes Group
‘The lack of power increased the challenges Malawi faced during the COVID-19 pandemic. This project demonstrates that solar energy offers a viable way to bring energy to the communities that need it most, supporting social and economic development. We thank all the partners of the Nkhotakota project, who have been instrumental in achieving our goal of electrifying new markets in Africa. Our goal is for this project to serve as a model for future private investments in the local solar sector.
QUOTE from Chris Bale, CEO, RAREH
‘RAREH is pleased to work with our partners to update this project. rAREH is committed to long-term investments in renewable power plants in Africa. We look forward to continuing to work with the government and people of Malawi to satisfy the country’s appetite for clean and affordable renewable energy.
QUOTE from Andrew Herscowitz, Director of Development, US Development Finance Corporation (DFC).
“We are pleased to support this important project, which will help expand renewable energy generation for the benefit of the people of Malawi. Increased generation and access to electricity is critical to increasing economic growth in Malawi. This project is a great example of the US government joining together with DFC building on the work of the US Agency for International Development and Power Africa, as well as the Millennium Challenge Corporation, to facilitate the private sector investment in support of prosperity.
Distributed by APO Group on behalf of African Trade Insurance Agency (ATI).
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