NAIROBI, Kenya, November 5, 2020/ -- COVID-19
has highlighted the extent of the critical energy gap in Africa, where
diversification is needed to ensure more stable and broader energy
access; Malawi’s USD67 million Nkhotakota Solar Power Plant, backed by
an international consortium, is expected to set a regional standard and
considerably reduce the country’s energy deficit; This is the 2nd
renewable energy project supported by ATI’s Regional Liquidity Support
Facility (RLSF), designed to cover the late-payment risks of publicly
owned power utilities.
The COVID-19 pandemic has shown the
urgency to ramp up energy access and to diversify the existing energy
mix in many African countries. In sub-Saharan Africa, electricity access
stands at just 43%, or roughly 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 USD67 million solar power project in Malawi, which is 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 a significant 37
MWac of clean energy to the 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 to be backed by
the African Trade Insurance Agency’s (ATI) Regional Liquidity Support
Facility (RLSF). ATI, through the RLSF, is providing liquidity cover for
a tenor of up to 10 years. The completed project will supply
electricity for up to 150,000 Malawian households.
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 station 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 (IPPs) against the risk of late payment by national power
companies.
The Nkhotakota Solar Power Plant is part of the
Malawian government’s plan to move the country from its reliance on
hydropower, which currently represents over 90% of its energy mix.
Hydropower has left the country vulnerable to frequent power supply cuts
in times of drought. The solar power plant aims to provide a more
sustainable solution for stable and consistent energy access.
The
project stems from Malawi’s first competitive tender in the power
sector leading to 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 tender process demonstrates global best practise and serves
as a potential model for the region in attracting critical foreign
direct investment to the sector.
The international consortium
behind the project consists of two project developers, Kenya-based
responsAbility Renewable Energy Holding (rAREH), the primary equity
partner providing equity financing and UAE-based Phanes Group. The two
developers are collaborating with the U.S. International Development
Finance Corporation (DFC) – formerly the Overseas Private Investment
Corporation (OPIC) – which is contributing debt financing, and Natsons
which is the local development partner.
In 2017, ATI and the
German Development Bank, KfW, with financing from the German Federal
Ministry for Economic Cooperation and Development (BMZ), launched the
RLSF. The Facility was created to help tackle climate change and attract
investments by supporting renewable energy projects in ATI’s member
countries. RLSF has an initial capacity of EUR 63.2 million and it
supports small and mid-scale renewable energy projects with an installed
capacity of up to 50 MW (and in exceptional cases up to 100 MW) by
protecting the developers against the risk of delayed payments by public
off-takers to ensure more projects reach financial close.
The
Facility can be accessed by IPPs located in countries that sign onto the
RLSF Memorandum of Understanding (MoU). To date, seven countries have
signed on – Benin, Burundi, Côte d’Ivoire, Madagascar, Malawi, Uganda
and Zambia, with several others in the pipeline including Ethiopia and
Ghana. ATI is actively encouraging other countries to sign on as a way
of providing more cost-effective and clean energy solutions.
QUOTE from Benjamin Mugisha, Chief Underwriting Officer, ATI“COVID-19
has laid bare the link between social infrastructure and economic
development. Access to adequate electricity underpins both. This project
demonstrates that there is still opportunity and demand for renewable
energy projects in Africa. ATI is excited to be part of this potentially
transformative project, particularly now, when it is so important to
show the world that it is still possible to build sound renewable energy
projects that can have lasting change.” QUOTE from Dr. Thomas Duve, Director - Southern Africa, KfW“The
investments required to meet Africa´s growing demand for sustainable
energy based on renewables is far greater than the funds available from
public sources. But African governments and their development partners
can facilitate the private sector investments necessary to bridge this
gap. Together, we can build stable, predictable enabling frameworks and
we can offer targeted de-risking instruments. KfW’s support with funding
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 address the fundamental
challenges of energy access, energy security and climate change.”QUOTE from Martin Haupts, CEO, Phanes Group“Lack
of power increased the challenges that Malawi faced during the COVID-19
pandemic. This project demonstrates that solar energy offers a viable
path to bringing power to those communities which need it most,
supporting social and economic development. We are thankful to all the
partners in the Nkhotakota project, who have been instrumental in
realizing our aim to electrify new markets in Africa. Our goal is for
this project to serve as a model for future private investment into the
local solar sector.”QUOTE from Chris Bale, CEO, rAREH“rAREH
is delighted to be working with our partners to actualize this project.
rAREH is committed to long-term investments to renewable power plants
in Africa. We very much look forward to continuing to work with the
government and people of Malawi to fulfil the country’s appetite for
clean, economical renewable power.”QUOTE from Andrew Herscowitz, Chief Development Officer, U.S. International Development Finance Corporation (DFC)“We
are pleased to support this important project, which will help expand
renewable power generation to benefit the people of Malawi. Increasing
electricity generation and access are key to increasing economic growth
in Malawi. This project is a great example of the U.S. Government coming
together, with DFC building on the work of the U.S. Agency for
International Development and Power Africa as well as the Millennium
Challenge Corporation, to facilitate private sector investment to
support prosperity.”
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