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(MENAFN – African Press Organization) NAIROBI, Kenya, November 5, 2020 / APO Group / –
COVID-19 highlighted the extent of the critical energy gap in Africa, where diversification is needed to ensure more stable and broader access to energy; The $ 67 million Nkhotakota solar power plant in Malawi, 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 Facility (RLSF), designed to cover the risks of late payment of utilities.
The COVID-19 pandemic has shown the urgency to increase access to energy and to diversify 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 the challenges remain, COVID-19 is also revealing the importance of increasing more affordable renewables within the energy mix. Leading the charge is a recently announced $ 67 million solar energy project in Malawi, backed by an international consortium.
The Nkhotakota solar power plant, one of Malawi’s first commercial-scale independent solar energy 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 under development in two phases of 21 MWac and 16 MWac, is the second renewable energy project supported by the African Trade Insurance Agency (ATI) Regional Liquidity Support Facility (RLSF). ATI, through the RLSF, provides liquidity coverage for up to 10 years. The completed project will supply electricity to up to 150,000 households in Malawi.
The first project to benefit from RLSF was a partnership with Gigawatt Global on Burundi’s first grid-connected private 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 energy producers (IPPs) from the risk of late payment by national electricity companies.
The Nkhotakota solar power plant is part of the Malawi government’s plan to move the country away from its dependence on hydroelectricity, which currently accounts for over 90% of its energy mix. Hydropower has made the country vulnerable to frequent disruptions to electricity supply in times of drought. The solar power plant aims to provide a more sustainable solution for stable and consistent access to energy.
The project stems from Malawi’s first competitive tender in the energy sector which led to a 20-year Electricity Purchase Agreement (PPA) signed between the Project Company and Malawi’s national utility, Electricity Supply Corporation of Malawi Limited (ESCOM), in February 2019. The process demonstrates global best practices and serves as a potential model for the region in attracting critical FDI into the industry.
The international consortium behind the project is comprised of two project developers, Kenya-based responsAbility Renewable Energy Holding (rAREH), the main equity partner providing equity financing, and the UAE-based Phanes Group. The two developers are partnering with US International Development Finance Corporation (DFC), formerly Overseas Private Investment Corporation (OPIC), which contributes to debt financing, and Natsons, which is the local development partner.
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 tool was created to help tackle climate change and attract investment by supporting renewable energy projects in ATI member countries. RLSF has an initial capacity of € 63.2 million 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 from the risk of late payments by public buyers to ensure that more projects reach financial close.
The structure can be accessed by IPPs located in countries that sign the Memorandum of Understanding (MoU) RLSF. To date, seven countries have signed in Benin, Burundi, Ivory Coast, Madagascar, Malawi, Uganda and Zambia, with many more in the pipeline including Ethiopia and Ghana. ATI is actively encouraging other countries to sign up as a way to provide cheaper and cleaner energy solutions.
QUOTE by Benjamin Mugisha, Chief Underwriting Officer, ATI
‘COVID-19 has exposed the link between social infrastructure and economic development. Access to adequate electricity is the basis of both. This project demonstrates that there is still opportunity and demand for renewable energy projects in Africa. ATI is thrilled 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 solid renewable energy projects that can have lasting change.
QUOTE by Dr. Thomas Duve, Director – Southern Africa, KfW
“The investments needed to meet the growing African demand for sustainable energy based on renewable energies are far greater than the funds available from public sources. But African governments and their development partners can facilitate the private sector investment needed to bridge this gap. Together, we can build stable and predictable supportive frameworks and offer targeted risk reduction tools. 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 this can we address the fundamental challenges of access to energy, energy security and climate change.
QUOTE by Martin Haupts, CEO, Phanes Group
The lack of power has increased the challenges that Malawi faced during the COVID-19 pandemic. This project demonstrates that solar energy offers a viable path to bring energy to those communities that need it most by supporting social and economic development. We are grateful to all the partners in the Nkhotakota project who have been instrumental in realizing 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 by Chris Bale, CEO, rAREH
‘rAREH is pleased to work with our partners to carry out 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 by Andrew Herscowitz, Chief Development Officer, US International Development Finance Corporation (DFC)
‘We are delighted to support this important project, which will help expand renewable energy production for the benefit of the people of Malawi. Increased production and access to electricity are key to boosting economic growth in Malawi. This project is a prime example of the US government’s union, with DFC building on the work of the US Agency for International Development and Energy for Africa and the Millennium Challenge Corporation, to facilitate private sector investment. in support of prosperity.
Distributed by APO Group on behalf of the African Trade Insurance Agency (ATI).
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