Electricity Supply Corporation of Malawi (Escom) is reviewing over 100 power purchase agreements (PPAs) signed between independent power producers (IPPs) and the disbanded Power Market Limited (PML) during the Peter Mutharika administration.
Nineteen of those were signed on the eve of the 2019 Tripartite Elections during the Democratic Progressive Party regime.
The power utility company’s chief executive officer Kamkwamba Kumwenda disclosed this at a press briefing jointly conducted by the Ministry of Energy and Malawi Energy Regulatory Authority (Mera) in Lilongwe yesterday.
He suspected that PML did not conduct due diligence on the bulk of the agreements, resulting in awarding of PPAs to non-existent entities on the back of suspected political interference.
“We have discovered that the agreements have been sold to them (IPPs) as a third customer. It means that there was an initial customer who sold it to a second and these are the third.
“This is not what we need to do. It means that the first ones who came in just wanted the agreement to make money out of it,” said Kumwenda.
PML was created as part of the power market restructuring process to perform a single buyer (SB) function in the electricity industry, but its functions have reverted to Escom following its disbandment.
Kumwenda said their suspicions have been heightened by failure by a majority of the IPPs to respond to Escom’s notice of the review process.
“We have written all IPPs that we want to do due diligence. A majority of them have not responded and it’s not amusing.
“We won’t waste time chasing them. If they don’t want to respond, we will cancel the PPAs. We want to deal with those that are genuine,” Kumwenda said.
Government is targeting to expand power generation to 1 000 megawatts by 2025. Meanwhile, Kumwenda has said the dubious agreements could lead to energy authorities counting on investors that would not deliver.
“We need to be sure that these people are available. They are investors out there. If we discover that these are dobadobas (dubious dealers), they have no office, they have no history of this business, we will cancel it,” he warned.
Kumwenda has said they have consulted lawyers to advise whether the power agreements are transferable before deciding the future of IPPs whose PPAs have exchanged hands.
The press briefing was organised to, among others, update the nation on the electricity situation and progress on disbanding of PML.
Principal Secretary in the Ministry of Energy Alfonso Chikuni could not be drawn if there are suspicions of criminality in the manner some PPAs were signed.
However, he said the transferring of PPAs ownership has created a mess at the ministry.
He said: “Some have sold their PPAs a couple of times. It is really clogging our work. We would like to streamline and concentrate on our work on what is viable.
“But you find that on a daily basis you are dealing with 20 meetings sorting out things that shouldn’t be sorted out. That shouldn’t be on your table in the first place.”
PML was incorporated as a public company on June 25, 2018 under the Companies Act. Its establishment was premised on government’s pursuit for an independent and credit worthy entity that instils confidence in investors.
Its birth left Escom with electricity distribution, transmission and system operating. It triggered a tug of war as Escom clung to the licence.
Late last year, government announced the dissolution of PML before effecting a liquidation two months ago through chartered accountant and insolvency practitioner Hastings Bofomo Nyirenda
Meanwhile, Chikuni has said that the process is almost completed and projected that Mera will officially hand over the single buyer licence back to Escom next week.
Energy expert Grain Malunga has since commended Escom for the steps it is taking, stating that it will bring sanity in investments surrounding power production.
The former Minister of Natural Resources, Energy and Environment, however, said the suspicious deals raise serious questions on the regulation of the energy sector.
“If this is true then we have a big problem. We have Mera which should have done due diligence. We need to question Mera if it is undertaking its functions in accordance with its mandate of regulating the sector,” said Malunga.