Govt suspends power deals
Government has instructed Electricity Supply Corporation of Malawi (Escom) to temporarily suspend dormant power purchase agreements (PPAs) and implementation agreements (IAs).
Government, through the Attorney General (AG) Thabo Chakaka-Nyirenda, has further instructed the power utility to stop signing new contracts until he finishes reviewing them by October this year.
At a time the country was seriously hit by foreign currency shortage, there was also an obligation placed on government in such contracts to source the forex for the benefit of the private power producers, a clause also under review by the AG.
In a written response to a questionnaire yesterday, Escom spokesperson Kitty Chingota confirmed receiving the instructions from the AG, adding that they complied.
She said: “The suspension is meant to allow the AG to review some clauses in PPAs to make sure that the PPAs are in the interest of all relevant parties.
“The review has a clear deadline, as such, we do not anticipate negative impact.
A source at the power utility disclosed that the AG wrote Escom chief executive officer on July 7 2023, with copies to Secretary to Ministry of Energy and head of Presidential Delivery Unit, informing them that he was reviewing PPAs and IAs that were signed but are dormant, and others that were yet to be signed.
The source said: “The AG is advising that the review process is taking longer than he anticipated due to a variety of reasons, and one example he cited that is delaying the process is how the contracts were drafted.
“So, he advised Escom that he is examining important clauses that should be included in the contracts, specifically those related to contract termination due to inactivity and obligation placed on government to source foreign currency for the benefit of the power producers.”
The source further disclosed that the AG was of the view that Malawi Government needed to exercise extreme diligence when signing any long-term agreement before this process is completed.
Based on this, according to the source, no more unsolicited PPAs would be signed.
The AG in an interview yesterday confirmed issuing instructions to Escom, but declined to comment further.
Escom earlier in June also indicated that it was reviewing a number of PPAs signed between independent power producers (IPPs) and the power utility during the Peter Mutharika administration.
About 19 of those were signed on the eve of the 2019 Tripartite Elections during the Democratic Progressive Party regime.
The power utility’s CEO Kamkwamba Kumwenda disclosed this at a press briefing jointly conducted by the Ministry of Energy and Malawi Energy Regulatory Authority (Mera) in Lilongwe on June 24 2023.
He suspected that due diligence was not conducted 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,” Kumwenda told journalists.
The disbanded Power Market Limited (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.
Government is targeting to expand power generation to 1 000 megawatts by 2025.
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.
