K25bn loan haunts Egenco

The Electricity Generation Company (Egenco) has said it is sitting on a time bomb as it owes suppliers over K25 billion.

According to Egenco, the debt has accumulated after it used part of its resources to rehabilitate Kapichira Hydro Power Station in Chikwawa after it was damaged by Cyclone Ana in January 2022.

Egenco spokesperson Moses Gwaza confirmed in an interview yesterday about the debt situation, saying the development means the power utility “may soon fail to procure maintenance materials for any faults that may occur on its machines”.

However, he said the debt challenge has been worsened by government failure to pay back K6.5 billion which the company used to rehabilitate Kapichira.

Gwaza further said failure by government to support them with resources under Malawi Rural Electrification Project (Marep), as had been earlier planned and supported by Parliament, forced them to use funds meant for loan repayments and operations.

He said: “Therefore, Egenco had no choice but was forced to use resources that were already committed to other operations to ensure that the Kapichira project was delivered in time as the country was going through a power supply crisis.

“As we speak, we have not received any money from Marep yet this was meant to be an emergency project.”

He said the K6.5 billion used on the fast track option at Kapichira had already been committed to foreign suppliers, but was idle in banks due to shortage of forex to effect the payments.

“We were, therefore, forced to withdraw those resources so that we could fix Kapichira. This further means we are sitting on a time bomb because, should something happen to the machines and the spares are not in the country because we did not pay for the spares since we used the money for Kapichira, we will have difficulties to repair the machines,” he said.

Gwaza said in effect, this means further delay to settle dues with international equipment suppliers may attract interests as per contractual agreements, as debts now hang around K25 billion.

“These are suppliers who provide us with the spares for our machines. We have had very long outstanding payments that we could not make due to the scarcity of forex. As such, we have accumulated them in those amounts,” he added.

Ironically, during the opening of the 33rd Malawi International Trade Fair and inauguration of the Malawi Bureau of Standards (MBS) laboratory and office complex on May 18, President Lazarus Chakwera accused Egenco management of lack of urgency when handling the restoration of Kapichira, which took a year and three months to complete.

The President gave the Egenco board until the end of this month (June) to do its duty of addressing the issues that lie at the root of Egenco’s dysfunctions.

“It is not acceptable for a Presidential deadline to be missed as a result of poor management and the board to still have no action taken after six months,” he said.

During a meeting with the Parliamentary Committee on Natural Resources on May 24, acting director of Energy Joseph Kalowekamo said they could not have released the Marep funds immediately because there was a process to be followed.

He told the committee: “Marep is a Treasury fund and, therefore, the approval instruction is supposed to come from the Treasury. In addition, Marep funds are guided by the Rural Electrification Act which spells out how the funds should be used.

“We also engaged the office of the Attorney General for a legal opinion and they did that. We compiled all documents and supplied them to the Ministry of Finance for approval. It really took time and the project was overtaken by time that Egenco ended by using its own resources before these funds could be released.”

During that meeting, legislators that included the committee’s chairperson Welani Chilenga took turns grilling government officials on why they failed to release the funds, let alone pay back Egenco the said money.

He urged the Treasury to ensure that the money is paid back to Egenco so that its operations are not interrupted due to failure to get maintenance equipment.

Minister of Finance and Economic affairs Minister Sosten Gwengwe did not respond to our queries on the matter.

Kapichira Hydro Power Station suffered extensive damage, particularly at its intake dam following the flooding of the Shire River due to Tropical Storm Ana in January 2022. This forced Egenco to shut down the station, taking off 129 megawatts (MW) from the national grid. This led to prolonged electricity rationing in the country.