MCA model to improve Escom’s financial performance

Escom’s new financial model developed by EY, an advisory and auditing firm, under the Millennium Challenge Account (MCA) project will improve the management of the power supplier, authorities have said.

Speaking at the official launch of the financial model at Protea Ryalls Hotel in Blantyre on Wednesday, Minister of Energy Ibrahim Matola said the new system will restore the Electricity Supply Corporation of Malawi’s (Escom) financial health and build the utility company into a viable parastatal.

According to Matola, the model is a tool that illustrates quantitatively the various aspects, that will help Escom improve its financial position based on key operational and financial inputs including tariffs, power supply, inflation and the exchange rate of the kwacha.

Matola said the model will project the working and capital needs of the power supplier for the period 2013 to 2018.

Speaking during the launch of the model, EY London executive director, Michael Cupit said they have provided Escom staff with training on the model.

“We have a support contract with Escom for the next four years and we will continue to work with them to continuously develop the system and ensure that everybody gets the best from the model,” said Cupit adding that the power supplier did not have a financial model before.

According to EY, they have tidied up the general ledger by reducing the company’s accounting codes to about 90.

Under the system Escom has now reduced its debtor days from 126 to 60 days and has also created a proper fixed asset inventory register.

The MCA–Malawi (MCA-M) was established in March 2008 following the country’s qualification in December 2007 for assistance from the Millennium Challenge Corporation (MCC), a US foreign aid agency.

MCA-M oversees the implementation of the $350.7 million power sector revitalisation project.

The power revitalisation project includes rehabilitation, upgrade and addition of generation, transmission and distribution assets to improve system reliability stability and expansion.

The project also includes provision of policy reform agenda and building capacity in the sector’s institutions including Escom, Malawi Energy Regulatory Authority (Mera) and Ministry of Energy.