Power investors need guarantees—Matola
International Monetary Fund (IMF) programme restricts government from providing guarantees to potential power investors, Minister of Energy and Mining Ibrahim Matola told delegates in attendance at the three-day International Power Conference which ended Thursday in Lilongwe.
He said for a country such as Malawi, which has no history of Independent Power Producers (IPP), and whose public utility has a weak balance sheet, it makes it difficult to meet demands from potential investors.
“Potential investors are looking for all sorts of guarantees including financial, political and exchange rate convertibility guarantees. The problem that needs to be solved by this conference is how can Malawi, which is on a tight IMF programme provide guarantees without jeopardising the programme,” said Matola, challenging delegates at the Bingu International Conference.
According to a presentation by Intra Energy Corporation’s Tim Boyce, some of the demands from the IPP that were raised during the conference are proper allocation risks, appropriate guarantee and acceptable tariffs and cost-reflective payment system. They also demand additional guarantees from government to give them adequate investment protection and a regulatory environment which gives investors comfort in the mechanism of selling power produced.
The minister acknowledged that government recognises that no investor will come if the regulated tariffs are less than their unit costs of production.
“Although Malawi in principle remains committed to achieving a cost-reflective tariff, our concern is how Malawi, with electrification rate of just nine percent can increase to electricity without pricing the majority of the population out.
“We hope through this conference, the solutions will be found,” said Matola.
Standard Bank Malawi, organiser of the event, assured government of their readiness to help Malawi attain its full potential.
“Our challenge is to connect the opportunities in the power sector in Malawi to pools of capital in Africa and outside the continent.
Standard Bank has the expertise in the power sector in Malawi and can also access pools of expertise across Africa,” said the bank’s chief executive officer Andrew Mashanda.
He said it is the bank’s desire that the important network built during the conference will translate into deals that will transform the lives of both investors and the people of Malawi.
According to principal secretary in the Ministry of Energy Winford Masanjala, resolutions made from the conference which will act as a road map in solving the power shortage in the country.
