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Government backs firm on Lilongwe water project

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Sosten Gwengwe

The government has defended the appointment of Quay Energy as the finance company for the Salima-Lilongwe Water Supply Project.

This comes after some quarters accused the company of lacking experience.

They also claimed that, as a relatively new firm, it could not raise the necessary financial resources for the project.

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The Ministry of Finance and Economic Affairs says, in a statement issued yesterday, that although the company is new on the market, having been established in 2021, the company has not had any negative feedback on its directors and affiliates, adding that it was identified after due diligence.

“Quay Energy has indicated that it would be working with reputable international financial institutions in arranging this financing, hence the financing shall be syndicated. Thus, Quay Energy is not the financier but the arranger for the loan,” the statement reads.

The ministry further says the proposed loan amount, as arranged by Quay Energy, is $313,447,757.00 (roughly K280 billion) and has a repayment period of up to 25 years.

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According to the government, the company offered it a grace period of six years, interest rate of 1.5 percent and a one-off payment for structuring fees of 2.5 percent.

It further indicates that the terms translate into a calculated Grant Element (GE) of at least 40 percent, which is above the required minimum of 35 percent for loan concessionality.

Finance Minister Sosten Gwengwe told Parliament on March 24 2022 that he intended to issue the SG in favour of Quay Energy subject to terms and conditions of issuance of an SG.

The scope of the contract is for the extraction of water from Lake Malawi to Lilongwe, surrounding areas and town centres along the M14 Lilongwe-Salima Road.

The Project also involves abstraction and treatment of 100,000m3/day water from the lake in Salima and transportation of the treated water through a 120 kilometre transmission pipeline.

The contract required the contractor, Khato Civils and South Zambezi to identify a financier of the project while the government’s obligation was to issue a sovereign guarantee for the loan.

The Salima-Lilongwe Water Project was initiated by Lilongwe Water Board in 2016 but Gwengwe said the project would be managed by a special purpose vehicle— namely the Salima-Lilongwe Water Supply Company.

The company has the Secretary to the President and Cabinet (SPC) and Secretary to the Treasury (ST) as its shareholders, with directors being the SPC, the ST, Solicitor General and Secretary for Justice and the Lilongwe Water Board Chief Executive Officer.

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