The Ministry of Energy has said the government will not be renewing its contract with Aggreko Power Solutions Limited after it ends this coming April.
In 2017, the government, through Electricity Supply Corporation of Malawi (Escom), leased 84 generators with a combined capacity of 78 megawatts from Aggreko, an independent power producer, as a measure of easing electricity blackouts.
However, the deal faced resistance from players in the power sector, who argued that diesel-powered generators would be unsustainable as they could cost Escom K57 billion in two years.
Speaking when Ministry of Energy officials appeared before Parliament’s Agriculture and Natural Resources Cluster, Secretary for Energy Patrick Matanda said the government would not be renewing the contract as it has been costly on its sides.
He said Aggreko would operate in the country up to the month-end of March 2022.
“We are grateful for the services that the company was offering in electricity generation but, with the cost that the government was incurring, we have resolved to terminate the contract,” Matanda said.
Cluster chairperson Werani Chilenga said the news was long overdue.
He said it was sad that the government was paying a lot of money for services that could be done by Egenco at a cheaper price.
“This is good news to this nation. We, as consumers, were paying huge tariffs and we hope that, when the contract ends, the tariffs will be reduced,” Chilenga said.
A 2019 audit report noted that power which Escom buys from Aggreko is too expensive, pegged at an average of K216 per kilowatt per hour (Kwh), compared with Egenco’s hydro-generated power, which costs K31.8 per Kwh.
The audit also noted that the purchasing cost of Aggreko’s power at K216 per Kwh was even more expensive than Escom’s electricity selling price of K92.78 per Kwh as of June 30 2019.