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Malawi Stock Exchange pens Escom on borrowing

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By Taonga Sabola:

Malawi Stock Exchange (MSE) has written Electricity Supply Corporation of Malawi (Escom) and Secretary to the Treasury over the power utility firm’s proposal to borrow K30 billion from the money market.

MSE Chief Executive Officer, John Kamanga, confirmed in an interview Tuesday that his institution penned Escom a fortnight ago.

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Among other things, the local bourse argues that raising such a huge sum through the capital market could be an ideal and cost effective avenue for Escom.

The development comes barely a week after Escom Chief Executive Officer, Allexon Chiwaya, told reporters in Blantyre last week that it would go ahead with the proposed K30 billion borrowing from the market to settle for commitments it incurred.

Kamanga said, according to their proposal, Escom could raise the desired amount of money at 18 percent interest, in a worst case scenario, as compared to banks which could lend the same amount of money at around 24 percent interest.

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He said, in their calculations, Escom could end up saving around K8.5 billion by raising the money through the bourse.

The stock market has in recent years provided an alternative avenue for the government and private companies to raise capital.

In July this year, one of the country’s commercial banks, New Finance Bank (NFB), floated a three-year K14 billion corporate bond whose proceeds will help the bank to boost lending.

In addition, government, through the Reserve Bank of Malawi (RBM), has been issuing a number of bonds on the market.

Kamanga said the MSE has highlighted in its proposal how NFB and the government have benefitted from issuing bonds on the market.

Escom has proposed to repay the bank loan over a period of five years at the rate of K800 million per month.

In the financial year ending June 30 2018, Escom made K8 billion loss after making a K6 billion profit in the 2016/17 fiscal year.

As of July, Escom owed about K28 billion to Egenco, K2.7 billion to Mera and K40 billion to various suppliers, local and international.

Escom has attributed the loss of billions to the unbundling of the parastatal to form Electricity Generation Company (Egenco) in 2017 as an independent power producer. The unbundling meant that Escom entered into a power purchasing agreement with Egenco at tariffs which Mera approved.

The Budget and Finance Committee of Parliament recently objected to Escom’s proposal to borrow billions of kwacha from the market.

Budget and Finance Committee Chairperson, Rhino Chiphiko, said his committee would not recommend to Treasury to guarantee the K30 billion loan.

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