Ministry of Economic Planning and Development and the Public Sector Reforms have resolved that Electricity Supply Corporation of Malawi (Escom) should pay K11.7 billion out of the K53 billion which it owes Electricity Generation Company (Egenco) by December 31, 2020.
A statement from the office of the Vice President indicates that 60 percent of the balance, equivalent to K25.2 billion is expected to be paid by December 31, 2021.
“The Ministry of Finance will also facilitate that Egenco issues a Credit Note for the remaining 40 percent balance. This means no bail out for Escom,” reads part of the statement released yesterday.
The resolution follows a meeting which Vice President Saulos Chilima held on August 7, 2020, with officials from Escom and Egenco, Malawi Energy Regulatory Authority (Mera), Ministry of Finance, Ministry of Energy and a team from the Public Sector Reforms committee.
The meeting also discussed another sticky issue on charges for energy transmitted between Escom and Egenco.
Escom complained that the K1.8 billion average monthly bill which Egenco charges is wrongly calculated and unsustainable.
It has therefore, been resolved that Escom and Egenco should use the existing metering facilities to determine actual energy transmitted between the two entities effective August 17, 2020.
“It has also been agreed that the Ministry of Finance will facilitate the review and amendment of the current Power Purchase Agreement (PPA) and ensure that the new signed PPA is put in effect by November 1, 2020,” reads the statement further.
Meanwhile, a task team has been set up to drive Escom’s turn-around strategy.
Team members will come from Ministries of Finance, economic planning and development, energy, justice and the Department of Statutory Corporations.
In reaction Escom Public Relations Manager, Innocent Chitosi said they have been part of the negotiation process and they agree with the resolutions.
“We shall expedite to implement the agreements,” he said.
And Egenco spokesperson, Moses Gwaza, expressed gratitude that finally the issues have been resolved.
“We are grateful to the Government that within a short period, it has managed to resolve this issue which has taken so long to conclude. We are happy now that Escom can meet its obligations and that we can begin to have some smooth operations and be paid for our generated power. This will enable us to re-invest the money back in energy generation and continue expanding our generation capacity,” he said.
Gwaza said going forward, Egenco is optimistic that negotiations on the Power Purchase Agreement (PPA) will be concluded.
Commenting on the resolutions, economic expert, Betchani Tcheleni, from the Malawi Polytechnic, said the loan has been restructured which should be easy for Escom to repay.
“Escom is failing to connect so many people with electricity which if they were connected it would have been making a lot of money. I mean connecting people is not a favour it is a business. Escom should have been pressing Egenco so that it generates more power,” he said.
Tcheleni suggested that if electricity supplying is a good business the company can go on the financial market and borrow money.
In 2018 Ministry of Finance, Economic Planning and Development also refused to honour a K58 billion financial bail-out request from Escom to enable it provide reliable power supply.
Escom said it found itself in the situation after its split that gave birth to Egenco on January 1 2017.