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UK-Malawi Trade & Investment Forum March 20, 2013 Energy Sector Perspectives Rob Mills World Bank

UK-Malawi Trade & Investment Forum March 20, 2013 Energy Sector Perspectives Rob Mills World Bank. Energy in Malawi: into the light ?. Challenges System under strain Financial challenges Responses Government-led reforms Extensive external concessional financing

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UK-Malawi Trade & Investment Forum March 20, 2013 Energy Sector Perspectives Rob Mills World Bank

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  1. UK-Malawi Trade & Investment Forum March 20, 2013 Energy Sector Perspectives Rob Mills World Bank

  2. Energy in Malawi: into the light? • Challenges • System under strain • Financial challenges • Responses • Government-led reforms • Extensive external concessional financing • Regional interconnection • Opportunities • Contracting • Investing: energy & economy-wide

  3. Years of under-investment has resulted in a difficult energy situation…

  4. …Not least due to tariffs among the lowest in Africa… • Malawi tariffs remain below economic costs • Insufficient funds to: • Maintain existing infrastructure • Build new generation & transmission • Connect customers • Undermines financial position of power utility (ESCOM).

  5. …But like much of Africa, extensive energy resources are available Hydro Biomass Geothermal ? Wind

  6. The Government has ambitious plans, starting with a reform agenda… • Tariff reforms • A new round of tariff increases & monthly review of Automatic Tariff Adjustment Formula • Implementation of a feed-in tariff & associated regulations • Reform of the electricity legal framework • Addressing legal uncertainty around licensing • Review de facto single-buyer model • Improved framework for unsolicited IPP bids • Turnaround of ESCOM • New management • ‘Turnaround facility’

  7. .. Backed by extensive external financing commitments... • ‘Energy Sector Support Project’ • Backed by US$85 million of WB financing (of which US$65 million grant) • Priorities: • Upgrading & expanding the distribution system • Feasibility studies for a new generation of hydropower • Demand side-management and energy efficiency • Institutional strengthening & sector studies • Millennium Challenge Corporation (MCC) Compact • US $350 million grant (including set-up & administration costs) • Now back on track • Priorities: • Transmission system upgrades • Hydropower rehabilitation (including dredging) • Support for ESCOM & policy reform process

  8. .. And a renewed commitment to interconnect with the Southern African Power Pool “Phase 1” “Phase 2” (possible route) Phombeya Matambo

  9. Assuming good progress on the reform agenda, this represents a significant opportunity-set for investors Investing in IPPs Investing in Off-Grid • Contracting • Improved Investment Climate • Development via IPP ‘default’ approach • Significant interest already expressed • Grid access at ~7%  plenty of customers… • Good potential for solar PV, mini-hydro, biomass • Significant T&D contracts • Reduced load-shedding • Fewer unscheduled outages • Improved energy quality • Faster connection times • Significant T&D contracts to be bid out • WB, MCC & GoM

  10. Final thought on 2013… “Chaka chino ndi chakachamayankho”

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