According to a press release, the RLSF will protect the Independent Power Producers (IPPs) in Malawi against the risk of delayed payments by the public off-taker, the Electricity Supply Corporation of Malawi (ESCOM).
”This type of guarantee is a common requirement from the lenders that fund the projects. Many projects have failed to access funding and in turn reach financial close because this type of guarantee was not available. The RLSF hopes to change this by providing the required guarantee in cooperation with the Letter of Credit issuing bank, ABSA Bank Ltd,” reads part of the release.
The Ministry of Finance, Economic Planning and Development acknowledged that “Malawi has an installed electricity-generating capacity of around 370 MW which is inadequate to meet the ever increasing demand”.
As part of improving electricity generation capacity, government is implementing a number of projects as well as negotiating with a number of potential investors in electricity generation.
“This facility will help the government in attracting more IPPs with a renewable energy focus because renewable energy projects can generally be cheaper, easier to be implemented, integrated into the national electricity grid and usually have a positive environmental impact once up and running.”
Commenting on the MoU signing, ATI’s Regional Underwriter for Southern Africa, Pizzaro Lukhanda, said, “This partnership with Malawi through the RLSF speaks directly to our mandate to help our member countries create a healthy environment for business and investments.
“The RLSF accomplishes this by creating a risk mitigation tool that can bring the public and private sectors together to oversee the successful completion of more renewable energy sector projects in Malawi. The positive impact of the RLSF will likely be felt for generations whether it be energy consumers, the government or the environment.”
The RLSF is a joint initiative of ATI, and KfW with funding from the German Federal Ministry for Economic Cooperation and Development (BMZ) with initial capacity of USD74 million. Under the program, RLSF will offer insurance protection to new small and mid-sized renewable energy projects (from 50 to 100 MW) in Sub-Saharan Africa.