Southern Africa Energy Program (SAEP)

The document is based on the Integrated Resource Plan (IRP) and the Malawi Renewable Energy Strategy (MRES), and it provides a comprehensive overview of the capital needs for the sector until 2030. The overall capital need to achieve the GOM's aspirations for the sector by 2030 is estimated at USD $6.10 billion across the entire power sector value chain. This includes generation projects, transmission lines, and distribution connections. The capital need is broken down into three categories: generation projects, transmission lines, and distribution connections. Generation projects are estimated to require USD $3.82 billion, delivering an additional 1,626 MW of power. Transmission lines are estimated to require USD $1.06 billion, delivering an additional 2,991 km of transmission lines. Distribution connections are estimated to require USD $1.22 billion, delivering 1.22 million connections to achieve 30% on-grid electrification. The analysis shows that 63% of the capital need, or USD $3.86 billion, must be made available in the next 5 years (2018-2022) to meet the plan. This highlights the urgent need for raising capital, aligning funding approaches, and considering re-phasing of projects. The GOM is advised to start planning a diversified funding approach based on this capital need and in accordance with desired timelines. This includes ensuring project financing is prioritized in the annual development budget and MAREF, utilizing commercial debt, concessional debt, and grants, promoting private sector participation through IPPs, JVs, SPVs, and BOT financing, and taking into account associated factors such as debt ceiling constraints and implications of government guarantees. The document also highlights the funding gap identified, which is calculated as the total funding need minus available funding. The available capital to date is USD $0.97 billion, which includes GOM budget, committed donor funding, and IPPs. This leaves a current funding gap of USD $5.13 billion to achieve the sector aspirations. The analysis shows that the funding gap is significant, and urgent action is required to address this gap. The document provides a way forward, which includes ensuring project financing is prioritized in the annual development budget and MAREF, utilizing commercial debt, concessional debt, and grants, promoting private sector participation through IPPs, JVs, SPVs, and BOT financing, and taking into account associated factors such as debt ceiling constraints and implications of government guarantees. The document also highlights the importance of aligning with GOM on how to leverage ongoing SAEP work, including work for improving the enabling environment for IPPs, transaction advisory services in the Mpatamanga hydropower project, and assistance with implementing EGENCO's strategic plan. The methodology used in the document includes calculating project funding needs and available funding sources to identify the funding gap. The document uses a range of sources, including the IRP, MRES, SAEP analysis, stakeholder interviews, and Zambia Power Sector Capital Mapping. The document also uses a range of benchmarks, including Lazard's Levelized Cost of Energy Analysis, Energy Regulatory Commission Kenya, and Institute of Development Studies UK. The document provides a comprehensive overview of the capital needs for the power sector in Malawi, and it highlights the urgent need for raising capital, aligning funding approaches, and considering re-phasing of projects. The document provides a way forward, which includes ensuring project financing is prioritized in the annual development budget and MAREF, utilizing commercial debt, concessional debt, and grants, promoting private sector participation through IPPs, JVs, SPVs, and BOT financing, and taking into account associated factors such as debt ceiling constraints and implications of government guarantees.