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Malawi: Insurance agency provides liquidity cover for solar project

In Malawi, the African Trade Insurance (ATI), through the Regional Liquidity Support Facility (RLSF), will provide insurance cover for an amount of $4.4 million against the risk of delayed payment by ESCOM for the 60MW Salima Solar PV.

The RLSF policy will be for an initial tenure of up to ten years. The liquidity cover being provided via RLSF will enable up to $78 million of total project financing.

Salima Solar PV plant is due to start operations in August 2021. This will be the first solar PV in Malawi to connect to the grid. The energy generated, at an estimated annual average of 154GWh, will be sold exclusively to the Malawian utility, ESCOM, under a 20-year Power Purchase Agreement (PPA).

This is the second project in the country to benefit from RLSF; the first project being Phase 1 of the Nkhotakota Solar Power Plant, with an initial installed capacity of 21MW. With project construction almost finalised, Salima Solar will be the first solar PV in Malawi to connect to the grid.

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The 60MW Salima Solar PV plant will be instrumental for Malawi’s underdeveloped electricity sector, which has an installed generation capacity of around 439MW. Over 90% of this capacity comes from hydropower plants on the Shire River in the southern region. This heavy reliance on hydro is often constrained by drought and low water levels.

Reforms by the government have led to the establishment of a viable electricity market for private sector participation in generation expansion. These reforms enable a high potential for solar and new hydro technologies to enter the power market.

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