Under the provisions, Malawi will receive US$48M of credit from the International Development Association (IDA), and US$45M will be given to Mozambique. The terms of the credit financing are 40-year terms including 10-year grace periods.
The project to improve the transmission links is part of the second phase of the Southern African Power Market Programme, and will connect Malawi to the Southern African Power Pool via Mozambique. The project will see 135km of 220kV line built in Mozambique and 75km of line in Malawi plus a new substation.
The World Bank said that the project is part of the strategy of helping Southern Africa to balance out the risks of climate-related power shortages in hydro-dependent regions.
In Malawi, the vertically-integrated state utility the Electricity Supply Corporation of Malawi (Escom) has a total installed capacity of 284MW in hydropower plants - mostly run-of-river on the Shire River. The country will benefit somewhat from the rehabilitation of the Tedzani I and II plants.
Peak demand was about 250MW last year and is rising at 5% annually but the country is vulnerable to drought-induced power crises, the World Bank noted. Between 1994 and 2002 the average flow in the Shire River was less than half the long-run average over the last 58 years for which data were available.
The World Bank added that by 2015 the country will need an additional 140MW of available capacity at least to meet demand.
Malawi plans to increase domestic power generation through a 64MW expansion of the Kapichira hydro plant - Kapichira II - on the Shire River by 2011. However, as the Bank noted, financing is not yet in place and this leads to uncertainty on the commissioning schedule, but even with the project the country would quickly need to import power via Mozambique.
In Mozambique, the state power utility Electricidade de Macambique (EDM) is vertically integrated with 140MW of hydro capacity (86MW available) plus thermal plants. Peak demand in the country is 350MW, and the utility buys most of its power from the 2075MW Cahora Bassa hydro plant on the Zambezi River, which has been owned and operated by Hidroelectrica Cahora Bassa, majority owned by Portugal.
The International Monetary Fund (IMF) recently noted the 'good progress' being made by Mozambique in seeking finance to acquire the majority stake in the plant from Portugal. Mozambique's stake will rise from 18% to 85% following the ownership transfer. A few years ago alstom refurbished the plants five units and each now has a capacity of 415MW.
