African Trade Insurance Agency’s (ATI) Regional Liquidity Support Facility (RLSF) is providing liquidity cover for a tenor of up to 10 years to the recently announced $67 million solar power project in Malawi, which is backed by an international consortium.

The Nkhotakota Solar Power Plant, one of Malawi’s first commercial scale independent solar power projects, is expected to add a significant 37 MWac of clean energy to the national capacity, currently estimated at 362 MWac.

The solar plant, which is being developed in two phases of 21 MWac and 16 MWac, is the second renewable energy project to be backed by RLSF. The completed project will supply electricity for up to 150,000 Malawian households.

The first project to benefit from RLSF was a partnership with Gigawatt Global on Burundi’s first private grid-connected solar plant, which was the country’s first permanent power station in 30 years. RLSF encourages investments in renewable energy in ATI member countries through a unique and innovative guarantee product that protects Independent Power Producers (IPPs) against the risk of late payment by national power companies.

The Nkhotakota Solar Power Plant is part of the Malawian government’s plan to move the country from its reliance on hydropower, which currently represents over 90% of its energy mix. Hydropower has left the country vulnerable to frequent power supply cuts in times of drought. The solar power plant aims to provide a more sustainable solution for stable and consistent energy access.

The project stems from Malawi’s first competitive tender in the power sector leading to a 20 year Power Purchase Agreement (PPA) signed between the Project Company and Malawi’s national utility, Electricity Supply Corporation of Malawi Limited (ESCOM), in February 2019. The successful tender process demonstrates global best practise and serves as a potential model for the region in attracting critical foreign direct investment to the sector.

The international consortium behind the project consists of two project developers, Kenya-based responsAbility Renewable Energy Holding (rAREH), the primary equity partner providing equity financing and UAE-based Phanes Group. The two developers are collaborating with the U.S. International Development Finance Corporation (DFC) – formerly the Overseas Private Investment Corporation (OPIC) – which is contributing debt financing, and Natsons which is the local development partner.

In 2017, ATI and the German Development Bank, KfW, with financing from the German Federal Ministry for Economic Cooperation and Development (BMZ), launched the RLSF. The Facility was created to help tackle climate change and attract investments by supporting renewable energy projects in ATI’s member countries. RLSF has an initial capacity of EUR 63.2 million and it supports small and mid-scale renewable energy projects with an installed capacity of up to 50 MW (and in exceptional cases up to 100 MW) by protecting the developers against the risk of delayed payments by public off-takers to ensure more projects reach financial close.

The Facility can be accessed by IPPs located in countries that sign onto the RLSF Memorandum of Understanding (MoU).

To date, seven countries have signed on – Benin, Burundi, Côte d’Ivoire, Madagascar, Malawi, Uganda and Zambia, with several others in the pipeline including Ethiopia and Ghana. ATI is actively encouraging other countries to sign on as a way of providing more cost-effective and clean energy solutions.