WOVWE HYDROPOWER EXTENSION PROJECT

Project description

The Wovwe hydropower project is located in Karonga district, Northern Malawi. The goal of the project is to increase power generation in the country through extension of the existing Wovwe Power Plant by 4.5 megawatt, mitigate power supply constraints arising from one transmission line for power evacuation to the North and to improve Northern Region grid stability. The project implementation period is two years for construction works and installation of the equipment.

Financial requirements

The CAPEX cost of the project is estimated at EUR 11 million (US$ 12.248 million).

Financial feasibility

The investment costs are converted into economic costs by applying the standard conversion factor of 0.9 which translates the investment cost to an economic project cost to EUR10.9 million (US$ 11.87 million).

Results of the economic analysis at different discount rates

Compared to Diesel/LFO

1. Item: 8% disc. rate

• Net Present Value (NPV) of Revenues: US$ 39.328
• Net Present Value (NPV) of Costs: US$ 12.234
• Net Benefit: US$ 27.094
• Benefit / Cost Ratio: 3.21
• Economic internal rate of return (EIRR): 22.7%

2. Item: 10% disc. rate

• Net Present Value (NPV) of Revenues: US$ 30.601
• Net Present Value (NPV) of Costs: US$ 11.602
• Net Benefit: US$ 18.999
• Benefit / Cost Ratio: 2.64
• Economic internal rate of return (EIRR): 22.7%

The feasibility analysis indicate that the project is economically viable, with net benefits of around US$ 19 million (10% discount rate) and a benefit cost ratio of 2.64, if compared to energy produced from a Diesel/LFO (Light Fuel Oil) genset. The economic analysis reveals an Economic Internal Rate of Return (EIRR) of 22.7%. This indicates that from an economic perspective the project is viable and beneficial, if compared to producing energy from LFO (Light Fuel Oil)/diesel gensets.

Proposed investment model

The government’s plan is to implement the Wovwe project through government own financing (concessional loan), or through a loans.

Project feasibility

Feasibility Study including the Environmental and Social Impact Assessment (ESIA) study was conducted and concluded in 2022. The ESIA study report was approved by the Malawi Environmental Protection Authority (MEPA) in December 2022 and the project feasibility reports are ready for submission to a Single Buyer for implementation approval.

Contacts

The Secretary for Energy, Private Bag 309, Lilongwe 3, MALAWI

Alfonso Chikuni, Principal Secretary for Ministry of Energy, alfonsochikuni@gmail.com

C. Chizonga, Chief Economist: cchizonga@yahoo.com