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Project Benefits

 

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MCA-Malawi Compact Benefits

Malawi’s $350.7 million Millennium Challenge Corporation (MCC) compact is a single-sector program designed to contribute to Malawi’s efforts in reducing poverty through sustainable economic growth. It is estimated that approximately one million Malawians will benefit from the compact interventions through increased consumption of electricity. Specifically, the Millennium Challenge Compact for Malawi brings the following benefits to the nation:

1. Income Benefits

  • The expected net present value of benefits are estimated to range from US$567.2 million to US$832.0 million projected to be realized during the next 20 years.
  • The estimated economic rate of return to range from 18.7% to 24.6% during the compact implementation period with the interconnector as the potential investment to come during the compact implementation period.
  • An estimated total of approximately 982,729 individuals (without interconnector) to 988,915 individuals (with interconnector) are expected to benefit from the MCC investments by year 20 after Compact term as a result of increased consumption of electricity.
  • The magnitude of private benefits increase from US$577 to US$841 per beneficiary with corresponding estimated benefit-cost ratio (cost effectiveness) of 1.70 to 2.27

2. Technical Benefits

  • The investments in the transmission and distribution (T&D) backbone are expected to increase network throughput capacity from 260 MW to 960 MW.
  • Transmission capacity will increase from 991.5 MVA to approximately 1,661.5 MVA.
  • Distribution capacity will increase from 868 MVA to approximately 942 MVA.
  • The T&D investments through the Compact are expected to reduce system losses by 5% from an average of 22-25% to 18% by end of year five of Compact implementation.
  • Additional capacity of up to a maximum of 3-6 MW from the refurbishment of Nkula A will be added to the existing installed generation capacity.
  • Improved load factors for installed generation capacity (58%-78%) from weed and sediment management investments that are expected to improve efficiency and water flow of hydropower stations along the Shire River Nula A and B; Tedzani I, II, and III; and Kapichira I and II).

3. Reform Benefits 

  • Improved power sector governance, operations and service.
  • Improved financial performance of the power sector.
  • Reduced real and perceived risks in the sector.
  • Increased availability of Malawi to participate in regional institutions – South Africa Power Development (SAPD), Southern Africa Power Pool (SAPP), Regional Energy Regulatory Authority (RERA), and African Forum for Utility Regulators (AFUR).
  • Increased ability for ESCOM to participate in regional power trade.
  • Increased potential for private sector participation and investment in power generation, transmission and distribution.