Malawi Compact

  • Grant Total: $350,700,000
  • Grant Committed: $250,466,896
  • Grant Expended: $81,892,081
  • Signed: April 7, 2011
  • Entry Into Force: September 20, 2013

Malawi's $350.7 million Millennium Challenge Corporation compact is a single-sector program designed to increase incomes and reduce poverty by revitalizing Malawi's power sector and improving the availability, reliability and quality of the power supply.

The compact is working to reduce the cost of doing business in Malawi; expand access to electricity for the Malawian people and businesses; and increase value-added production in Malawi. Three compact projects seek to increase the capacity and stability of the national electricity grid and bolster the efficiency and sustainability of hydropower generation. Project activities are helping to create an enabling environment for future expansion by strengthening sector institutions and enhancing sector regulation and governance.

Financials as of June 30, 2016

Environmental and Natural Resource Management Project

The Environmental and Natural Resource Management Project’s objective is to reduce costly disruptions to Malawi’s hydropower generation by mitigating the growing problems of weed infestation and excessive sedimentation in the Shire River Basin, and to and implement better environmental and natural resource management in upstream areas. The project will accomplish the objectives through three activities:

A Weed and Sediment Management Activity will mitigate the impact of weeds and sedimentation on the Shire River Basin and identify environmentally appropriate disposal sites, and expand use of upstream biological control measures.

An ENRM Activity will develop and implement a set of activities aimed at improving environmental and natural resources management (ENRM) in the Shire River Basin. The new activities expect to decrease power outages and increase electricity output at three hydropower plants affected by invasive weeds and excessive sedimentation, to improve land use and watershed management practices, and to help resolve underlying environmental and social issues affecting electricity generation and the communities dependent on the natural environment.

A Social and Gender Enhancement Activity will complement the ENRM Activity by supporting improved land use and natural resource-based economic development activities carried out by women and vulnerable groups in the Shire River Basin. As women are often primary decision makers in natural resource-based economic activities that may impact land use practices, a Social and Gender Enhancement Fund will support activities that improve sustainable management of resources, which can reduce natural resource degradation, increase economic opportunities, and help decrease outages at downstream hydropower plants.

Infrastructure Development Project

The Infrastructure Development Project focuses on the most urgent rehabilitation, upgrade and modernization needs of Malawi’s power system. The project is composed of three activities aimed at preserving and stabilizing existing generation capacity, improving capacity of the transmission and distribution network, and increasing the efficiency and sustainability of hydropower generation.

The Nkula A Refurbishment Activity will support the refurbishment of the Nkula A hydropower plant, with the objective of improving the availability of power in Malawi by reducing outages caused by the condition of the plant, and maximizing power output from Nkula A. The refurbishment will improve the reliability of the plant, extend its useful life, and thereby avoid a partial or total failure of the plant.

A Transmission Network Upgrade Activity is designed to upgrade the backbone of the transmission network in order to improve the quality and reliability of the electric power supply in Malawi; increase the capacity to move power from the south – where 98 percent of Malawi’s power is generated – to the central and northern regions; reduce technical losses on transmission lines; and provide a secure transmission link between the southern and central regions. A planned 400kV line will also support planned interconnection between Malawi and its neighbors.

A Transmission and Distribution Upgrade, Expansion, and Rehabilitation Activity includes investments to upgrade and extend existing network connections in the southern, central, and northern regions of the Malawi power network, as well as to provide new network extensions and install new controls and modernized communication systems.

Power Sector Reform Project

The Power Sector Reform Project supports the Government of Malawi’s policy reform agenda and builds capacity in critical sector institutions through two activities.

The ESCOM Turnaround Activity aims to restore the Electricity Supply Corporation of Malawi’s (ESCOM) financial health and rebuild ESCOM into a financially strong, well-managed company. MCC funding will support three main areas of the turnaround: finances, corporate governance and operations.

The Regulatory Strengthening Activity complements the Infrastructure Development Project and the ESCOM Turnaround Activity by providing support for the Government’s policy reform agenda and building capacity in the Malawi Energy Regulatory Authority and the Ministry of Energy. The objectives of the activity are to develop a regulatory environment consistent with best practices in independent power utility regulation that supports additional public and private investment in new generation and expanded access.