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World Bank loans for Mozambique and Malawi

19 July 2007 – Two loans for the building of new transmission lines in Mozambique and Malawi were approved by the World Bank’s board of directors last week.

The money will come from the International Development Association and total $93 million with Mozambique getting $45 million and Malawi, $48 million.

The money is earmarked for the development of a regional electricity grid, with the aim of increasing regional trade and economic growth.

The new Malawi-Mozambique transmission line will connect Malawi to the South African Power Pool (SAPP), allowing energy trade to take place between SAPP and Malawi.

Malawi will have access to Mozambique’s excess capacity and the additional revenue will prove useful to Mozambique’s energy sector. Wendy Hughes of the World Bank says, "the interconnection will allow Malawi to reap the full benefits of membership of the Southern African Power Pool, both to import electricity when necessary – particularly if there’s a drought – and also to export any surplus electricity Malawi doesn’t use at night-time".

A 220 kV, 135km transmission line will be built in Mozambique from the Matambo substation in Tete province to the Malawian border. The line will then travel a further 75 kilometres to a new substation at Phombeya.

EDM, Mozambique’s electricity company, will additionally receive technical assistance, capacity building, training and equipment. Worn out and obsolete equipment will also be replaced to increase security of supply and remove bottlenecks.

Set up in 1995, the SAPP’s mandate is to address the growing power shortages within the region (increased capacity of 1000MW per year is the estimated demand) and it is estimated that demand will outstrip supply by 2014. Cost estimates to meet this increased regional demand average around $5.2 billion.

Members of the SAPP are Botswana, the Democratic Republic of Congo, Lesotho, Mozambique, Namibia, South Africa, Swaziland, Zambia, and Zimbabwe. In the SADC region Angola, Malawi and Tanzania must still be connected to the power pool.

The World Bank is encouraging the development of the regional pool through soft loans. This latest loan will have a ten-year grace period, after which the repayments will be spread over the next 40 years.