Exclusive interview: EdM CEO provides insights on State-run utility company

Exclusive interview with Dr Mateus Magala, CEO, Electricidade de Moçambique (EDM), an invited and confirmed participant of the Utility CEO Forum at the upcoming African Utility Week in Cape Town from 15-17 May.

“By 2030, EDM will have become a smart utility whose services and products exist in every household, all corporations and enterprises across all of Mozambique”

Let’s start with some background on EDM, there is a proud history there.
• Created in 1977 as a parastatal, changed to a public company in 1995;
• Vertically integrated with the mandate to generate, transmit, distribute and commercialise electricity in the whole country for everyone, including business.
• Also with the mandate to operate and manage the national electricity transmission network (TSO);
• Exporter of energy to the SADC region, and importer during peak hours;
• Electricity generation capacity: > 2600MW;
• Transmission network: > 5,000km high voltage lines;
• 3,600 workers nationwide;

EDM started, in 2015, a process of profound transformation with the aim of achieving high levels of efficiency and effectiveness, critical to deal with the challenges to meet its obligations. The company intends to help Mozambique achieve universal access to energy and become a regional hub by 2030. Subsequently, EDM introduced its first Code of Ethics, reviewed, and redesigned a new Organisational Structure. All the functions, directorates and divisions were restructured and a new process of recruitment and selection n of staff to fill positions introduced.

The aim of the reforms is to ensure that in the next 13 years, all Mozambicans must have energy in their houses. Looking at the number of clients 13 years ago, that is, in 2004 compared to the number of today, we note that the number is almost 5 times more, moving from 283,865 (two hundred and eighty three thousand and eight hundred and sixty five) to 1,641,151 (one million, six hundred and forty one thousand and one hundred and fifty one) consumers. In 2017, the Company connected more than 150 thousand clients against 100 thousand that had been set by the Government. For this year of 2018, the target of the Government is of 200 thousand new clients, while internally the challenge is to connect 300 thousand new households.

New models of service provision have been adopted, and various projects of electrification have been implemented, which made it possible the connection of more than 60% of new connections set by the Government.

What does your role entail?
When I was invited by the Government to lead EDM, three serious challenges were put before me. The first was to transform EDM into a credible, prestigious and competitive utility, which will power and light up Mozambique including with renewable energy sources. The second great challenge was to turn this public enterprise into a reference company both regionally and internationally.

And the last one was to position the company and the country itself as a regional hub in the production and commercialisation of power for the Southern African region. These have been the goals toward which we have been working hardly full time during all these three years we have been leading the utility. And we are very much encouraged, we are at the right direction to meet the goals, as can be learnt from the following paragraphs.

Taking into account the various indicators and criteria established for the selection of the largest company in Mozambique, in 2017 EDM was awarded for the second consecutive time as the first ranked in the ranking of the 100 largest companies in Mozambique with the largest Business Variation in the Sector of Services in 2016 by KPMG.

In the ranking of the 100 largest companies in Mozambique in terms of Turnover, EDM was ranked in second place, after MOZAL, which returned to being the largest company in this category, enabling EDM to improve tree positions in relation to the previous edition in 2016 and four, compared to the 2015 edition.

In 2017, The Blue Bird Club, a youth group based in the city of Beira, Sofala province, has also elected EDM as the Company of the Year 2017 and myself as the Economic Personality of the year 2017, for having distinguished myself in the leadership and business management, factors that have boosted a lot in the positive performance of the company.

I have also received an African Leadership Business Excellence Award, by Africa Leadership Magazine, in April 2017, in recognition of my leadership in the transformation process of EDM.

In result of the reorganisation, the company has reduced its number of directors from 75 to 35 (26% female), and its managers from 223 to 74 (18% female). Also, the revenue has increased from 150 to 480 MUSD in the past 2 years, and tariffs were revised to an accumulated level of 107%, unprecedented in Mozambique before, in trust that myself and my team will modernize the company while operating it in a more business-like manner, will still meet the social mandate of providing universal access to electricity in Mozambique.

What projects that EDM is currently involved in are you most excited about? How will this change people’s lives?
EDM is currently focused in implementing a transformation program with three main objectives:
– Achieving the universal access by 2030;
– Becoming an energy hub in Southern Africa;
– Ensuring gender equality;
– Becoming a reference company internationally.

As part of the transformation agenda, EDM also intends to become a sound and viable company able to implement the Government agenda for the energy sector, attract capital and ensuring high standards of quality of services. Specifically in terms of projects, we are currently concluding the construction of the first CCGT power plant in southern Africa; we will start in the coming May the construction of our first PV plant in Mocuba, with an installed capacity of 40MW.

The next challenging projects we are targeting are the 400MW gas to power plant and the associated 400 kV transmission line Temane-Maputo with about 600km, the interconnections Mozambique-Malawi, Mozambique-Zâmbia and Mozambique-Tanzania and the construction of the Caia (in Sofala province) – Nacala (Nampula province) 400kV transmission line . These are the great and exciting challenges we are engaged in, which will effectively turn Mozambique in an electricity hub, and transform to the better its people living standards.

In addition to these projects, the company introduced new financial and asset management procedures, which are more efficient, transparent and professional; and it started a programme for the reduction of losses. These actions enabled to increase its capacity to provide services to the public and to collect the receivables, construction and expansion of infra-structures and maintenance of sustainable projects.

What are the main challenges to the power industry in Mozambique. And the opportunities for investors?
The main challenges essentially is the expansion of the electricity access, which is currently at about 27%, our goal is to reach universal access by 2030. This is a challenging goal since there are a need of increasing investment in various fronts – generation, transmission and distribution.

It is also challenging to ensure adequate, reliable and resilient transmission infrastructure across the country – as you may know Mozambican territory is huge and you need to extend lines for very long distances. Not less important is the necessity of the establishment and full functioning regulatory board, ensuring full cost reflective tariffs and reliable supply of electricity to the general population and economy in general.

How important is renewable energy in Mozambique’s energy mix?
We see renewable energy as the ‘new normal’ and as such we are organising ourselves to take advantage of this huge and moment defining opportunity. Within EDM, we have created a new Directorate for Renewable Energy and we are in the process of developing a renewable energy strategy for EDM.

In fact, in the New Integrated Master Plan we expect to grow the share of renewable energy to between 10-20% in the next 25 years or so. This represent between 600-1,200MW of power generation based on renewables. Currently we have approved two major solar power projects of 41MW each with the first to start construction in March 2018 and expected to supply power in the first quarter of 2019. It is our hope that with some investor interest it will grow, principally in the provision of batteries storage capabilities and investments in renewable energy technologies.

We also have some PPP with different stakeholders and EDM is undertaking feasibility studies in several locations with potential in renewable energy. On-going studies of three (3) Wind Power Plants in Namaacha, Manhiça and Cahora Bassa with 100MW each, and two (2) PV Power Plants in Cuamba and Dondo with 30MW each, and all of them for grid integration. With EU support there is on-going establishment of a Renewable Energy Feed-in Tariff (REFIT) and a Resource Center for technical assistance in Renewable Energy and Energy Efficiency. With French Cooperation, it was launched in September 2017 a Renewable Energy Auction Program, called PROLER.

Renewable energy is particularly important in achieving increased access and energy security, particularly considering the fact that Mozambique has exceptional natural conditions. In addition it can play a role as a booster to the local economy and economic growth.

Escalating costs, ageing infrastructures and growing populations have placed an increased strain on resources. In 2017 alone, Mozambique’s peak electricity demand reached 1,850MW, while the entirety of Southern Africa is facing increased demands of 38,897MW. With primary energy demand has been historically met by traditional sources such as wood or charcoal (which accounted for 64% of energy production and 77% of final energy consumption back in 2011); the country is now looking at alternative resources to support its growing need for electricity.

How important is regional cooperation in your view?
Regional cooperation is fundamental for Mozambique’s energy security, hard currency generation and political stability.

What is your vision for the sector?
By 2030, EDM would have become a smart utility whose services and products exist in every household, all corporations and enterprises across all of Mozambique. EDM would also be recognised as a flagship utility with clearly defined leadership and functional roles within the Southern African Power Pool community.

With this vision, we believe that EDM will play a pivotal role in lighting Mozambique transformation and ensuring a bright future for all its citizens within the country and regionally.

What are you most looking forward to at the CEO Forum?
I hope that at this event will be interesting to share knowledge in energy sector with various CEOs, suppliers, and partners. In this very challenging energy area it is very important to learn from different sources.

How important is it for utility executives on the continent to gather like this?
This is a particularly important Forum to share experiences and knowledge in energy sector that’s why utilities executives must come to add more value.

Source: ESI Africa