Yet another dark cloud of power shedding lurks ahead should the government back down on its own pledges to bail out its money-starved Tanzania Electric Supply Company (Tanesco), The Guardian on Sunday can reveal.
This comes in the wake of last week’s apparent government attempts at shifting goal posts, analysts say, citing suspension of Tanesco’s top management as a case in point.
The Permanent Secretary of the Ministry of Energy and Minerals, Eliakim Maswi, last week accused the state-owned utility firm’s top managers of ‘intentionally’ planning and initiating power rationing to damage the credibility of the government in the Parliament.
However, the latest move contradicts a firm government stand on power rationing,also made by Mr Maswi, who had earlier vowed that ‘there will never be power rationing in the country’, and that severe load-shedding would soon become history among Tanzanians.
According to analysts, there is a close link between the financial crisis facing the cash-strapped power firm and its failure to secure a Sh408 billion loan from the consortium of local banks, as well the government’s delayed guarantee required by the lenders.
Fears of a repeat period of black-outs stem from the fact that while the government has not honoured its financial commitments to Tanesco – made public inside Parliament last August -- the level of waters in the main hydropower generation dams is dropping drastically, with the likelihood that it could worsen by the end the year.
A technical report prepared by Tanesco management which was presented last week to its board of directors and a copy served to the Minister of Energy and Minerals reveals that Tanesco needs Sh462 billion from the government to cover the deficit for the period between July and December, this year.
The monies would enable the utility firm to run the business efficiently -- and without power rationing – or face another darkness.
The nine-page report states clearly that while Tanesco expects to generate Sh566.771 billion in the next six months through electricity sales, the cost of buying power from independent producers would amount to Sh587.156 billion, costlier by at least by 4 percent than Tanesco’s projected revenues during that period.
The report cited the independent power producers who stand to pocket the hefty gains as Songas, Independent Power Tanzania Limited (IPTL), Symbion (Dododoma, Dar es Salaam and Arusha) and Aggreko.
The document further reveals that Tanesco projects to earn Sh181.43 billion from other power sales – which apparently includes a government pledge of Sh80 billion to support the running costs.
However, this pledge has yet to be translated into a resource for Tanesco coffers.
In January, this year Tanesco had proposed to raise its power tariffs by 150 percent, but the Energy and Water Utilities Regulatory Authority (EWURA) later capped it at just 40 percent.
“The Government is advised to search for the Sh462.07 billion so as to bail out the firm financially during this transitional period without necessarily increasing existing power tariffs. Also there are lenders who have shown intent to offer financial credit to government so as to have a workable solution to the problems during emergency period.
These lenders are ready to effect $300 million (Sh480 billion) in 8 to 10 weeks after the agreement is reached. The government can consider bringing such stakeholder on board under the current strategies” the Tanesco report affirms.
Tanesco management argues that since the amount needed exceeds the proposed -- but stalled -- Sh408 loan from a consortium of banks, there was need for the government to look for alternative sources of finance to salvage the national utility firm and the power generation.
“The required money is beyond the Sh408 loan amount from a consortium of commercial banks (which in principal will earn Tanesco Sh346.8 billion only because the government will approve for 85 percent guarantee at maximum) we have attached the financial position analysis if Tanesco will not be granted approval to increase power tariffs” noted the report.
While it was expected that the money from the loan would primarily serve to improve power generation, Tanesco argues in its report to the board of directors and the parent ministry that if the loan is secured, it would help to settle overdue debts amounting to Sh276.81 billion.
“The remaining money will cater for cost emanating from emergency power generating plants,” the report says.
Our sister paper, reported on Saturday that Tanesco’s hope to secure the Sh408 loan was fading, and that the firm might settle for a paltry $65 million (Sh103 billion) in bridge financing. Finance Minister Dr William Mgimwa was quoted as saying the government had put the loan on hold for good reasons – but declined further details.
Poor state of hydro dams
While the central government is slow in facilitating the loans that would finance reliable power generation, the Tanesco report reveals that under the current operations the major dams on Great Ruaha river could possibly dry up by the turn of this year.
The document shows that by December, 2012 the water level at Mtera dam, the main water reservoir for Kidatu dam in Morogoro, would be less that a meter above the minimum operational level – recommended at 687.5 meters above sea level – could go down to nearly 688 meters.
The report tells the board and to the parent ministry – in cleat terms -- that there has been a steady decrease of water level at Mtera dam for the past three months beginning mid-April, forcing Tanesco to switch off for lack of diesel, Heavy Fuel
Oil or Jet A1
“Based on the power generation plan for July- December 2012 hydro plants will generate an average of 151 megawatts as follows: Mtera will generate 22 megawatts, Kidatu 54 , Kihansi 60, Nyumba ya Mungu 3, Hale 3, New Pangai Falls 9 and Uwemba 0.2 megawatts.
This implies that the projected generation capacity of all hydro plants (151megwatts) amounts to a mere 27 percent of the 561MW installed capacity of the six hydro plants.
As such, power generation now depends heavily on emergency power generation by operating gas and fuel powered plants which, according to the report by Tanesco, is projected to count for over three-quarters-(76.38MW) of the total national requirement. Gas will account for a major share of 49.79 percent and fuel plants 26.59 while hydro plants will produce the remaining 23.62 percent.
Now with the poor state of dams, it is clear that the country faces imminent danger of a repeated power crisis reminiscent of 2006.