When politicians, notably Members of Parliament, wanted electricity at any cost – and threatened to block the budget estimates of the ministry of energy and minerals last year -- little did they know they were also courting financial dire straits for the state-owned power utility firm.
Though they won the battle, the war still holds because the Tanzania Electric Supply Company (TANESCO) is now spending half its revenue on exorbitant capacity charges to independent power producers.
These costs do not include the price tag for buying power from the same independent power producers – while the so-called capacity charges still have to be paid whether Tanesco consumes electricity or not.
Capacity charge is money paid to the owner of the power generating plant regardless of the operation of that plant, which means the money accumulates every month and has to be paid even if the plants were to switch off.
As things now stand, Tanesco’s monthly collections between July and December, this year, stand at an average Sh94 billion per month, but the firm will have to spend half of that money on capacity charges, with the biggest chunk of it goes to Symbion Power -- the company that inherited the controversial operations of Dowans Tanzania.
The revelations come amid claims that the cash-strapped power utility is making a huge profit from its monthly revenue collections, but the firm cannot sustain its operational cost.
According to Tanesco’s financial analysis and forecast for the period under question (July-December), capacity charges alone would cost the state power utility a whopping Sh256 billion. At the same time, Tanesco will spend another Sh331 billion during the same period an average of Sh55 billion per month to buy electricity from private producers, The Guardian has established.
This means monthly that, when all the sums are done, Tanesco will be left with a monthly deficit anounting to Sh3 billion shillings.
The Minister for Energy and Minerals, Professor Sospeter Muhongo was quoted this week as saying that Tanesco’s income stood at Sh94 billion a month and put the firm’s monthly recurrent expenditure at a mere Sh11 billion – rubbishing Tanesco’s apparent financial crisis – and argued that Tanesco doesn’t need any fiscal assistance from the central government. He also queried the expenditure of the remaining money after deductions of recurrent expenditures, such as salaries.
According to the financial analysis and forecast, the biggest winners in Tanesco’s spending spree are Songas, Independent Power Tanzania Limited (IPTL), Symbion and Aggreko.
Symbion alone will pocket a staggering Sh85.755 billion in the next six months in capacity charges from its plant located in Dodoma, but would still sell power to Tanesco worth Sh19.602 billion -- which surpasses its ability to sell by more than 400 percent. According to technical documents made available to The Guardian, the same company (Symbion) would receive a monthly Sh74.327 billion over the next six months (Sh12 billion) in capacity charges, but would still sell power worth Sh20 billion at its heavy fuel powered plant in Arusha.
Songas is meanwhile projected to make Sh28.248 billion in capacity charges over the same period, but would sell power worth Sh56.103 billion (Sh9 billion) every month. IPTL is the only independent producer making lowest returns on capacity charges, projected at Sh4.964 billion during a period it expects to produce energy worth Sh168.9 billion.
Symbion Dar es Salaam will also comparatively lower expenses on capacity charges against money spent on power purchases, now currently estimated at monthly incomes of Sh22 billion in capacity charges and Sh35.3 for sale of energy from its Jet A1 fuel-powered plant, while Aggereko would receive is Sh12 billion in capacity charges compared to Sh24.691 for energy produced.
This paper has also established that Tanesco has projected to spend Sh69.83 billion in the next six months on fuel and lubricants to run the independent power plants and some owned by Tanesco – all amounting Sh11.6 billion.
In its last edition of July 22, our sister paper, The Guardian on Sunday carried a story on an apparent dark cloud of power shedding should the government back down on its own pledges to bail out its money-starved Tanesco.
That came in the wake of apparent government attempts at shifting goal posts, analysts said, citing suspension of Tanesco’s top management as a case in point.
The Permanent Secretary of the Ministry of Energy and Minerals, Eliakim Maswi, had earlier 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.
.Analysts said there was 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. They are instead processing for $65 million (Sh103) billion as a bridge financing to Tanesco, according to Finance Minister, Dr William Mgimwa.
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.
However, the ministry of Energy and Minerals through it minister, Professor Muhongo and Permanent Secreatry, Elikim have dismissed any possibility of power crisis noting that there were enough initiatives to avoid power rationing and ensure reliable power generation and supply.
The duo concurred in their statement early this week that there was enough money to purchase fuel for independent power generating plants and that the situation was manageable.