The cash-strapped Tanzania Electric Supply Company (Tanesco) may now have to settle for a paltry $65 million (Sh103.35 billion), or just a quarter of the money earlier earmarked -- $256.6 million (Sh408 billion) -- to fund its touted power rescue plan.
Tanesco is said to have agreed to receive what is described as “bridge financing” in the wake of government’s failure to provide a guarantee that would shore up the firm’s bid to borrow the money from a consortium of three local banks led by Citi Bank.
It has since taken Tanesco nine months of hard, yet futile, bargaining to secure the Sh408 billion, thanks to red tape and apparent lack of seriousness at the Ministry of Finance. The money was part of an ambitious power rescue package amounting to Sh523 billion which Parliament endorsed on August 13, 2011, ostensibly aimed at curbing power rationing with an additional 572MW to the national grid.
However, Finance Minister, Dr William Mgimwa, admitted during an exclusive interview this week in Dodoma that the plan to borrow the Sh408 billion had since stalled, and that even ‘bridge funding’ mechanism would only be possible after Tanesco and the three local banks had signed a “financial agreements” before the government could provide its guarantee for the $65 million.
The finance minister said the request for $65 million was a recent move by Tanesco, in itself an act of desperation because the government would not immediately provide a guarantee to the utility firm in its bid for the originally agreed loan amounting to Sh408 billion.
Although the minister denies allegations that the government had refused to endorse the original loan application – vide its guarantee -- documents made available to The Guardian show that Treasury had been sitting on issuance of the guarantee for the past nine months.
The finance minister says discussion on the possibility of issuing the guarantee for the money was still under way, only that processes were temporarily halted to resolve what he describes as “some important” issues – but declines further details.
“The government has temporarily halted the process of issuing the guarantee for the loan but the matter is still under discussion. We did that for a good cause … we wanted to sort out some pertinent aspects of the matter,’ he said.
The finance minister also throws the onus of delays in issuing the guarantee for the so-called bridge financing mechanism back to Tanesco, saying the utility firm had yet to sign “the financial agreements” with two of the three local banks that are ready to give it the money.
He said only Citibank had since sealed an agreement with Tanesco for the loan amounting to $20 million while NMB has expressed interest to give out $26million. But, NBC that was to dish out the remaining $19 million had not made any open commitment in writing.
Dr Mgimwa (pictured) said it was imperative that Tanesco finalized talks with all three financial houses before submitting the agreements to the government – arguing that it would be inappropriate for the government to issue its guarantee for $ 65 million while the loan accessed by Tanesco was far less than the amount demanded by the power utility.
Else, each local bank willing to raise money for the bridge financing mechanism might request for a separate guarantee from the government, which cannot be done. “So, we have told Tanesco to finalise talks with the three financiers before submitting the agreements to us so that we can issue the guarantee,” Dr Mgimwa said.
As things stand now, the current strategy of borrowing funds -- from any source -- under government guarantee would not solve the country’s enduring power crisis.
Dr Mgimwa says that borrowing money under such arrangement was a mere stop-gap measure – and that a lasting solution lies in “cost effective” power generation such as gas-powered plants.
Generating power from heavy funnel oil is now estimated at $40 Cents per 1Kwh, while the same amount of power (1Kwh) generated from gas costs between $0.13 and $0.14 Cents.
Power generation from coal is said to be the least expensive, with current costs pegged at $11 Cents per 1 Kwh, while wind generates 1 Kwh at $13 Cents.
The current national power demands is estimated at 1400MW, and an envisaged Mtwara-Dar es Salaam gas pipeline could generate up to 2500MW.
Our sister paper, The Guardian on Sunday, last week ran an exclusive report on how desperate Tanesco officials have spent nine fruitless months chasing an elusive Sh408 billion.
Dozens of meetings are said to have since been held between finance ministry officials, Tanesco representatives and those from the lending institutions, but no breakthrough is yet in sight.