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Wanted: Heavy investments in coal mining industry
2006-02-25 07:35:04
By Michael Haonga
The much envied Tanzania richness in natural endowment is either miserably left to benefit a few – the get rich quickly even at gun point - or arguably ignored as not being in the first list of priorities.
Testifying on huge coal reserves enough to generate power for even the whole of East Africa region, the National Development Corporation (NDC) Managing Director and Chief Executive officer, Col. J. L. Simbakalia says the Corporation is actively seeking coal mining investment partners/investors.
Some may convincingly argue that for how long can Tanzania, over 40 years since it attained its independence in 1961 from the British UN Protectorate Territory mandate, remain at the level of citing how potentially rich and committed it is to harness its natural endowment richness for development course.
The prioritization of coal mining in its 12 areas list by NDC which is chaired by Professor Simon Mbilinyi, is not only heartening, but also indicative of how serious Tanzania is committed to changing the economic outlook.
It is also out of that concern that some stakeholders have made it point blank that the sooner concerted efforts are made to implement some of the agreements made to start tapping abundant coal potential that can even produce electricity to meet the East African region demand the better.
This would in fact augur well with the new vigor, strength and pace motto of the fourth phase government so that the country cannot only attempt to run but, like others, fly to the much cherished economic prosperity.
Other NDC areas of Joint Venture Investment Opportunity which has coal mining at top list, are thermal power generation, Mtwara Development Corridor, Central Development Corridor, Export Processing Zones Development, Small Scale Mining Promotion, Iron Ore, Vanadium and Titanium Extraction, Commercial Contract Farming, Minerals Beneficiation, and Lake Natron Soda Ash Deposits.
As it were, Tanga Cement Company Limited is one leaf of experience which challenges not only other companies but also may serve to remind stakeholders from within and outside the country on how abundant coal reserves in the country could be deployed for generating power.
According to the Tanga Cement Company Board Chairman, Dave King,’the company last year invested in the coal plants, which caused significant raise in our cost, but also facilitated us a shift from dependence on electricity to using of coal, thereby reduce the cost in the long term scenario.’
This indicates how coal could be tapped to generate electricity even though Tanga Cement Company imported coal from South Africa on grounds that until Tanzania invested in developing its abundant coal at Kiwira and Mchuchuma to be of the quality needed to producing sufficient heat, it could not be used.
According to NDC, the Mchuchuma coal-fired thermal power scheme, initially to start producing 400 MW is conceived as an alternative source of power to Tanzania which is predominantly hydro.
But much more too is in the context of unreliability of rainfall which has frequently beset the hydro power generation of the country as is the case now and the last two decades.
Of great concern is that although the government and sponsors signed an agreement in 2001, there has been a delay in its implementation to-date.
The agreement provided for implementation of the project in accordance with the Project Development Programme (PDP), jointly formulated by the project sponsors and the government.
NDC admits that ”Implementation of the this project has faced setbacks due to failure to reach mutually agreeable development phases as provided for in the PDP agreed between the government and the project sponsors — namely NDC, Siemens Ltd Grinaker-LTA and Cinergy Global Power Inc.
It is noted further that the failure may be attributed to lack of an appropriate regulatory framework for power management despite the government’s intention to liberate the sub-sector.
Planned core objectives of the Mchuchuma coal utilization project are sixfold namely - Conclusion of the Project Verification Stage involving carrying out a study on commercial sustainability of the project, obtaining World Bank support, finalization of power sector structural reform process, formulation of power purchase agreement principles and signing of Implementation Agreement.
- Carrying out confirmatory studies on coal mine, power station, transmission line and village and associated infrastructure.
- Preparation of final financial model, drafting and signing relevant agreements and passing of legislative and regulatory enablers,- Facilitate preparation and implementation of relevant social development programme for local empowerment, - Facilitate registration of Special Purpose Vehicle companies and Final Agreements and acquisition of relevant guarantees from the government, and - To monitor and supervise the carrying out of a feasibility study on power transmission system.
According to the review report on the project up to the end of last year indicates also sixfold achievements to have been reached as follows.
As a caveat to the agreed PDP, the Government approved staged development of the project with commissioning of the first 200MW by the year 2007/8 by Independent Power Producer subject to confirmation of market for power to be produced,Following this, the Government, through the Ministry of Energy and Minerals (MEM) granted the Project Sponsors mandate to seek power markets within and outside Tanzania,Negotiation to ascertain power demand were initiated with utility organizations in Kenya, Uganda and other neighbouring countries.
Negotiations were also undertaken with various bulk power consumers in the country, like big mining houses.
Marketing of the Mchuchuma Project to other prospective participants is continuing.
Various companies have so far expressed interest to participate in developing the project.
The companies include TOTOBA Industrial and Mining Investment Holdings (Pty) Limited and BSG Resources Limited both of South Africa,- NDC mobilized a grant of US D420,000 from BADEA for the feasibility study of Mchuchuma-Mufindi Power Transmission Line.
The feasibility study was completed in April 2004 and recommended a least coast generation development plan for Tanzania for the next 25 years.
It concluded that Mchuchuma Coal-to-Electricity Project is the least cost generation option,- Additional study on High Level Economic Justification for the electrification of villages/towns close to the Mchuchuma-Mufindi transmission line has concluded that the project is feasible from the economic perspective.
It is in the interest of Tanzanians and the world at large for use of what is abundant naturally for economic improvement enabling people to live decent life hence stakeholders from within and outside the country may hasten investing in the coal mine industry in the country.
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