Govt, Songas in crisis talks as unpaid power bills pile up

28Mar 2016
Lydia Shekighenda
The Guardian
Govt, Songas in crisis talks as unpaid power bills pile up

Independent power producer Songas has warned that it may be forced to suspend its supply to the state-owned Tanzania Electric Supply Company (TANESCO) due to an unpaid back debt of a least $100 million (over 218 billion/-) that TANESCO owes it.

The imminent possibility has prompted the government to open talks with Songas over how to settle the huge payment arrears and avoid a fresh wave of enforced power blues and load shedding if Songas were indeed to cut off its contribution of 180 megawatts (MW) - around 25 per cent of total requirement of the national power grid.

"TANESCO is currently behind in payments of between $90m and $100m to us," Songas managing director Nigel Whittaker told The Guardian.

"There is always the risk that we won’t be able to run and we would be obliged to shut down if this money is not paid," Whittaker added.

TANESCO's outstanding power bills to Songas have basically doubled from around $51 million in 2013. The state-run utility is the sole client of Songas, which has previously stated that the payment arrears are stifling its plans to expand its power supply infrastructure through further investment.

"We are optimistic," said Whittaker when asked about the prospects of TANESCO settling its outstanding debts anytime soon.

TANESCO's acting managing director Decklan Mhaiki acknowledged that the company was lagging behind in its payments to Songas and confirmed that negotiations were underway on how to clear the power bills that keep piling up.

“We have already paid Songas some amount of the money owed, but we are still working out how to settle the remaining arrears,” Mhaiki said without giving figures.

Some of TANESCO's main creditors have expressed concern after the company, which is around 765bn/- in debt, applied to the country’s chief energy regulator for permission to lower power tariffs from next month.

But the state-run power utility maintained that its tariff reduction plan had been well thought-out and makes financial sense because the completion of the Mtwara-Dar es Salaam gas pipeline means that it can now do away with costly oil imports for power generation.

According to Maiki, the TANESCO proposal to lower power tariffs will not affect its obligation or commitment to clear the debts it owes to Songas and other independent power producers, as well as other creditors.

“We have proposed to lower power tariffs by 1.1 percent from April .... this proposed reduction has taken into account all needs from all sides, therefore the move will not affect our plans to settle the outstanding debts,” the TANESCO boss asserted.

Songas is an integrated gas-to-electricity facility comprising gas processing plant, transportation pipeline and power plant.
Its majority shareholder is Globeleq, a leading independent power generation company that operates several power projects across the African continent under joint ownership of CDC (the UK development finance institution - 70 per cent) and Norfund (the Norwegian Investment Fund for Developing Countries – 30 per cent).

Apart from Globeleq, other investors in the Songas project include TANESCO, the Tanzania Petroleum Development Corporation (TPDC), and the Tanzania Development Finance Company Ltd (TDFL).

(The Ministry of Energy and Minerals is also taking part in ongoing talks over the unpaid power bills, according to officials.

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