Magufuli orders ban on any more dubious power deals

17Mar 2016
Our Reporter
The Guardian
Magufuli orders ban on any more dubious power deals

President John Magufuli yesterday outlawed all new emergency power purchase agreements similar to existing deals that have literally crippled the state-run Tanzania Electric Supply Company Limited (TANESCO).

Kinyerezi I power plant manager John Mageni (2r l) briefs President John Magufuli (r) shortly after the president inaugurated the gas-to-electricity turbines in the Dar es Salaam suburb yesterday.

He warned that any government official who signs such contracts will be swiftly sacked. Magufuli criticized what he called the “extremely high” capacity charges currently being paid by TANESCO to private electricity suppliers like the controversial Independent Power Tanzania Ltd (IPTL) company.

“Our country must do away with these power rental agreements that have caused us so many problems, such as IPTL and others.

This is because we became too reliant on temporary power solutions from private businessmen,” the president said.

“We are paying capacity charges at extremely high rates ... we are causing (unnecessary) hardships to poor Tanzanians,” he added.

Magufuli made the remarks at the ground-breaking ceremony for the construction of the Kinyerezi II power plant in Dar es Salaam.

The 240MW gas-fired plant, 100 per cent owned by the government through TANESCO, is being built by the Sumitomo Corporation of Japan.

According to official government documents seen by The Guardian, the cash-strapped TANESCO currently spends more than $16.76 million per month (over 36.6 billion/-) to pay capacity charges to a handful of independent power producers.

Under conventional power purchase agreements, payments for capacity are made whether or not electricity is actually generated by the privately-owned power plants.

IPTL, which is at the centre of the infamous Tegeta escrow account scandal, is paid $2.655 million (5.8bn/-) by TANESCO each month as capacity charges for its installed 100 megawatts.

Other foreign companies enjoying similar windfalls from the public power utility firm are Aggreko, which calls itself the world’s largest temporary power generation company, and receives a cool $2.084 million from TANESCO in monthly capacity charges; and Symbion Power, an American energy company with three power plants in the country that are each also earning billions of shillings in similar charges. TANESCO pays Symbion (Arusha) $1.866 million, Symbion (Dodoma) $2.25 million and Symbion (Dar es Salaam) $2.69 million every month.

Meanwhile, the 180-MW capacity Songas power plant located at Ubungo, Dar es Salaam gets the biggest slice of the cake, bagging an eye-watering $5.2 million (approx. 11.35bn/-) as capacity charges from the public power utility each month.

That apart, TANESCO also pays energy charges to these companies whenever it buys electricity from them in cases of power generation gaps from its own turbines.

Noting yesterday that the monthly payments to IPTL and the other private power firms were draining the country’s scarce resources, Magufuli put an immediate stop on similar contracts from now onwards.

“If any (government) expert comes forth with more proposals for power rental agreements instead of proposals on how the government can buy its own power generation plants, that expert is no good and must be removed,” the president instructed the energy ministry.

Tanzania’s energy sector has long been dogged by graft scandals, the most recent being the IPTL-Tegeta escrow account row in 2014 which led to the resignations of several implicated ministers in former president Jakaya Kikwete’s government.

Members of parliament said senior government officials fraudulently authorised the transfer of at least $122 million of public funds from the escrow account held jointly by TANESCO and IPTL to the latter’s disputed owner Singh, through his privately-owned company Pan Africa Power (PAP).

The government officially denied any impropriety in the funds transfer, and PAP also said it was all done legally. However, it was later revealed that the deal was fraudulent through and through.

Apart from the succession of high-level government resignations that followed, criminal charges were also filed on several of the implicated officials.