Songas in new power cut threat over TANESCO debt

10May 2016
Getrude Mbago
The Guardian
Songas in new power cut threat over TANESCO debt

The private power-generating firm Songas Limited yesterday threatened to suspend its operations at its 189-megawatt Ubungo Power Plant from tomorrow over arrears amounting to $90 million (200 billion/-) accumulated by the state-owned Tanzania Electric Supply Company (TANESCO).

TANESCO managing director Felichesmi Mramba

Addressing the media in Dar es Salaam, Songas managing director Nigel Whittaker said the company was running out of funds, a fact which was hindering it from continuing with production.

“We are suspending the plant’s operation as we can’t continue operating it without money,” Whittaker said.

But in a response later yesterday, TANESCO managing director Felichesmi Mramba said if Songas goes ahead and shuts down its plants tomorrow night as announced, the power supply firm will have contravened its contract with the state utility.

“According to our contract with Songas, they are supposed to give us a 90-day notice before taking such an action, which they did not do,” Mramba said.

According to Whittaker, Songas initially planned to suspend its operations in January this year, but was strongly requested by TANESCO and the government to continue generating and supplying power in the apparently futile hope that TANESCO would eventually service the outstanding bill.

“Songas receives most of its revenue from TANESCO and, like any private company, it cannot fund its operations without first being paid,” he said. “The revenue that Songas earns is put back into the business to primarily cover operating and maintenance costs, taxes and pay the Tanzania Petroleum Development Corporation.”

In December last year, Whittaker said, Songas reached an agreement with TANESCO that by April this year the payment arrears of the last 12 months would have been cleared. But nothing had been paid up to yesterday, he added.

He further explained: “Over the past few months, TANESCO, the Ministry of Energy and Minerals, and Songas reached a solution on how to pay the arrears over time. Whilst TANESCO has been making weekly payments to Songas to deal with some of the current month’s electricity charges, the arrears continue to grow and Songas’ operations are therefore again at risk.”

“Songas is an important contributor to Tanzanian economy. Over the past four years, we have demonstrated our patience and commitment to the people of Tanzania by continuing to operate whilst waiting for TANESCO to deliver on their financial commitment to us, but it is not as we expected,” Whittaker said.

He however added that “we are still optimistic that there will be a solution to this problem. Although with such uncertainty over payments, the safe and reliable operation of Songas’ facilities is now in peril.”

The Songas boss said they would continue to pursue meetings and discussions with both TANESCO and the government to remedy the situation. “But at this time we have had to suspend our operations until a satisfactory agreement with all parties has been reached,” he concluded.

Since 2014, Songas’ Ubungo Power Plant has been a major player in the Tanzanian electricity sector, supplying approximately 20 percent of the total national demand through power generated with the use of gas from the Songosongo Island gas fields.

By utilizing the country’s own natural gas resources, Songas has substantially reduced operating costs for TANESCO and other industries in Tanzania. TPDC estimates that the local economy has benefitted by $5 billion in cost savings since gas production from Songo Songo commenced.

If Songas actually suspends its operations and leaves TANESCO with a 20 per cent national energy deficit, then there is a real danger of power blues hitting the nation. But Mramba maintained that TANESCO would “do everything possible” to ensure that there are no power cuts.

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