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Govt unveils Sh523b power rescue plan

14th August 2011
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  The Total cost is Sh523 billion
  Deficit is Sh408
  Tanesco`s revenues for six months is Sh115 billion
  Power rationing has cost Tanesco Sh420 billion in 18 months
  By June, this year, government owed Tanesco Sh86 billion
  At the end of 2012 power projects to cost Sh1.2 trillion
The Minister for Energy and Minerals, William Ngeleja

The government yesterday presented a comprehensive power rescue package that would give the nation a total of 572 megawatts at the cost of Sh523 billion($330 million).

The rescue package would enable the country end the worsening power rationing that has clouded the nation for months now and cost the economy dearly.

The Tanzania Electric Supply Company (Tanesco) alone has lost revenue amounting to Sh420 billion over the past eighteen months as a result of the power rationing.

At the same time a total of 50 companies have been closed or forced to reduce their production by 50 percent, during the past seven months.

But, presenting the government’s Power Rescue Package yesterday, the Minister for Energy and Minerals, William Ngeleja, assured the nation that the proposal would end the power rationing between September and December, this year.

While sections of the legislators questioned the expensiveness of the rescue package, the Minister responded by saying the cost of power rationing to the economy was bigger than what the nation would incur, to finance the multibillion shillings proposal.

“We need electricity but at what cost? Having electricity under this package is still cheaper than not having it, because in every single unit that is not produced, it costs the economy $1.10.” Minister Ngeleja said.

Minister Ngeleja whose Ministry was given three weeks to come up with a rescue package to save the country from the worsening power rationing, said the target was to produce 500 megawatts, but under this package there would be a total of 572 megawatts.

He also ruled out any possible increment of electricity tariff as part of financing the $330 million package.

“ There will be no increment of electricity tariffs until the country is able to have enough electricity, and has moved out of the current crisis,” the Minister assured the nation yesterday.

Elaborating the financing mechanism of the package, Ngeleja made it clear that while the total cost was Sh523 billion, Tanesco’s revenues during that period would be only Sh115 billion, creating a deficit of Sh408 billion.

To meet the deficit, Minister Ngeleja told the Parliament that the government would act as guarantor to enable Tanesco borrow the Sh408 billion from local banks, a move strongly challenged by the opposition camp.

The camp challenged the government, saying instead of cutting its spending spree in order to finance the proposal, the burden has been left to Tanesco to borrow from local banks.

But in response, Minister Ngeleja defended the move, saying borrowing wasn’t just a government’s culture or a sin, adding that ‘if super powers economy in the world were borrowing money to finance various projects, there was nothing wrong for Tanzania to do the same.

“If America, the world’s powerful nation borrows, who are we?” Asked Ngeleja. He added, “This is not a dictatorial regime and therefore we can’t just impose orders on investors in the name of collecting revenues.”

Legislator January Makamba emphatically stated: “It’s time to say goodbye to emergency power..., this should be the end because sometimes the so called emergency turn out to be the conduit of corruption.”

572 megawatts structure

According to Ngeleja, Symbion Power Tanzania Limited, Aggreko, Independent Power Tanzania Limited (IPTL) and the National Social Security Fund (NSSF) are the companies that have been contracted by the government through Tanesco to resolve power crisis on emergency plan.

Symbion, that was generating 75 megawatts by mid July when Ngeleja tabled the ministry’s before it was rejected by Parliament , is now trying its generators so that they can run on JET I. According to Ngeleja, until the end of this month Symbion, which has the capacity to generate 112 megawatts, will be able to add another 37 megawatts into the national grid.

Independent Power Tanzania Limited (IPTL) which is also in the list of plants expected to provide an immediate solution to the crisis has beefed up power generation to 100 megawatts from 20 megawatts that were being generate in mid July when the budget was rejected by the MPs.

The minister told the House that IPTL has been able to beef up power generation after the government succeeded to raise funds. However, the minister neither revealed the amount of funds raised nor its source.

The Minister also told the House that in late June, Tanesco signed an agreement with Aggreko International in which the latter would bring generators with the capacity to produce 100 megawatts. According to Ngeleja, the generators arrived in Dar es Salaam yesterday and the assembling work, which is done on 24 hour basis, is underway.

Symbion, according to Minister Ngeleja, is in three phases expected to install other generators that are expected to generate a total of 205 megawatts by December this year. Under this plan, Symbion would next month install a 45-MW capacity plant at Ubungo while in October the company would bring in the country a 110 -MW capacity plant that would be installed in Dodoma.

He said in the last phase Symbion would bring in a 50-MW capacity plant in December to be installed in Arusha.

The National Social Security Fund (NSSF) on their part have agreed to purchase a 150MW capacity power plant whose installation would also be done in three phases. The minister said next month NSSF will bring in the country a 50- MW capacity power plant while another two plants with 50- MW capacity each will be bought on in October and November, respectively.

According to Ngeleja, if all goes as planned, the nation would have surpassed the target by 272 megawats under the emergency power plan because when the budget was rejected on July 18, the ministry was required to come up with a plan of generating 300 megawatts on emergency measure by December this year.

He said if 572 megawatts would be added to the national grid by December this year, there would over 1110 megawatts of power for the nation with a surplus of about 272 megawatts.

Sticking on the emergency power plan that ends on December this year the minister said the government will have to bear the financial burden of financing it since Tanesco’s financial muscles can not overcome it.

He said while the cost for implementing the plan stands at Sh 523 billion, Tanesco’s revenue up to December would not exceed Sh 115 billion. In that respect the government will bridge the financial gap reaching Sh 408 billion.

On the long term plan, the government would guarantee Tanesco to enable it purchase a 300 MW capacity plant. According to Ngeleja the project would be implemented in 2012.Ngeleja said until December 2012 all listed projects would have cost Sh 1.2 trillion.

He said to enable the plan get smooth implementation the government would waive taxes on fuel used by various power generation plants whose companies have entered agreements with Tanesco except JET1.

However, the minister told the august House that once the government succeeds to supply reliable power to its customers it will float a request to Energy and Water Utilities Authority( EWURA) to have power tariffs reviewed to meet the running and administrative costs.

According to Ngeleja ,Tanzania is a nation with less power tariffs compared to Kenya and Uganda. But, he highlighted that the change in tariffs will touch large scale power consumers such as companies and mining firms only.

The minister said the Confederation of Trade and Industries (CTI) has welcomed the government proposal as long as it supplied reliable power.

Ngeleja also told the House that customers owing Tanesco have to pay their debts to generate funds to help the company and the government in general, implement the projects. Until June this year the government owed Tanesco a total of sh 86 billion.

The government came with the plan yesterday after MPs on July 18 rejected the financial estimates of the Ministry of Energy and Minerals because of lack of enough funds allocated to address the ongoing load shedding and allegations of corruption made against Permanent Secretary David Jairo who was sent on paid leave to pave way for investigations.

Having rejected the budget Prime Minister Mizengo Pinda was compelled to withdraw it.

SOURCE: GUARDIAN ON SUNDAY
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