As the Tanzanian government embarked on a programme to upgrade its Electricity Supply Industry (ESI) – to fulfil the Tanzania’s Development Vision (TDV) 2025 – there are three main reasons why investors should be excited about the new plan, which is named Electricity Supply Industry (ESI) Reform Strategy.
A comprehensive plan
Firstly the plan is composed of detailed activities which will be implemented in the immediate, short ,medium and long terms. In the immediate term, key activities will involve ring-fencing Tanzania Electric Supply Company Limited (TANESCO) Strategic Business Units, valuation of assets and liabilities of TANESCO, and a human capital needs assessment.
In the short term, TANESCO generation segment is expected to be unbundled with IPPs unconditionally allowed to sell electricity directly to bulk off-takers and pay wheeling charges only to the company responsible for transmission. In the medium term, the distribution segment will be unbundled from the transmission unit.
A gradual process
Secondly, this strategy recommends a gradual unbundling of the state owned utility company into independent generation, transmission and
distribution companies with much emphasis of private sector participation in the entire supply chain with exception of transmission segment.
Commercial gain
And the third reason why the plan brings excitement to investors is that the reforms embedded in the plan aim to create a financially sound ESI in Tanzania through increased investment from both private and public sector; increased electricity connection and access levels.
The plan complied by the country’s Minister for Energy and Minerals Sospeter Muhongo also revealed the Tanzanian government need $11.4 billion to boost Tanzania Electricity Supply Industry.
“The Power System Master Plan identifies short term financing requirements as US$11.4 billion about US$1.9 billion per annum of which 73.5 percent is for generation. While the Government of Tanzania (GoT)and TANESCO have been the primary financiers with some forms of support from Development Partners, the projected growth exceeds existing resources. Therefore, the private capital investment becomes an important option to bridge the financing gap within the context of appropriate controls and balancing the interests of both investors and customers,” reads part of the plan.
It also said that over the past two decades, the ESI in Tanzania faced enormous challenges including capacity shortage and backlog investment, attracting private investment in the electricity sub-sector; increasing connection and access level to electricity; increasing security and reliability of the power supply; reducing technical and non-technical losses; diversifying power generation sources; and improving TANESCO’s financial performance.
The ESI Reform Strategy plan also provided an overview of Tanzania’s electricity market structure in the next eleven years, 2014 – 2025 which include the “Increase investment from both private and public sector; Enhance private sector participation; Increase connection and
access levels to electricity; Diversify sources of energy for electricity generation and supply; Enhance affordability and reliability of electricity supply; Reduce system losses; and Establish a competitive wholesale and retail electricity market.”
It added that power generation will be undertaken by both public and private companies. Small Power Projects will also be further promoted under the Standardized Small Power Purchase Agreement.
Minister Muhongo said the ESI Reform Strategy plan was developed through comprehensive consultations with key stakeholders, review of existing institutional set up, relevant policies and laws, past studies and benchmarking experience against other countries.
By George Mpofu
