Former Permanent Secretary at Ministry of Energy and Minerals, Patrick Rutabanzibwa said if the 1.1 percent tariff reduction is approved by Energy and Water Utilities Regulator Authority by next month, Tanesco will have to seek alternative financing.
“Tanesco has indicated one such source as being commercial bank loans, which would have the added burden of having to be paid back with interest. Another possible source that we are aware of is the Development Policy Operation facility of the World Bank,” Rutabanzibwa who |Country Chairman of PanAfrican Energy Tanzania Limited, an Orca Exploration Corporation subsidiary, said.
Responding to Smart Money questions regarding populist political policies being advanced by the government, Rutabanzibwa pointed out that in the past, Tanesco’s creditors have been paid by the World Bank’s DPO facility.
“Through this facility, funds have in the past been made available to help Tanesco pay off some of its debts. In 2013 and 2014 a total of US$40 million of arrears owed to PanAfrican Energy by Tanesco were settled using DPO funds,” Rutabanzibwa who is one of the longest serving Permanent Secretaries who retired over three years ago, noted.
Efforts by SmartMoney to get World Bank position on the subject proved futile over the past fortnight because newly appointed Country Director for Burundi, Malawi, Somalia and Tanzania, Bella Bird has been travelling on official duties.
“The Country Director has been travelling a lot this month, please bear with us and we will communicate to you once she is back in office,” said Communication Officer, Loy Nabeta in an email.
There is growing concern among gas supplying companies that the tariff reduction move will cripple the already cash strapped state utility which collects barely enough to service debts month Officials at Songas Ltd and Wentwoth Resources Limited said they are watching closely Tanesco’s developments.
“We may put our gas increase production on temporary hold because of the risk of delayed payments,” an official at Wentworth in Dar es Salaam, said.
In its recent statement, Wentworth said, “First gas delivery to the new government owned Mtwara to Dar es Salaam natural gas pipeline commenced on 20 August 2015.
Average gross daily gas production of 46 million standard cubic feet per day(MMscf/d) during the fourth quarter and 16 MMscf/d for 2015, with an expected increase up to 70-80 MMscf/d by the end of Q1 2016 as gas turbines at existing and new power generation facilities are commissioned and become fully operational.”
At Songas, which together with PanAfrican Energy are owed the largest sums by Tanesco, the mood among senior management officials was equally disturbed.
“Let’s wait and see as events unfold, we will issue a statement when Ewura has finally endorsed the new tariff,” said an official at Songas.
Under pressure from politicians, Tanesco submitted proposals to Ewura to reduce its current average tariff of 12.6 US cents per kilowatt-hour by 1.1 percent on 1st April, 2016 and by another 7.6 percent on 1st January, 2017.
In its tariff application to EWURA dated 24th February, 2016 Tanesco has indicated that the tariff it is proposing starting April would only allow it to meet its cash obligations in 2016 without including the payment of an outstanding sum of about US$ 320 million owed to its lenders and trade creditors as of December, 2015.
End last year, Tanesco Managing Director, Felchesmi Mramba said if the company’s monthly revenue collection will be boosted by an increase in power generation due to use of natural gas, it would repay its debts by the first half of this year.
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