Tanzania: Tanesco Tariff Increase On Hold

East African (Nairobi)

25 September 2007
Posted to the web 25 September 2007

Joseph Mwamunyange
Nairobi

The Tanzania Electric Supply Company (Tanesco) will have to wait a bit longer before the Energy and Water Utilities Regulatory Authority (Ewura) endorses its proposed increase in power tariffs.

The electricity utility, which recently recorded a first in the region when a syndicate of Tanzania's own local commercial banks and pension funds raised a massive $240 million to fund its recovery, will have to cool its heels until Ewura calls a meeting to discuss its submissions.

Ewura acting director general Anastas Mbawala told The EastAfrican that the process is in the preliminary stages as Tanesco is required to submit detailed information to support its proposed 40 per cent tariff hike.

"The application was as per guidelines requiring the power utility firm to apply for any adjustments. Their application will be made public and comments from the public will then be invited, followed by an evaluation and review of the current tariffs," he said.

Tanesco's recent loan is the single largest corporate finance deal ever in East Africa - bigger even than the KenGen IPO in Kenya in 2004 and far surpassing Safaricom's Ksh12 billion ($179 million) bond issue of 2005 in Kenya.

Arranged by Stanbic Tanzania Ltd, the six-year loan amortises after two years and has a government guarantee.

Stanbic Bank Tanzania, National Microfinance Bank and CRDB Bank are co-arrangers alongside Tanzania Investment Bank, Exim Bank Tanzania Ltd, the Public Service Pensions Fund, the Parastatals Pension Fund, the National Social Security Fund, the Local Authorities Pension Fund and the Government Employees Provident Fund.

The proposed tariff hikes have already met criticism from the Confederation of Tanzania Industries (CTI), which has charged that the proposals could impact negatively on the competitiveness of the country's industrial sector.

CTI chairman Reginald Mengi said members are arguing that some of the costs are not genuine.

Tanesco's recent $240 million loan will go towards strengthening the company's transmission and distribution network in order to reduce power losses, to connect new customers and to train staff to improve customer service delivery.

The World Bank has also promised to give Tanesco $111 million towards improving its network and other aspects related to making the firm more stable.

Hiking of power tariffs is part of the firm's recovery programme, under the Tanesco Financial Recovery Plan (FRP) 2006-2010.

The FRP is developed in such a way as to ensure Tanesco is able to procure, fund and serve an investment stream of Tsh1.275 trillion ($102 million) over the next five years.

Under the FRP, the power utility firm embarked on an ambitious capital expenditure programme to sustain an average load growth of 15 per cent per annum over the next five years.

Ewura regulates the energy and water utilities in the country, which are required by law to obtain permission from the regulator to effect any tariff changes.

Tanesco serves less than one million clients out of a population of 37 million people.

The national electricity coverage is 10 per cent but in most regions is in single digits. Rural coverage is less than two per cent.