20110815
Reuters
DAR ES SALAAM (Reuters) - Tanzania plans to spend 1.2 trillion Tanzanian shillings by the end of next year for emergency power projects aimed at ending chronic energy shortages in east Africa's second-largest economy.

Energy and Minerals Minister William Ngeleja said in a presentation to parliament seen by Reuters on Monday that the government was seeking loans from China to finance construction of a natural gas pipeline from Mtwara in southern Tanzania to Dar es Salaam, the country's commercial capital.

Parliament approved the government's emergency power rescue package on Saturday. It expected to add 572 megawatts (MW) to the national power grid by December 2012 against the current deficit of 260MW.

Ngeleja said the state-run Tanzania Electric Supply Company (TANESCO) would spend 523 billion shillings between now and the end of this year on emergency power, but would earn just 115 billion shillings revenue during the period from electricity sales due to low power tariffs.

"Comparative surveys done in east Africa have revealed that Tanzania has the lowest electricity tariffs compared to Kenya and Uganda. TANESCO has been operating like a charity buying power at very high costs and selling it to its customers at low prices ... we cannot continue in this path," he said.

"We are requesting TANESCO to send an application to the energy regulator, EWURA, for (tariff hikes). We will make the (tariff) adjustments when we are satisfied that power supply has become reliable."

Ngeleja said the planned tariff hikes would target mining companies and other large power users in the country.

"Domestic power consumers will not be affected by proposed tariff increases ... tariffs will not be adjusted until we are satisfied that citizens receive electricity services and there is no power rationing."

The minister said the government would invest in thermal plants powered by natural gas, oil, jet fuel and coal in attempts at weaning itself off weather-dependent hydropower, which accounts for 55 percent of the country's energy sources.

He said the government would settle its long-standing debt of 86 billion shillings to TANESCO and provide guarantees for loans to enable the public utility to raise funds for new power projects.

Tanzania has been plagued by frequent power outages since December because of recurring drought and under-capacity of the existing natural gas supply infrastructure.

The International Monetary Fund (IMF) cut its 2011 growth forecast for Tanzania to 6 percent from 7.2 percent in March, saying frequent power outages would hurt output.

Tanzania's Prime Minister Mizengo Pinda announced in parliament on Saturday the country had lost an estimated 840 billion shillings in revenue collection within the past six months due to rolling power blackouts.

"According to the CTI (Confederation for Tanzania Industries), around 50 factories have been shut down because of the power cuts. TANESCO has also lost 466 billion shillings in 2010/11 due to power rationing," he said.