Tanesco in financial mess

HENRY LYIMO

THE government said Tanzania Electric Supply Company (Tanesco) standoff with independent power producer, Songas will be resolved in time to avert a planned switch off of power plants at Ubungo by the latter due to accumulation of arrears in payments for services.

The Commissioner for Energy and Petroleum Affairs in the Ministry for Energy and Minerals, Hosea Mbise, told reporters in Dar es Salaam that the Treasury is reviewing all Tanesco debts and will help the cash strapped power utility firm to come up with comprehensive payment plans. Tanesco and the Ministry of Energy and Minerals were also continuing with negotiations with Songas to rescue the situation, he said.

Songas Managing Director, Nigel Whittaker, said in Dar es Salaam on Wednesday that they will switch off two out of six power plants at Ubungo station on Saturday as part of measures to absorb the impact of delayed payments from Tanesco that led to financial constraints to the energy firm. If effected, the shutdown will take off 40 MW of electricity from the national grid.

“If no payment for the arrears is agreed, Songas will need to gradually suspend operations at its Ubungo power plant,” he told reporters at a breakfast meeting noting that the arrears had accumulated to 100 million US dollars which is equivalent to 14 months payment.

Songas generates about 180 MW of power to the national grid from six plants at Ubungo using gas from the Songo Songo Island gas fields. He said Songas cash flow had reached a critical stage and may need to commence a gradual suspension of its operations at its 190 MW Ubungo power plant.

The Union and Zanzibar governments are the main bad debtors of the troubled power utility firm making it unable to pay its creditors, he admitted adding bailout plans had already started.

He said the Treasury was slashing budgetary allocations of government ministries and departments to service their debts which include that owed to Tanesco, he explained. According to him, the state-run power utility firm owes its creditors about 600bn/- while its bad debts have reached 300bn/-. The debt by the Union and Zanzibar government is about 200bn/-.

Other measures include reviewing Tanesco’s payment schedule of 3bn/- each week to its creditors that began since last year so as to avoid accumulation of arrears. “We’re going to see if they are still maintaining this and if no we must know why,” he said noting that the schedule and amount were deemed possible because Tanesco collects over 100bn/- per month.

He said the government had also obtained 100 million US dollars in donor financial support to bail out the firm.

He did not give details. Mr Mbise said the government recognised Songas as an important partner that helped the country to avert load shedding due to drought that affected its hydro-electricity dams.

Tanesco Managing Director, Felchesmi Mramba said discussions on the matter between the power utility firm, the Ministry of Energy and Minerals and Songas were still going on.

“People should not get worried. We’re still in discussions and we hope we will get solution to the problem before Saturday,” he told the ‘Daily News’ in an interview.

He said the delays in effecting the payments were partly contributed by long time taken to verify some invoices due to some details which need to be agreed upon or corrected. “What contributes to delays in payment is invoice verification process which has been taking long time due to some inaccuracies,” he said.