We’re keen to boost investment, says Songas

HENRY LYIMO

TANZANIA’S energy sector continues to attract global attention as a major investment bargain and investors are eager to know how the sector will develop under the new leadership in the country.

Songas is one of key private players in the sector generating about 180MW of power using gas from the Songo Songo Island gas fields. Following are excerpts of an interview of its new Managing Director, Nigel Whittaker with our Staff Writer, Henry Lyimo.

QUESTION: Since taking over your management in Tanzania, what were your expectations and how satisfied or disappointed are you so far?

ANSWER: I bring more than 25 years’ experience to this role having previously worked across the energy sector in Asia, Eastern Europe, Middle East and Africa. Each place I have lived has presented new adventures and challenges so I have learned to go into a country with few expectations while keeping an open mind in order to learn fast. So, I’m really excited about being in Tanzania which has so much potential for growth and is positioning itself to becoming an economic leader in East Africa.

But to do this, there needs to be many changes and effort by the government to bring stability to the electricity sector and encourage private and global investors. Songas has been providing essential electricity to Tanzania since 2004 using local gas resources, which has saved the country more than US$5 billion.

It is the lowest cost thermal power producer in the region. Whilst I knew how important the asset was to the country’s reliable power supply, the significance of this has particularly been evident with the current drought reducing the availability of the hydro-electricity generation facilities - we all are experiencing regular power outages.

Q: How stable and attractive is Tanzania’s electricity sector?

A: The Songas project was Tanzania’s first natural gas power project. We have been providing reliable electricity to Tanzania for more than ten years now which is proof that long term investments into Tanzania can be successful. In order to keep pace of the growing demand and supply of the sector, the government has a critical role to play and must develop and successfully implement sector reforms.

The ongoing key sector initiatives such as the Electricity Supply Industry Reform Strategy and roadmap-which is targeted to improve the environment for private investment in electricity generation and distribution-and the ‘Big Results Now’ initiative-aimed at accelerating development in the sector-are proof that the government is keen to promote, enhance investment and growth of the sector.

Q: What do you think the new government should address as a matter of priority in the gas sub sector?

A: Gas production has the potential to significantly impact the commercial and political landscape in Tanzania if it’s done correctly. Foreign direct investment and economic growth is estimated to rise as multinationals have, since 2010, identified significant and commercial gas reserves. The recent enactment into law of legislation around gas sector governance should hopefully pave the way for stable gas sector.

This will have incredible ramifications for the economic development of Tanzania and East Africa. It is our hope that the newly elected President and government will urgently address the financially viability of the electricity sector while development of the gas sector continues, in order to support future investment and development of much needed generation capacity.

Q: What are your comments on reports that Songas is struggling to meet its operational costs as a result of payment delays from TANESCO?

A: Songas generates electricity using gas from the Songo Songo island gas fields off the coast of Tanzania. The project reached commercial operation in August 2004 and was immediately expanded to reach its current capabilities in August 2005. Songas receives most of its revenue from TANESCO, the state owned utility company and like any private enterprise, it cannot fund its operations without being paid.

TANESCO is now more than 12 months behind in its payments which means capital has not been available to do scheduled maintenance of the plant equipment-a factor in time will affect the plant’s ability to safely and reliably operate. With Songas contributing 20-25 per cent of electricity to the system, we understand the importance of our role in the country and want to continue to operate our plant.

We are also keen through Globeleq, Songas Limited majority shareholder, to expand our investment portfolio in the energy sector in Tanzania, to build and operate larger power plants, however, such a commitment is dependent on clearing of payment arrears and the introduction of financial stability to the elWe encourage both TANESCO and the government to urgently address this serious situation and we already have started working closely with the new Ministry to attend to this ongoing issue.

Q: If you are granted three-minute audience with President John Magufuli, what would you wish to tell him?

A: First, I would congratulate him on his election as the President of the United Republic of Tanzania. My conversation would then naturally be to request the President/Government to urgently address the financial viability of TANESCO and the sector as a whole and pay its suppliers, to avoid larger power crisis. It is well known that TANESCO delayed payments to its suppliers, including Songas, could have wide reaching implications for the economy of Tanzania and the attractiveness of Tanzania as an investment destination.