September 1, 2008

Tanzania to Construct New Hydropower Plant

Text of report by Wilfred Edwin entitled "Dar is set for Ruhudji hydropower station" published by Kenyan newspaper The EastAfrican website on 1 September

Plans by Tanzania to construct a 358 Megawatt hydropower station at Ruhudji River [southern Tanzania] entered the decisive stage with the floating of the tender recently.

The Ministry of Energy and Minerals is seeking consulting services on financial and transactions to support the government and the Tanzania Electricity Supply Company (Tanesco) with the preparation, negotiation, and finalization of the project's financing.

The project, estimated at 800m dollars and to be partly financed by a loan from the World Bank, will be done via a public private partnership approach to be developed per best international market practices in respect of risk allocation and fair and equitable returns to project participants.

To develop this, the government said last week it will engage a legal advisor to support the groundwork of the project, which include key project agreements and associated documentation.

It is expected that the technical part will be carried out simultaneously and a prospective financing plan put together by the project sponsors.

The legal consultant will be expected to help Tanesco and the government to ensure the project is developed and structured in a timely manner as a bankable project in a manner consistent with the best international market practices for PPP power projects.

In the wake of recent massive failures in many power purchase agreements, that saw many political leaders shown the door, the consultant will also ensure that in the agreements, the interests of the government and Tanesco are reasonably protected.

Ruhudji is one of several hydropower projects targeted by the Tanzanian government in its power master plan. Others are the Mchuchuma Coal fired plant (200MW), and the Rumakali Hydropower Development (222MW).

Around 90 per cent of Tanzania's energy needs is met by woodfuel. Petroleum and electricity account for eight per cent of energy consumption while coal and other sources cover less than one per cent.

Tanzanian has tried to diversify its sources of energy, but with limited success. Electricity supply has been erratic because of the national grid's heavy reliance on hydroelectric power.

Tanzania's sole producer and supplier of electricity, Tanesco continues to face a severe budgetary shortfall, due to unpaid electricity bills by the government.

Experts argue that the country should choose the most appropriate interconnection point and to negotiate for power exchanges with Kenya and Uganda.

Originally published by The EastAfrican website, Nairobi, in English 1 Sep 08.

(c) 2008 BBC Monitoring Africa. Provided by ProQuest LLC. All rights Reserved.