Tanesco expects a 200bn/- loss, thanks to drought

Tanesco needs a 408bn/-loan to fund electricity generation

Tanesco is expecting to report an annual loss of 200bn/- in 2011 and the same amount for this year because of the drought, the firm managing Director has said..

Tanesco’s MD William Mhando told the Bloomberg www.bloomberg.com  “We made a profit of 15bn/- in 2010, and 5 bbn/-in 2009…But the low water levels caused a loss in 2011, and this will continue this year.”

To bridge the gap, Tanzania’s state-owned power utility said it’s in talks with a group of lenders including Citigroup Inc. (C)’s domestic unit for a 408bn/-($257 million) loan to fund electricity generation.

“The money is needed to fund emergency power projects that we undertook last year to meet demand,” Mhando said. “We expect to conclude negotiations with a group of financiers led by Citibank today or tomorrow.”

 The 408bn/- loan will be used to pay for fuel used until December 2011 and for a charge demanded by power generators when their plants aren’t running at full capacity, Mhando said.

Tanzania, East Africa’s second-biggest economy, had an electricity deficit of 264 megawatts last February following a drop in hydropower generation after a drought. The resulting power outages caused a slowdown in economic growth to 6.4 per cent in the third quarter of 2011 from 6.7 per cent a year earlier, the National Bureau of Statistics said.

Eng Mhando

Tanesco, as the utility is known, is also pursuing financing for new generation projects to be commissioned this year, Mhando said. The government is expected to complete an agreement with HSBC Holdings Plc (HSBA) to fund a 100-megawatt gas- fired plant in Dar es Salaam, estimated to cost $165 million, he said.

“This and another 70-megawatt plant fired by heavy fuel oil in Mwanza have been contracted to Jacobsen Elektro AS,” the Norwegian power-plant builder, Mhando said. In addition, the utility is seeking 83 million euros ($107 million) for a 70- megawatt plant in the northern region of Tanga, he said.

Electricity output in Tanzania is currently 700 megawatts, matching demand, “which means the impact of any shortfall is significant,” he said.

Source: www.mobile.bloomberg.com reported by David Malingha Doya in Dar es Salaam via Nairobi at pmrichardson@bloomberg.net.

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