What Power Africa Means For Tanzania

Tanzania Energy Sector Overview

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The Government of Tanzania’s (GOT’s) Big Results Now (BRN) initiative for 2016 aims to phase out high cost emergency power plants (EPP), increase generation capacity to 2,780 MW, reform the public utility’s (TANESCO’s) operations, and meet new demand through low-cost solutions, such as developing new gas resources and mini and off-grid renewable opportunities. Recent gas discoveries have quadrupled Tanzania’s known resources. A new gas pipeline, necessary for new gas generation from southern Tanzania to Dar es Salaam is under construction and scheduled for completion in late 2014. Tanzania has 1,501 MW of installed generation capacity to serve its population of over 47 million, but high reliance on expensive thermal and emergency generation sources that utilize diesel, heavy fuel oil or jet fuel has made the sector financially unviable.

Current Generation Input Mix: 37% Hydroelectric, 33% Gas, 29% Other Thermal, 18% access to electricity, 7% rural access to elect

Tanzania has made progress by entering agreements with independent power producers, who bring know-how and technology, and establishing feed-in tariffs that provide many of the commercial terms that would otherwise delay negotiations on power purchase agreements (PPAs). The GOT is publicly committed to improving TANESCO’s viability through tariff reform allowing for full cost-recovery and operational improvements to the management of the utility. TANESCO’s recent
request for a 39% tariff rate increase was approved by the regulator,
EWURA, effective January 2014, increasing the average rate to 17 cents/
kWh.

Power Africa is supporting the Tanzanian energy sector through transaction assistance for priority generation projects, technical advice to release the constraints to private sector investment, and capacity building for key institutions. The 150 MW Kinyerezi I gas-fired thermal plant continues to advance with the recent confirmed plans to ship the final two GE turbines.

Highlighted Transactions
Name MW Type of Transaction Value (USD Million) Timeline Power Africa Support GOT Actions
Kinyerezi I 150 Gas Generation

$183 million

* TANESCO payments to developer ongoing
* Construction 2014
* Operational 2015
* Facilitate financing * Possible sovereign guarantee from Ministry of Finance
* Prioritized TANESCO payments
Kiwira River 10 Small Hydro

$17 million

* Construction Late 2014
* Operational 2016
* Assistance with in-country lender through USG guarantee program
* Portable guarantee to assist developer in obtaining a loan
* Tax incentives through Tanzania Investment Center
* Standard PPA (SPPA) framework for small renewable projects
* Feed-in-Tariff
NextGen/ Kigoma 5 Solar

$7.6

* Construction 2014
* Operational 2015
* Facilitate financing
* Assist TANESCO and
* EWURA to resolve SPPA issues.
* TANESCO, REA, to support actions that allow EWURA to resolve SPPA issue

The 10 MW Kiwira River small hydro project received a Power Africa portable loan guarantee and is approaching close on its financing arrangements in early 2014. Power Africa’s collaboration with EWURA on revision of renewable energy feed-in tariffs is working towards an improved PPA for renewable energy projects, while support to TANESCO on load management strategies has potential to limit future usage of high-cost EPP generation and reduce TANESCO losses, improving sector viability.

Power Africa Initiative: Mobilizing Investments in Energy

Power Africa is a U.S Presidential initiative announced in June 2013 and designed to increase access to electricity in sub-Saharan Africa over the next five years. Power Africa begins in six focus countries with ambitious strategies for energy sector development – Ethiopia, Kenya, Tanzania, Liberia, Ghana, and Nigeria. Additionally, in Uganda and Mozambique, Power Africa promotes responsible and transparent resource management.

Power Africa accelerates investments to develop resources responsibly, build out power generation, efficient distribution and transmission, and expand the reach of mini-grid and off-grid solutions. A key goal is to add cleaner, more efficient electric generation capacity.

A New Way of Doing Business for Development

Power Africa directly addresses constraints to investment by taking a transaction-centered approach to galvanize collaboration, producing near-term results while driving forward reforms that pave the way for future investment. This two-pronged approach focusing on transactions and on energy sector management enables public sector partners, such as ministries and power companies, to more effectively and efficiently govern energy resources and leverage private sector investment and technology to meet vital energy needs for economic growth, health, and education.

Power Africa brings the trade, regulatory, finance and other expertise of 12 specialized U.S. Government agencies to advance transactions between public and private investors. Power Africa Transaction Advisors are based in the focus countries. Trade delegations, and other Power Africa outreach efforts, invite U.S. companies to invest in the region and bring their cutting-edge technologies and solutions to expand access to affordable and sustainable electric power.

Power Africa Contact for Tanzania:

Daniel Moore, Power Africa Country Team Leader
Email: dmoore@usaid.gov

U.S. Government Coordinator for the Power Africa Initiative:

Andrew Herscowitz
U.S. Embassy, Nairobi, Kenya
Email: powerafrica@usaid.gov
Follow on Twitter: @aherscowitz

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Last updated: June 02, 2014

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