Troubled Tanesco risks losing access to gas pipeline

Saturday April 14 2018

Tanesco building

The Tanzania Electric Supply Company (Tanesco) building in Ubungo, Dar es Salaam. The firm owes $109 million to Tanzania Petroleum Development Corporation (TPDC). PHOTO | NMG 

By KILASA MTAMBALIKE
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Tanzania electricity supply firm Tanesco risks losing rights to a crucial gas pipeline deal if it does not pay Tsh248 billion ($109 million) to Tanzania Petroleum Development Corporation (TPDC).

TPDC has said that the debt is causing it financial distress, as it also owes the Exim Bank of China.

Controller and Auditor General Prof Mussa Assad has advised the government through the Ministries of Finance and Planning and Energy to bail out Tanesco and help TPDC meet gas purchase and other operational costs.

“TPDC may not be able to service the loan obtained to facilitate construction of Mtwara-Dar Gas Pipeline from Exim Bank of China and their respective interests, if Tanesco does not settle this liability,” Prof Assad said in an audit report.

He further said that failure to repay the loan shall subject the corporation to a compounded interest of 0.8 per cent charged on the unpaid loan balance which will increase financial cost to TPDC and the government.

“Further, failure to pay the loan shall amount to transfer of TPDC rights under the Gas Sales Agreement (GSA) to Exim Bank of China as per Clause 2 of the Security Assignment Contractual Rights, which forms of the Agreement signed between TPDC and Exim Bank of China,” he added.

Tanesco entered into a Gas Sales Agreement in September 2015 whereby the the power utility company buys natural gas from TPDC for power generation at Kinyerezi, Ubungo II and Symbion Power Plants.

“I have noted that between September 2015 and December 2017 monthly invoices totalling to Tsh567,514,961,312.95, ($254, 448,796.08) were issued by TPDC to Tanesco with respects to the natural gas supplied to Tanesco for power generation.

“My audit noted that by December 2017, Tanesco had managed to settle Tsh318,904,743,618.61 ($142,982,887.87) equivalent to 56 per cent of the total amount of invoices leaving Tsh248,610,217,694.34 ($111,465,908.21) unsettled,” Prof Assad said in the report.

There are also concerns that if the state utility company is not assisted to pay the outstanding bills, it is likely that it would pass on the burden to consumers in the long run.