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Wednesday, October 2, 2013

WAITING FOR ‘THE DRAGON’ TO SPIT FIRE

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By Daniel Mbega-Iringa
TANZANIANS are still bracing how to survive with eagerness as they wait for 'the Dragon' to spit fire in order to bring to an end the adamant 'traditional' power blackouts that to some consumers has been part of their daily lives.
"For years now we are used to government leaders and politicians' cheatings, they enter big deals on our behalf to justify their legacies like this coal-to-electricity deal with the Chinese people.
"Let's wait and see what happens, otherwise it's just another same old story," says Juvenalis Haule (47), a pub owner in Ludewa, Njombe region.
He somehow seems to have a bit trust on the coming project at Mchuchuma coal mine in Ludewa district, south-west of Tanzania, where China has entered into partnership with Tanzania for coal mining.
Under the deal, China will build a coal-generated plant in the next three years that will produce 600MW.
"Coal is there, but we don't have capital and technical-know-how to extract it. If the Chinese are coming, maybe we can achieve something from our resources.
"We're tired of frequent blackouts that affect our businesses. But we want the locals to benefit first.
"We don't want this to be another demonstration area like what is happening now in Mtwara," says Haule, referring to the current situation in Mtwara region where residents have held a number of demonstrations to resist the building of a gas pipeline to Dar es Salaam.
China's Sichuan Hongda Corporation Limited (SHC) seems to be the redeemer to Tanzanians from frequent blackouts that has faced the country for more than 15 years now, hence affecting economic and social development.
When the National Development Corporation (NDC) and Sichuan Hongda Corporation (SHC) signed an accord on September 21, 2011 that, among others, will see the construction of a thermal power plant at the Mchuchuma coal mine in Ludewa district to produce 600MW, most Tanzanians heaved a sigh of relief, hoping to see the end of power rationing.
"The (electricity) tariffs are very high, we can't afford. Let another source of power come, maybe the tariffs will be reduced," says Mathias Maliwa (42), a businessman based in Iringa Region.
In 2012, the Government approved the 81.27 percent increase in electricity tariffs instead of continue spending tax-payers money estimated at Sh160 billion in monthly subsidies to the financially-troubled TANESCO. The national electricity utility's monthly revenue collection stands at Sh90 billion, but spends Sh250 billion to sustain its power generation – a deficit of Sh160 billion.
This has so far made it difficult for most Tanzanians, whose daily income is averaged at less than one US dollar hence the coming of the Mchuchuma project has been of much relief to them.
TANESCO's generation capacity is about 800MW but most often supply is about 600MW, leaving the national power grid without the required 20% reserve margin, which results in frequent power outages.
The country's electricity production, that relies mainly on hydropower, includes the 100MW Kihansi hydroelectric plant, the 160MW Kidatu facility, the 40MW Mtera power station and the trivial 15MW Pangani, 5.0MW Hale and 2.6MW Nyumba ya Mungu facilities.
However, climate change, deforestation, farming and poor irrigation infrastructure lead to ominously long dry spells in Tanzania's Great Ruaha river basin.
The Great Ruaha river, referred to as the country's 'ecological backbone' which also provides 70% of Tanzania's hydroelectric power, originates in the Kipengere mountains and stretches roughly 84,000 kilometres, flowing through the wetlands of the Usangu valley and the Ruaha National Park and eventually emptying water into the Rufiji river.
But then there is the 142MW supplied Songas, 102MW from the Ubungo gas plant, 60MW from Independent Power Tanzania Limited (IPTL), 42MW from the Tegeta gas plant and 60MW from Symbion 60MW.
TANESCO also plans to generate power from other sources such as the Singida wind project which will produce 50MW, the 200MW Kiwira coal fired power project, the 300MW Mnazi Bay gas project and the 240MW Kinyerezi project.
NDC's corporate affairs manager, Mr Abel Ngapemba, said that the Mchuchuma coal-to-electricity project has the capacity to produce 600MW, and expects to start producing 300MW by 2015.
The project is a joint venture between NDC, on behalf of the government, and the Sichuan Hongda Group. They have jointly formed Tanzania China International Mineral Resources (TCIMR) that intends to invest USD 1.3 billion to establish a three million-tonne a year coal operation. This will be sufficient to fuel a 600MW power station, almost matching the 623MW that Tanzania's energy sector currently produces, though half of that production will be used by the mines and steel works at the site.
It is said that SHC will start with 600MW and then increase gradually to 1800MW. The project will construct a 220 kV transmission line from Mchuchuma to Liganga and 400 kV transmission line from Mchuchuma to Mufindi to connect with the national grid.
The agreement – Mchuchuma Integrated Coal Mine and Thermal Power Station Concession and Liganga Iron Ore Concession under TCIMR – will build a coal mine, iron ore mine, coal-fired power plant and steel works at the Liganga iron ore and nearby Mchuhuma coal mines, some 800km from Dar es Salaam.
The mining contract has so far drawn concerns even to politicians, including the opposition, who for many years have been in contention with the government due to shadowy contracts that exploit the country's mineral resources, and now have confidence on the Chinese investment that they can't wait to see it take off.
Outspoken Kigoma North legislator Zitto Zuberi Kabwe (Chadema) is among those politicians who support the US$3 billion twin project that will see the extraction of coal at Mchuchuma and the iron ore mining at Liganga in Ludewa district.
Mr Zitto, chairman of the Parliamentary Public Accounts Committee (PAC), who – in a deeply divided society and an utterly fractured politics – had in the past opposed mining contracts that led to his expulsion in the House on several occasions, says the Chinese-Tanzania partnership is optimistic on the project, saying the production of 600MW could liberate Tanzania from arbitrary and frequent power outages.
"Once the thermal plant starts operation and production, it is evident that a total of 1500MW will be produced from the South Tanzania Electricity Complex as Mchuchuma coal mine is one of the three mega projects in the Sothern Tanzania that are being carried out by NDC," says Mr Zitto.
These three coal mining mega projects, touted as the biggest electricity projects since Tanzania attained independence over 50 years ago, would have a combined total of 1500MW, according to Mr Kabwe.
He says the project dubbed as South Tanzania 1500MW Electricity Complex will transform the Southern Corridor and Tanzania as a whole.
"It should be noted that currently the country has 1034MW installed capacity in terms of electricity generation but we are only generating about half of that estimates put it at 560MW."
The Ngaka Coalfields Project, located in Mbinga district about 250km on the Njombe-Mchuchuma-Manda road, which currently has 45 staff on the ground, could produce 400MW and has targeted an initial 200MW by about 2014 to 2015.
Malawi has already asked for a contract to supply them with 150MW from this project.
The project is being developed through Tancoal Energy Limited (Tancoal), a joint venture between Atomic's 85% owned Tanzanian subsidiary, Pacific Corporation East Africa (PCEA), which owns a 70% interest in Tancoal, and the National Development Corporation (NDC) of Tanzania, which owns 30%. The estimated coal reserves stand at 200 million tons and it is said to have the best coal in the country.
Another project is the Kiwira coal mine which is currently at the hands of Kiwira Coal and Power Limited (KCPL) which is a JV by Tanpower Resources Limited (70%) and Government of Tanzania (30%).
The Government has finalized the transfer back of shares from Tanpower Resources back to the government in order to transfer ownership to National Social Security Fund (NSSF) and State Mining Corporation (STAMICO) to run Kiwira Coal Mine and has committed in transferring ownership to NSSF.
NSSF, on its part, has committed to buy it out and all its debts – for only US$1. It's under this guise that NSSF took it upon them to give a presentation on their future intentions and how they will revive and develop Kiwira in the next 5 years in order to produce 500MW electricity that they will sell to TANESCO.
The NSSF Director of Planning, Investment and Projects, Mr Yacoub Kidula, was once quoted as saying Kiwira owed the Fund more than Sh15.14 billion. The mine has accumulated debts to the tune of over Sh28.72 billion, with NSSF being the major creditor. Other creditors are the Public Sector Pension Fund (Sh9.49 billion) and CRDB Bank (Sh4.07 billion).
These debts forced the GOT to lay off 400 workers and shut down operations at the country's largest coal mine to keep a lid on costs.
Though confident on the project, but Mr Zitto notes that lack of sense of urgency in decision making by the government to get these projects going, corruption as everyone wants a cut from the concerned parties could hinder the project.
As people wait for the 'Dragon' to spit fire from Mchuchuma coal mine, many still wonder whether this could be realistic and question about due diligence as the Chinese company has no experience in power generation.
According to its official website, Sichuan Hongda Co. Ltd is principally engaged in the manufacture and distribution of zinc ingots and chemical products.
The company's major products are zinc ingots, monoammonium phosphate, lead-sulfide concentrates, zinc oxide, zinc-sulfide concentrates, calcium hydrogen phosphate, liquid ammonia, calcium superphosphate and organic phosphate fertilizers, among others that are being distributed in domestic and overseas markets.
The numbers are huge. The total investment is $3bn, starting with $600m and with the rest spread over several phases covering numerous years. Eventually, three million tonnes of coal, three million tonnes of iron ore and one million tonnes of steel will be produced per year. There is 546 million tonnes of coal at the site, enough to last for over 100 years and makes the project an anchor in the Mtwara Development Corridor.
"The potential of all this is obvious from these numbers. But fulfilling this potential will not be straightforward. And doing so while avoiding all the social and environmental problems than often follow the mining industry will be even harder. Some notes of caution are therefore justified," says Ben Taylor, former Executive Director of Daraja Development Limited, a non-profit organization based in Njombe.
First, he says, this is still all at an early stage. TCIMR has been given 36 months for "exploration" since 2011 before project implementation begins, though government leaders suggest that things would move more rapidly.
"Either way, there's a good chance that we're still a long way away from any significant employment, coal, steel or power being produced."
He adds: "When this much money is involved, the project is bound to attract interest from people who are not interested in helping Tanzania, or in making a legitimate profit. Corruption is a serious risk here.
"When the numbers given are so inconsistent, this only serves to create doubts. Let's not forget that initial investment is only half the battle. Keeping things running can be just as big a challenge."
Power blackout
On March 11, 2013, TANESCO's acting managing director Mr Felchesmi Mramba said that Tanzania will continue to experience random power cuts for the next 18 months or so until the completion of the proposed $1.22 billion natural gas pipeline to run from Mtwara to Dar es Salaam.
Mr Mramba said that the frequent power cuts were mainly due to high power generating costs in meeting the electricity capacity the nation needs adding that only 130 megawatts were generated from Kidatu, Pangani and Kihansi hydroelectricity sources. Hydropower can generate up to 561MW – 71 percent of the country's overall production – but often drought reduces the capacity to 120MW.
"The actual cost of selling power per month is 162bn/- – not to mention an extra 90bn/- in salaries, taxes and other expenses. TANESCO is relatively afloat only thanks to subsidies since July 2011 which up to last month that amounted to 231.2bn/-," he was quoted as saying.
It is well understood that TANESCO currently spends 5.4 billion shillings a day on fuel to produce 365MW from emergency power plants and the company's total daily revenue is just 2.34 billion/-. In 2012 TANESCO made a loss of around 200 billion/- and is expect to make a loss of 100 billion/- in 2013.
Power blackouts have been part of the lives of Tanzanians since early 1990s, but the East African state of about 48 million people suffered extensive power cuts in 2006 after drought slashed its hydropower production. Due to the problem, Tanzania introduced daytime power outage from 0800 to about 1700 each day.
In 2011, Tanzania once again experienced a 10 to 12-hour power cuts for three months because of low water levels at hydropower dams, and a shortage of fuel for thermal power generation. The country had been plagued by frequent power-outages since December 2010. In this wake, the International Monetary Fund (IMF) cut its 2011 growth forecast for Tanzania to 6% from 7.2% in March, saying frequent power outages would hurt output while food and fuel prices could push inflation higher.
Former chairman of the Parliamentary Committee on Energy and Mineral, Mr January Makamba (now deputy minister for Science, Communication and Higher Education), once suggested the Government to sort out the gas issue. "The situation as it stands today is scandalous. The bottom line is that we have gas in Tanzania but we do not control its production, its transportation, its distribution and its price. We might as well be importing it via tankers from Qatar. If, for instance, today we have just enough gas to produce only 100MW of power, it will not be directed to TANESCO gas plants (where we do not pay capacity charges) but to Songas plant (where we buy power and pay capacity charges)."
The current status of energy sector in Tanzania shows that, TANESCO fully owns transmission and distribution and the transmission system comprise of 220kV with 18 lines (2,732km), 132kV with 16 lines (1,543km), 66kV with 5 lines (544km) and 38 grid primary substations of 2,189MVA while the installed power capacity is 1,509.85MW and only 14% of the country is electrified (12% of urban and 2% of rural).
The strategies ahead for power generation expansion projects is to complete the Mwanza HFO (60MW) by 2013, Mtwara-Dar es Salaam (532km) gas pipeline (3,900MW) by 2014, Kinyerezi I dual fuel plant (150MW) and Kilwa (Somanga) gas plant (IPP 210MW) by 2014.
Kinyerezi II gas plant (240MW) by 2015, Mnazi Bay gas plant (300MW), Kiwira coal plant (200MW), Kinyerezi III gas plant (300MW), and Ngaka coal plant (200MW) all by 2016. <ENDS>.

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