Bloomberg News

Tanzania Power Utility Gets $165 Million HSBC Loan for Plant

March 29, 2012

Tanzania’s state-run power utility said it secured a $165 million loan from HSBC Holdings Plc to build a 100 megawatt gas-fired facility.

“Construction already started on this one, and could be commissioned next month,” Tanzania Electric Supply Co. Managing Director William Muhando said by phone yesterday from Dar es Salaam, the commercial capital, without saying when the loan was approved. Jacobsen Elektro AS, a Norwegian company, is building the Dar es Salaam plant, he said. An HSBC spokesman declined to comment.

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

Aggreko Plc (AGK), the world’s largest provider of mobile-power supplies, this week cut off its two 50-megawatt plants in Dar es Salaam, which it started operating in October, because the power utility hasn’t paid 58 billion shillings ($36 million) it owes, Muhando said.

Aggreko’s actions shouldn’t have a “significant impact” on power supply, he said. “The water level in our reservoirs has slightly increased and we are now using more hydropower and gas-fired generators.”

Tanesco, as the utility is known, owes power suppliers including Glasgow-based Aggreko 230 billion shillings, Zitto Kabwe, chairman of the Parliamentary Parastatals Organizations Committee, said in a text message.

Cash Supply, Loss

“Aggreko switched off because Tanesco had no money to pay, and still has no money,” Zitto said.

The plant isn’t running “due to lack of fuel,” Aggreko spokesman Tom Eckersley said in an e-mailed response to questions yesterday.

Tanesco expects to report an annual loss of 200 billion shillings for year 2011 and the same amount for this year because of the drought, Muhando said Jan. 19. The country’s power tariffs are below the cost of producing and supplying power, and Tanesco gets subsidies from the government to make the difference, according to Muhando.

The government is in talks with HSBC for more funds for a 70-megawatt oil-powered plant in Mwanza, 701 miles (1,128 kilometers) northwest of Dar es Salaam, which Jacobsen will build, Muhando said.

Electricity output in Tanzania was 700 megawatts in January, matching demand, he said.

Muhando on Jan. 19 said Tanesco was in discussions with a group of banks led by Citigroup Inc.’s domestic unit for a 408 billion-shilling loan to fund power generation.

“Agreements have been concluded between the government and the banks to provide” the funds, he said. “They are working on the format of guarantees from the government.”

To contact the reporter on this story: David Malingha Doya in Dar es Salaam via Nairobi at pmrichardson@bloomberg.net

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net


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