Could you give us a brief historical background on Tanesco?
Tanesco is an electricity, public utility here in Tanzania. It is responsible for generation, transmission and distribution of electricity on mainland Tanzania. We also sell bulk power to Zanzibar, where there is a separate utility. They are responsible for selling and distribution of electricity on Zanzibar island. The first public electricity supply company in Tanzania was established in 1908 here in Dar es Salaam, and slowly it expanded to cover the entire country. So we are a public, vertically integrated utility, and we are operating throughout the country. Our main sources of generation are hydro. We have an interconnected system which covers the bigger part of the country. On mainland Tanzania we have 20 regions and out of these 20, 14 are interconnected, so only 6 are isolated. Even if the main source of generation is hydro power, we have some thermo generation in the form of gas turbines and diesel engines, they are all running on liquid fuel. We have other indigenous resources of energy like coal and natural gas, but these are yet to be developed in a commercial sense. We have a small coal mine with a power generation capacity of only six megawatts. The total installed capacity of Tanesco is about 700 megawatts. Of this, about 340 is hydro, the balance is thermal. Of course the government, has for several years now been looking into the liberalizing of the electricity market, and before 1992, Tanesco used to enjoy the monopoly being the only supplier of electricity in the country. But in 1992 the monopoly was lifted, so other people could come in, install their own generation facilities, sell power either directly to consumers, or to Tanesco. So there have been some small independent power producers buying electricity, but still Tanesco is the dominant supplier of electricity in the country.
We also import electricity from our neighbors, from Zambia. We do import to supply electricity to some townships close to the border with Zambia, so these are small scale imports. We also import electricity from Uganda, and we supply the North Western part of the country, a place called Bukoba, in the Kagera region. We have looked at the potential of interconnection in our neighboring countries. We have completed a feasibility study for an interconnector between Zambia and Tanzania. This is a big interconnector, for the bulk import/export of power at 340 kilowatts. We have also done a feasibility study for an interconnector between Tanzania and Kenya. Within the East African Cooperation we are looking at a Master Plan for the development of the power systems of the three East African countries, Kenya, Uganda and Tanzania. Look at all the potential resources within these three countries, look at the potential for interconnection, and look at how we can jointly develop these resources, for the benefit of all the three countries. So there is this study which is just about to start within SADC, which is the Southern African Development Community. Again we are looking at interconnections within all the countries of SADC. This is a bigger market. We are now looking for a consultant to prepare the big document for implementing that project. So this is basically what has been happening within Tanesco and the electricity sub-sector.
Are you looking at eventually privatizing the company in the future?
Yes, we have started looking at that, and this is being done by the Government. We have a privatization agency here in Tanzania. It is the Presidential Parastatal Sector Reform Commission. They are responsible for the privatization of public companies in Tanzania. They have just started now looking at the Privatization of Tanesco, and they are in the process of inviting consultants and advisors, who will advise them on how to proceed on the privatization of Tanesco. So we have really just begun the process.
Could you tell us a bit more about the development of the whole sector since the liberalization? What effect did it have on your company?
We have just had a few small private generation projects which have been implemented since that time. So mostly all investments still come through the Government and Tanesco. They have been the major investor in the electricity sub-sector in terms of generation increments, and expansion of the transmission, and expansion of distribution systems. So investments have mostly come from the Government and Tanesco, and also with assistance from donors.
Could you give us some more statistics on your company in terms of staff and your turnover of last year?
We have about 7,000 employees in the company, and we have about 400,000 customers, at the moment. Our turnover last year was about 140 billion Tanzanian shillings.
When we talked to the Minister of Energy he raised the issue of bad debtors, to what extent has this affected Tanesco, and what measures are you taking to face these problems?
This has had a big impact on Tanesco finances. Especially this year, we did not get very good rains, and therefore that affects our hydro-generation capacity, so we have to be more dependant on thermal generation, and as I said, thermal generation will burn liquid fuel, and these are expensive, so we need a lot of money to maintain the operation of the thermo systems. Since 1995 we have introduced the what we called, prepayment metering systems. It is installed now and out of the 400,000 customers that we have, about 60,000 are on the prepayment metering systems. That helps us to get our revenue upfront, because the customer buys before he uses electricity. Whereas in the conventional billing system the consumer uses electricity first and then you bill him, and then he comes and pays. But with the prepayment system he buys electricity first, and then goes and puts it in his meter and then starts using it. So at least the company gets its money upfront, and that helps our liquidity. But this is only 60,000 out of the 400,000 customers that we have, so it is still a small customer base on prepayment metering, and the reason for that is that prepayment meters are more expensive than conventional meters. So you need more money to install prepayment meters than you would need to install conventional meters. We are still addressing this problem, and our intention is to continue to expand customer base with prepayment meters, because it is the only way that we can guarantee revenues.
In terms of power tariffs, how do you see power tariffs developing in the near future?
There are two major problem that we have in this country; One - the country is very large, almost a million square kilometers, and two, we have very low population density and very low access to electricity. Only 10% of the population of this country has access to electricity, so the rest 90% of the population has no access to electricity. It has been the Governments intention to expand the system, to reach as many people as possible. In the last five years we have been embarking on a major rural electrification program, to try and reach as many of our people as possible. But because of the size of our country, and the low population density in the country, it means that expansion of the system is a very costly undertaking. You need a lot of money to reach these people, and therefore the pace of rural electrification has been very slow. But that also had an impact on the tariff. Because we need more money to reach more people, so the few customers that we have, have to pay high tariffs so as to enable the utility to have more funds for rural electrification. Of course now the Government has started to look at other ways to finance rural electrification. These prices cannot keep on going up, it will reach a stage where people cannot afford the electricity anymore, and that is not a good thing, especially considering what is happening to the environment when people are using wood and charcoal for their fuel energy needs. There is a need to change the system so that at least the tariffs remain where they are, or at best reduced so that people can afford the electricity. It will ease the financial requirements of the utility to invest in rural electrification.
To what extent are you looking at the option of attracting more private investors into this sector?
That is a very important step, and as I said we are looking into the privatization of Tanesco. | For the electricity sub-sector, the monopoly has been lifted, so the private sector, is invited to come to Tanzania, to invest in the generation or distribution of electricity. They are free to do that. We have the Tanzania Investment Center and investors can go there to get assistance. The Government has made it possible for investors to come in and invest, and they have given them incentives to do that. This is to encourage private investors to come in now and invest in the electricity sub-sector in Tanzania, and there is a lot of room for expansion in this country. So I think investors will be able to come and invest and do what they can to increase the access of electricity. But also to supply some of these big mining companies, that are now starting to operate in this country. There is a lot of new investments coming into Tanzania in the mining sector and the industrial sector and all these are going to need a lot of power.
You had the monopoly until 1992, so you are a very well known company here in Tanzania. What is the image Tanesco has today in Tanzania?
I think our image is not bad, it is a good image. But we have had a few problems in the recent past. For example between 1992 and 1997 we had a severe drought in this country and we had to resort to load shedding. And by load shedding I mean curtailment of power to consumers because you don't have enough capacity to supply all the consumers. So you ration power, you supply a certain part of the town, the other parts remain in darkness, and then we go on doing that, switching from day to day we go on supplying different parts of the city. So we have been doing that from 1992 to 1997. Then in 1997 of course we had the El Nino and suddenly our reservoirs were full, and we didn't have that problem anymore. In this period of 1992 to 1997 our image was very bad. At least from 1998 we recovered, and our image improved. Since then we have been trying very hard to sustain a level of performance that will satisfy our customers. We have had this drive since 1998 to make sure that we have been serving our customers. We have for example, decentralized our billing. Before all the bills were prepared here, at the head office, and then sent to the various branches up country. It took time before a customer got his or her bill. We have decentralized to the branches, so that now the bills are coming out every month, in time, and therefore our customers can pay their bills in time as well, they don't have to be suddenly confronted with a bill that is three or four months behind, and suddenly have to pay a huge bill. We are trying to avoid some of the problems our customers have. We are addressing also the problems of the frequent breakdown of the system of power through faults, low voltage problems. We are trying to optimize our distribution system so that the quality of supply is good.
Given all these improvements since 1998, and also the improvement of your image, how do you ensure to keep this image for the international community?
We believe that if private investors have to come in this country, take over, or invest in the electricity sub-sector, they will look at Tanesco first to see how Tanesco is performing. Therefore, we have to continue to sustain this good performing, so that at least the private investors when they come here and look at us, see that this is a good utility, and we are maintaining good performance, assets, so that even when they take over, they take over a good performing asset, they are not taking over some junk. They take over something which is in good condition and continue to move forward from there rather than take out everything and bring everything as new. We are also trying to educate our workers. As you can imagine, when they hear about privatization, everybody is very concerned about their future, because when this new person comes in and takes over Tanesco, they don't know what is going to happen to them. They might sack all the worker, and bring in new people. I have always told them that when a private investor comes in and looks at Tanesco, and he knows that Tanesco people are good people, efficient, I think this is the first place he is going to look for people he wants in the system. He will not go to the streets, and pick people from the streets. He would like to have people who already know the system, know the equipment, I think he would like to keep those, rather than bring in new ones. And we will continue with this exercise, so that our workers don't start thinking of sabotaging the company and things like that. They should think that this company is their company and they will continue to be in this company, as long as they perform well. If they don't do that then they will be out, even before Tanesco is privatized.
If you could name three aspects, why potential investors should look at Tanesco, three strengths Tanesco has, what would you name?
The first thing is that we have a very efficient, modern system, and we are in the process of modernizing some of the old power plants that we have, bringing them to this high-tech operating mode. We are changing them to be computer controlled. The second is that there is big potential for expansion, and this is good for a private investor, because they are always looking for opportunities for expansion, because that is how they can generate more business. There is a huge potential of expansion here in this country. The mining sector is now expanding very rapidly, as well as the industrial sector, and tourism is also picking up. So these are areas with potential market for expansion, and definitely private investors would look at that and say well, this is a good place to go and invest. The third aspect is that we have all these indigenous resources here, natural gas, coal, hydro power, and geo-thermo. Coal has not been exploited so far. We are looking into natural gas, so that we can use gas to fire the thermo plants that we have. These three to me, are attractive reasons that private investors should look at Tanzania apart from the other incentives that have been offered by the Government for foreign investors to come and invest here in Tanzania.
Given all this potential in the country, where do you see Tanesco within the next three years?
Tanesco in the next three years, will unbundle, split into three distinct units. We have a generation business unit, as a separate entity, then we have transmission as another separate entity, and distribution as a third separate entity. This is to prepare for privatization as these are the three key business areas in the electricity sub-sector. We want all these to be split so that they can operate independently of each other. So this is the first thing that is going to happen; to split the company into these three business units. That will enhance efficiency, because now all these three are in one hat, it becomes difficult to even set priorities. But if we operate as independent units, then all the three units will strive to be efficient, on its own merits.
Do you have a last message you would like to tell our readers?
Tanzania is a good destination for private investors. Almost all the sectors have something happening, in this country. But the most important sectors are Mining, Industry and Tourism. These are expanding so fast. When I look at the growth in the usage of electricity, it is alarming. The demand is growing very, very fast. And therefore we need a lot of investment to increase the generation capacity that we have, so that we can supply all these big mining houses that are opening up.
The Tourism sector is expanding very fast as well. We used to concentrate in the northern sector, but now it is almost everywhere. Tourism is now spreading everywhere throughout the country, even in areas which were never been thought of as being potential areas for tourism, have now been opening up. We have to send power to all these areas.
Industry is another potential area and there is a lot of interest now, because we have a lot of raw materials in Tanzania which can be used for industrial use. With the good incentive package by the Government, I think private investors should not worry at all about coming and invest in Tanzania. We who work in this country are ready and prepared to work with them to ensure they are successful. And in that way, of course, Tanzania also as a country will benefit. |
