By Mkinga Mkinga | The Citizen Reporter | Dar es Salaam | Tuesday, 12 June 2012
Power firm Songas yesterday sent out a distress signal, saying it may have to switch off its plant if Tanesco does not settle a $30 million (about Sh48 billion) bill for services provided this year.
The firm indicated that the country may be plunged into darkness should Tanesco fail to pay for generation of electricity supplied so far this year. Songas needs the money to maintain its facilities and it may have to shut down if the payment is not made soon.
Seventeen regions are currently served by the national grid and the demand, as of yesterday, was 800 megawatts. If Songas were to remove 180mw, which is 22.5 per cent of the total generation, regions connected to the national grid would face an acute power shortage.
“Songas has yet to receive any payments for the generation we have provided in 2012,” said Managing Director Chris Ford. “With such a lot of money not received, we are finding it very difficult to finance our own activities.”
Asked when Songas was likely to switch off its power generation facilities, Mr Ford said: “I am not sure we can give you a direct date, and we are not issuing any threats.”
The permanent secretary in the Ministry of Energy and Minerals, Mr Eliakim Maswi, referred this reporter to Tanesco managing director William Mhando, saying he (Maswi) handles policy issues and not Tanesco debts. But when reached by phone, Mr Mhando quipped: “I am not aware that Tanesco owes Songas.”
Sources privy to Tanesco’s dealings hinted yesterday that the state-owned power firm is chasing a commercial loan that is to be guaranteed by the government. The loan, to be secured from an international bank, will facilitate payment of arrears to all creditors.
Yesterday, Mr Ford admitted knowing about Tanesco’s financial difficulties and the reason why the firm had been unable to pay Songas recently. He added: “We have continued to operate, though, and are hoping to be able to keep doing so.”
Songas has kept its plant running in the hope that the situation would improve and Tanesco would pay up. “Unfortunately, it hasn’t and we very soon need to pay for our maintenance activities to ensure we can keep running reliably,” said Mr Ford.
Songas has important maintenance to do on at least three of its six generating units. It also needs to pay for essential operating costs such as taxes to the government, insurance policies and fuel.
The firm supplies about a quarter of the electricity Tanesco supplies to its own customers. It also delivers natural gas to another 225MW of additional generating plant (on top of its own 180MW) from the processing plant on Songo Songo Island and through its natural gas pipeline. Generation from natural gas is inexpensive, compared to liquid fuels.
Songas charges an average of between five to six US cents per kWh (and is the cheapest thermal plant in Tanzania) while running a plant on liquid fuel (like Aggreko or Symbion) typically costs around 25 to 30 US cents per kWh. Using liquid fuel is reportedly four to five times more expensive than using Songas to generate electricity.
If the firm does not receive enough funds to manage and maintain its gas processing and transportation facilities, Tanesco will need to replace natural gas with the much more expensive liquid fuel for its generating plants.
“Clearly, this will make Tanesco’s already difficult financial situation even worse,” said the Songas CEO, “and so we are working with Tanesco and asking them to pay us as quickly as they can.”
“We do hope that Tanesco and the Government are able to resolve this difficult situation,” Mr Ford added. “We want to be able to operate our facilities and provide reliable service though we need to be able to maintain them in order to do so safely and dependably.”