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- Feb 11, 2007
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More beans spilled in Richmond/Dowans saga: Government to pay Richmond contract inheritor more than initially envisaged
THISDAY REPORTER
Dar es Salaam
THE government is to pay more than 100bn/- in energy charges alone to the company that inherited the 100-megawatts power generation contract from the US-registered Richmond Development Company during the two-year duration of the much-criticized agreement, THISDAY can reveal today.
Industry sources say Dowans Holdings S.A of the United Arab Emirates will receive around $87m (approx. 104.4bn/-) from the government in energy charges alone by the time the lease agreement expires.
So far, the government has already paid more than $30m (approx. 36bn/-) in energy charges to Dowans, being 35 per cent of the total $87m due to the company.
Dowans Holdings was unexpectedly and somewhat mysteriously brought into the picture in December last year to inherit Richmond�s highly controversial contract with the Tanzania Electric Supply Company Limited (TANESCO).
It has also been revealed that while the contract signed between TANESCO (on behalf of the government) and Richmond was for the generation of 100MW of electricity, Dowans is currently operating five gas-powered turbines with a total output of 112 megawatts.
The well-placed industry sources told THISDAY that the total $87m energy charge was agreed after recent tests and other assessments on the Dowans turbines network.
After the plant (network) test was conducted, TANESCO experts realised that the five Dowans turbines had the capacity to produce a total of 112MW of electricity. This means the government is now obliged to pay a total of $87m in the two years of the lease agreement, said one government source.
At this rate, Dowans is still liable to be paid an additional $57m (68bn/-) in energy charges up until expiry of the existing contract.
The government source said the total value of the Dowans/Richmond power generation project is now pegged at $139m, from the original $175m estimated before the start of the project.
Official documents seen by THISDAY show that under the original Richmond contract, it was agreed that the government would pay Richmond/Dowans on monthly basis a lump sum based on the contract price of 0.0499 USD/kWh.
According to the contract, the capacity price was set at $34.60565 per kilowatt per month.
Energy sector experts also criticise some terms of the agreement between TANESCO/government and Richmond/Dowans, saying the $10,000 daily penalty imposed for implementation delays was worked out in an unorthodox manner.
In contracts of such magnitude, the standard rate of penalty fee is usually 2.5 per cent of the value of the project, said one source, adding: I dont know where they got this figure of $10,000 daily penalty for such a big contract.
Officials of both TANESCO and the Ministry of Energy and Minerals were not immediately available to comment yesterday on these latest revelations.
There have been reports that a serious proposal is now in the wind for the government to purchase the whole power plant (turbines) outright from Richmond/Dowans once the lease contract expires.
Dowans, which began supplying around 100MW to the national power grid in October this year, is scheduled to go off-line in October next year.
THISDAY REPORTER
Dar es Salaam
THE government is to pay more than 100bn/- in energy charges alone to the company that inherited the 100-megawatts power generation contract from the US-registered Richmond Development Company during the two-year duration of the much-criticized agreement, THISDAY can reveal today.
Industry sources say Dowans Holdings S.A of the United Arab Emirates will receive around $87m (approx. 104.4bn/-) from the government in energy charges alone by the time the lease agreement expires.
So far, the government has already paid more than $30m (approx. 36bn/-) in energy charges to Dowans, being 35 per cent of the total $87m due to the company.
Dowans Holdings was unexpectedly and somewhat mysteriously brought into the picture in December last year to inherit Richmond�s highly controversial contract with the Tanzania Electric Supply Company Limited (TANESCO).
It has also been revealed that while the contract signed between TANESCO (on behalf of the government) and Richmond was for the generation of 100MW of electricity, Dowans is currently operating five gas-powered turbines with a total output of 112 megawatts.
The well-placed industry sources told THISDAY that the total $87m energy charge was agreed after recent tests and other assessments on the Dowans turbines network.
After the plant (network) test was conducted, TANESCO experts realised that the five Dowans turbines had the capacity to produce a total of 112MW of electricity. This means the government is now obliged to pay a total of $87m in the two years of the lease agreement, said one government source.
At this rate, Dowans is still liable to be paid an additional $57m (68bn/-) in energy charges up until expiry of the existing contract.
The government source said the total value of the Dowans/Richmond power generation project is now pegged at $139m, from the original $175m estimated before the start of the project.
Official documents seen by THISDAY show that under the original Richmond contract, it was agreed that the government would pay Richmond/Dowans on monthly basis a lump sum based on the contract price of 0.0499 USD/kWh.
According to the contract, the capacity price was set at $34.60565 per kilowatt per month.
Energy sector experts also criticise some terms of the agreement between TANESCO/government and Richmond/Dowans, saying the $10,000 daily penalty imposed for implementation delays was worked out in an unorthodox manner.
In contracts of such magnitude, the standard rate of penalty fee is usually 2.5 per cent of the value of the project, said one source, adding: I dont know where they got this figure of $10,000 daily penalty for such a big contract.
Officials of both TANESCO and the Ministry of Energy and Minerals were not immediately available to comment yesterday on these latest revelations.
There have been reports that a serious proposal is now in the wind for the government to purchase the whole power plant (turbines) outright from Richmond/Dowans once the lease contract expires.
Dowans, which began supplying around 100MW to the national power grid in October this year, is scheduled to go off-line in October next year.
