Tanzania to Invest $1.2 Billion to Revamp Power Utility

Date : 08/04/2014 @ 10:20AM
Source : Dow Jones News
Stock : Exxon Mobil Corp. (XOM)
Quote : 79.87  0.0 (0.00%) @ 4:23AM

Tanzania to Invest $1.2 Billion to Revamp Power Utility

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The Tanzanian government is planning to invest at least $1.2 billion to revamp its ailing state power utility, the East African nation's latest effort to guarantee reliable power to domestic and industrial consumers, the energy and minerals ministry said Monday.

The investment will enable East Africa's second largest economy to reform its Tanzania Electricity Supply Co. to enable it to attract necessary investments from the private sector to boost generation, transmission and distribution facilities, the ministry said in a report.

The reforms are expected to help the country attract enough investments to diversify power sources and boost generation capacity to at least 10,000 megawatts over the next ten years, from the current 1,600 MW, the report said.

The investment, one of the largest in the sector in more than a decade underscores how urgently Dar Es Salaam wants to heal its economy from years of chronic power shortages as it positions itself to become the region's next energy hub, after discovering huge natural gas reserves.

"The Reform Strategy also proposes the desired market structure" the report said "A state-owned generation company will be established through unbundling from the transmission and distribution segment ...this is expected to intensify competition in power generation."

The reforms are also expected to help the country connect at least 75% of its citizens to the national grid. Currently, only 24% of Tanzanians are connected to the national grid.

Around half of the projected new power capacity will be generated from natural-gas fired plants. Tanzania started turning to gas-fired power plants three years ago to wean its electricity sector from the unreliable hydro power stations.

Gold mining companies such as Africa Barrick Gold. and AngloGold Ashanti remain some of Tanzania's largest power consumers.

Exploration companies have struck a flurry of natural gas discoveries off Tanzania's southern coast, increasing the country's proved natural gas reserves to 47 trillion cubic feet from less than 10 trillion cubic feet five years ago.

The discoveries have rendered the country a hotspot for natural gas exploration, attracting a host of international companies, including China's largest offshore oil producer, Cnooc Ltd., U.S. "s ExxonMobil Corp., U.K.'s BG Group as well as Russia's state-run Gazprom. Around a dozen deepsea blocks are yet to be explored due to disputes over revenue- sharing with the semi-autonomous archipelago of Zanzibar. The U.S. Geological Survey estimates that East Africa's coastal region holds up to 441 trillion cubic feet of natural gas.

Write to Nicholas Bariyo at nicholas.bariyo@wsj.com

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