TANZANIA ELECTRIC SUPPLY COMPANY LTD Presentation on the performance of the Company to Development Partners By Eng. Felchesmi Mramba Managing Director- TANESCO

Identification footer with date Contents Background Current Power Situation Internal Reforms and Status Recent Improvements Financial Performance Conclusion Identification footer with date

Background Tanzania Electric Supply Company Limited is a parastatal organization under the Ministry of Energy and Minerals (MEM) established in 1964. The Company’s core business is Generation, Transmission and Distribution. The Company also sale electricity to the mainland and bulk power supply to the Island of Zanzibar. Vision To be an efficient and commercially focused utility supporting the development of Tanzania and to be a power house of East Africa. Mission To generate/purchase, transmit and supply electricity in the most effective, competitive and sustainable manner possible. Company Values Ethical Excellence Receptiveness

Current Power situation Generation Installed capacity in the grid is 1501.24 MW. Hydro: 561.84 MW (37.43%); Thermal: 939 MW (62.57%). Capacity of thermal plants (Gas: 501MW; Oil: 438.4 MW) Off-grid stations total capacity is 92.4 MW Highest grid system demand is 898.72 recorded in November 2013. Transmission System : Transmission network comprises of 2,732 km of 220kV lines; 1,555.79 km of 132 kV lines; and 578.7 km of 66 kV lines, totalling 4,866.85km by the end of November 2013. Distribution System : Comprises of 17,021 km of 33 kV lines, 5,375km of 11kV lines, 34,513km of LV and 11,124 distribution transformers.

Internal Reforms and Status Main Focus Areas Operational Efficiency Customer Service Improvement Business Growth Our people Identification footer with date

1. Operational Efficiency Build Effective Procurement function by: Decentralizing procurement function Restructuring the PMU Build PMU Capacity Effective Management of Stock items by: Enhancing Stock Management Enhancing Stock Monitoring Identification footer with date

Operational Efficiency … Strengthening ICT systems to support the business Implement Corporate Management System Automate most of the Operations Improve on collection of electricity revenues Replace all post-paid meters with prepaid meters in three years time Use Banks for collection of payments from customers Establish electronic payment systems for credit systems Stretch collection targets with attractive incentives to best performers Identification footer with date

Operational Efficiency … Improve revenue protection Increase severity of penalties to electricity thieves Enhance education to customers on electricity theft Enhance partnerships with customers to provide information on electricity theft Institute Stern disciplinary action on staff any colluding with customers to steal electricity Use modern tools, technology and improved technical design Acquire modern tools to standardize workmanship Use Low cost but good quality designs and materials Identification footer with date

Identification footer with date 2. Customer Service … Improve quality of power supply to customers Improve maintenance of the system Complete the ongoing Distribution Projects to improve reliability and improve voltage Improve electrical safety Monitor compliance on safety measures in distribution lines e.g. use of insulators, cutting of trees and use of PPE Institute friendly process and timely compensation to affected customers Enhance Monitoring of safety compliance Identification footer with date

Identification footer with date Customer Service… Enhance customers relations management Establish one stop shop under reviewed customer processes Enhance monitoring and evaluation of Customers Service Charter implementation Enhance Customer Service Training Improve Customer Communication Use more efficient communication channels including sms and social media to communicate with customers Identification footer with date

Identification footer with date Customer Service … Enhance stakeholder relationship and engagement including functional PR Develop communication policy and strategy Capacity building Provide adequate tools and equipment Provide strategic guidance for stakeholders Relations Management at various organizational levels i.e. Corporate, zonal, regional and plant levels Identification footer with date

Identification footer with date 3. Business Growth … Build a Lean Head office structure focused on supporting regional operations Decentralize Operations and empower zonal and regional offices Increase access to electricity in Urban areas Source commercial financing for network expansion and rehabilitation Implement urban electrification program Identification footer with date

Identification footer with date Business Growth … Expand Customer base Outsourcing distribution network expansion and rehabilitation Stretch connection targets for all region Allow Customer Group payment to speed customer connection and reduce connection costs Identification footer with date

Identification footer with date Our People Involvement of regional/plant management in setting performance objectives Participatory driven performance contracts One Minute Goals PDP (Performance Development Program) Inculcate business management orientation and sense of responsibility and accountability Enhance Management and Leadership Capacity Establish accountability through regular financial reporting and operations monitoring and evaluation Identification footer with date

Internal Reforms - Status PMU Specialized Units within PMU operational All posts advertised Interview of shortlisted candidates in progress ICT Establishment of CMS is in progress Use of Banks customers payments started in May 2014 and being rolled out to all regions. Completion: July 2014 Use of SMS to inform customers in progress Online application for new connection is in progress Identification footer with date

Internal Reforms - Status Revenue Protection Installation of meter on substations and feeders completed by 100% Installation of meters on transformers and feeders completed in Dar es Salaam, Tanga, Coast and Iringa Installation of AMR meters to all T2 & T3 customers is 100% completed Inspection Vehicles procured for all Class A regions Identification footer with date

Internal Reforms - Status Access to electricity Connection to outstanding applications of more than 30 Working days completed. Areas to be electrified under Urban Electrification Programme has been identified negotiation for funding of the same is in progress. Use of Modern Tools and Technology Procurement of necessary tools and equipment is in progress. Identification footer with date

Internal Reforms - Status Involvement of regional/plant management in setting performance objectives Performance Contracts for 2014 signed with subordinates All regions and plant managers have submitted their business plan that will be used to set their next year Performance Contracts. One Minute Goal Targets agreed with Subordinated PDP Group Targets agreed with all regions and Power Plants Identification footer with date

Identification footer with date Recent Improvements Identification footer with date

Identification footer with date Recent Improvements … Identification footer with date

Identification footer with date Recent Improvements … Identification footer with date

Identification footer with date Recent Improvements … Reasons for loss reduction Replacement of post paid meters with pre paid meters Energy metering at substations, feeders boundary and transformer Replacement of defective meters Enforcement of meter inspections Enhanced maintenance Identification footer with date

Identification footer with date Recent Improvements … Identification footer with date

Identification footer with date Recent Improvements … Identification footer with date

Identification footer with date Recent Improvements … Mobile payment systems: TANESCO has continued to use Banking Institutions and Mobile Phones Operators for convenience of payment This mode of payment is simple, safe and user friendly. Identification footer with date

Identification footer with date Recent Improvements … Debt Recovery Strategy TANESCO has started a three years program for replacement of post-paid meters (which is 36% of all customers meters at the moment) with pre-paid meters. This will allow TANESCO to earn revenues upfront as well as ease recovery of 50% of the arrears for every purchase. Identification footer with date

Identification footer with date Recent Improvements … Identification footer with date

Identification footer with date Recent Improvements … Identification footer with date

Identification footer with date Recent Improvements … Group Performance Targets TANESCO has implemented a Performance Development Program (PDP) with collective performance targets for regions/plants whereby after meeting targets reward is given and when target is not met a penalty is instituted. Great performance improvements have been achieved using this strategy Identification footer with date

Identification footer with date Recent Improvements … Bonus and Performance … TANESCO has also established individual performance contracts from top management to principal level and One Minute Goal (OMG) for the rest of the cadre which is also connected to a reward/penalty after evaluation of the achieved performance. Identification footer with date

Identification footer with date Recent Improvements … Identification footer with date

Financial Performance Identification footer with date

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Financial Performance … The rise of outstanding arrears to creditors in the first quarter of 2014 is the result of higher usage of liquid fuel in the fourth quarter of 2013 due to lowest water levels in Mtera and Kidatu Dams. Note: Mtera Dam was completely shut in October 2013 while Kidatu was shut in December 2013. This was the most severe drought impact for a period of four years since drought started As a resulted it derailed the trend of arreas decrease observed during 3rd quarter of 2013. Identification footer with date

Financial Performance … Starting from January 2014, the water inflows to Mtera dam increased due to better rains in 2014 and production from Mtera and Kidatu plants increased and hence use of liquid fuel was minimized. This contributed to reduced cost of generation TANESCO’s revenue showed improvement from January 2014 due to tariff increase and reduced generation costs Payment of outstanding arrears to EPPs and IPPs from TANESCO revenues had consistent improvement TANESCO has also managed to buy enough distribution materials and connect the customers who were pending   Identification footer with date

Financial Performance … Identification footer with date

Financial Performance … Identification footer with date

Financial Performance … Identification footer with date

Financial Performance … Assumptions: Generation plan assumes an average hydrology Cost of Generation will go down in year 2015 due to replacement of EPPs and IPPs which generate by liquid fuels with gas fired plants. The Financial Support from the Development Donors will continue in 2014 and the Government will disburse to TANESCO the promised USD 100m and 80 from the Development Partners in the months of July and October respectively. The Demand will continue to grow at a steady rate of less than 8% for 2014. Identification footer with date

Financial Performance … Assumptions: In the year 2016 there will be a slight increase in cost of sale resulting from the carried costs of newly commissioned IPPs and PPPs. No tariff increase forecast from 2014 – 2017 but revenue growth will depend on new customer connections and increased consumption. The provision for bad debt will start decreasing in year 2017 following replacement of postpaid meters by pre paid meters throughout the country. Identification footer with date

Financial Performance … Impact of the following on TANESCO’s financial situation: Tariff increase; Revenue collection increased from TZS 74.79 billion in March 2013 to TZS 99.79 billion in March 2014 – which is an increase of 33.4% Rain; Cost of production dropped from TZS 115.32 billion (in January 2014) to TZS 86.66 billion (in February 2014) – which is a decrease of 25%. DPs disbursement. Reflected under “Arrears status” in financial performance. Identification footer with date

Identification footer with date Other Success Stories Establishment of two Subsidiaries: The following two subsidiaries have been established under TANESCO: TGDC – Tanzania Geothermal Development Company. This is a Company created with the purpose of developing (studying, exploring and drilling) Geothermal Potentials in the Country. TCPC – Tanzania Concrete Poles Company: This a Company created to deal with manufacturing of concrete pole for transmission and distribution uses in the country. The purpose being to adress the issue of deforestration as well as supplying poles which are enviromentally friendly and in a sustainable way. Identification footer with date

Conclusion TANESCO’s Financial situation has shown strong signs of recovering and as per the projections the outstanding arrears should be fully liquidated in 2015 Consequently TANESCO has started retiring of EPPs. Two Symbion plants in Dodoma and Arusha have been decommissioned in June 2014. Two more which are Aggreko Ubungo and Aggreko Tegeta will be decommissioned in November 2014. TANESCO will soon start to negotiate with Symbion Ubungo to change from Emergency to long term IPP contract arrangements in order to further bring down generation costs. TANESCO and IPTL will soon start negotiation on the conversion from liquid fuel to natural gas usage.

Identification footer with date Ahsante Thanks Identification footer with date