Electricity – the pursuit of excellence Presentation to the ABA 20 April 2006

Clean, reliable, cost-effective electricity available to all

> Context – overview of the sector > Poor performance – symptoms and diagnosis > Solutions – medium term and immediate

Overview of the sector

Customers Generation 650MW Transmission distribution IPTL 100MW Songas 180MW New genco? Policy and regulation by MEM Tanzania’s electricity sector is dominated by TANESCO

Customers Transmission distribution Aggreko 50MW OFPC 380MW Bujagali 200MW Regulated by an independent regulator Government retains some ownership in Uganda’s electricity sector but mostly it is commercially driven New 100MW

Customers Transmission distribution Genco Regulated by an independent regulator UK, like many European, US and Latin American countries has no government ownership Genco distribution

Poor performance – symptoms and diagnosis

We are all familiar with the problems… > poor reliability > higher prices > low access > load-shedding

…and the impact on our businesses and homes > unable to operate > loss of production batches > damage to equipment > high cost of back up generation cost of lack of electricity supply is estimated at between 50c and $2.00 for each unit not supplied

Tanzania’s generation capacity is mostly hydro- electric and dependent on rainfall… Kidatu Mtera Kihansi rain

…and today long term water levels are critically low (though ‘run-of-river’ stations are OK)… Kidatu Mtera Kihansi rain

…so when the rains stop, we will be back to where we were a few weeks ago… Kidatu Mtera Kihansi rain

…and without hydro generation TANESCO cannot meet daily demand

Without immediate short term generation demand will outstrip supply for between three and five years

Supply is just about enough to meet demand if two new emergency plants are brought on line this year

Reasons for poor performance > Historical under-investment > TANESCO is under-resourced > Management has not been performance-focused > Poor planning process

Reliable electricity supply is achievable within five years

> commercial management focused on bottom line performance > rules based regulation setting targets for efficiency and reliability > set tariffs to reflect actual costs of the sector including cost of capital > step back, let managers manage and reward/penalise success/failure

Tanzania has the lowest average electricity price in East Africa

Today’s load-shedding and ongoing poor reliability are the result of a prolonged historical failure of the sector investment process Forecast growth, and reserve margin Identify investment needs Identify capital available Structure projects and get capital Implement Causes of failure to invest: bankrupt sector donor / subsidy reliant insufficient experience political decisions / indecisions Capital is available: Commercial banks Institutions / pension funds Dar Stock Exchange Strategic investors Development Finance Multi-laterals

Clean, reliable, cost-effective electricity available to all