Electricity – the pursuit of excellence

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

2. Clean, reliable, cost-effective electricity available to all

3. Context – overview of the sector • Poor performance – symptoms and diagnosis • Solutions – medium term and immediate

4. Overview of the sector

5. Tanzania’s electricity sector is dominated by TANESCO Policy and regulation by MEM Customers Songas180MW Generation650MW distribution Customers IPTL 100MW Customers New genco? Transmission New genco? Customers

6. Government retains some ownership in Uganda’s electricity sector but mostly it is commercially driven Regulated by an independent regulator Customers OFPC380MW distribution Customers Aggreko 50MW New 100MW Customers Transmission Bujagali 200MW Customers

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

8. Poor performance – symptoms and diagnosis

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

10. …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

11. 180 Tanzania’s generation capacity is mostly hydro-electric and dependent on rainfall… rain rain rain Mtera Kihansi 80 Kidatu 200

12. …and today long term water levels are critically low (though ‘run-of-river’ stations are OK)… rain rain rain Mtera Kihansi 0 Kidatu 180 120

13. …so when the rains stop, we will be back to where we were a few weeks ago… rain rain rain Mtera Kihansi 10 Kidatu 20 20

14. …and without hydro generation TANESCO cannot meet daily demand

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

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

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

18. Reliable electricity supply is achievable within five years

19. 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

20. Tanzania has the lowest average electricity price in East Africa

21. Today’s load-shedding and ongoing poor reliability are the result of a prolonged historical failure of the sector investment process Forecastgrowth, andreservemargin Identify capital available Structureprojectsand getcapital Identify investment needs 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

22. Clean, reliable, cost-effective electricity available to all