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

6. 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

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

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

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

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

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. > 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 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

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