1. 1 MINISTRY OF ENERGY AND MINERALS (MEM) 2014/15 BUDGET AND ESI REFORM OVERVIEW 24 JUNE, 2014

2. COVER OF PRESENTATION  Part One: Plan and Budget for 2014/15 overview.  Part Two: Electricity Supply Industry (ESI) Reform Strategy and Roadmap. 2

3. Vision To be a vibrant and performance driven Ministry that ensures Tanzania’s energy and mineral resources contribute significantly to the socio-economic development of the country.

4. Mission To promote, facilitate, regulate and monitor the development and sustainable utilisation of energy and mineral resources for the benefit of Tanzanians.

5. Core Values  Accountability  Effectiveness  Transparency  Results oriented  Loyalty  Responsibility  Integrity

6. MEM OBJECTIVES ACCORDING TO SP Objective A: Sustainable development and management of energy resources for national development enhanced. Objective B: Sustainable development and management of mineral resources for national benefit improved. Objective C: Resources management and support services improved. Objective D: HIV and AIDS infection reduced and support services to employees improved. Objective E: Implementation of the National Anti- Corruption Strategy effected, enhanced and sustained.

7. 2014/15 Budget Preparation  MEM Plan and Budget preparation for 2014/15 started early in November, 2013.  The budget was submitted to the Ministry of Finance for scrutinization in February, 2014.  The parliamentary Committee approved it in May, 2014.  MEM speech was presented to the Parliament on 29 May, 2014 and the discussion was on 30 th May 2014 7

8. MEM PRIORITIES FOR 2014/15 Energy Sector  Continue with construction of gas pipeline and the processing plants.  Continue with implementation of priority power projects under BRN initiative, including IMPLEMENTATION of ESI Reform Strategy and Road Map.  Strengthening existing power generation plants, transmission lineS and distribution network.  Expediting implementation of urban and rural electrification projects.  Improving legal and regulatory framework for energy sector.  Promoting investments in renewable energy resources..

9. Priorities ……… Mineral Sector  Increasing Government revenue collection from mineral sector.  Enhancing capacity at Zonal Mining Offices.  Implementation of the Sustainable Management of the Mineral Resources Project (SMMRP).  Supporting development of Small Scale mining;  Improving legal and regulatory framework in the mineral sector.  Promotion of mineral value addition activities to enhance revenue collection.

10. MEM Budget Ceiling 2014/15 10 Category Ceiling % Recurrent125,378,452,00011.6 Development957,177,170,00088.4 Total1,082,555,622,000

11. Local and Foreign Dev. Budget 11 CategoryAmount % of total budget Local652,805,000,00068.2 BRN Projects (91%)(595,900,000,000) Foreign304,372,170,00031.8 BRN Projects (91%)(277,700,000,000) Total (Local + Foreign)957,177,170,000

12. Development Projects Allocation in 2014/15. Main projects  Due to the budget constraint, funds allocated to many projects are insufficient.  The focus in 2014/15 has been BRN projects.  Tshs. 873.6 billion (91.3%) of total Development Budget has been allocated to the BRN projects.  Only 8.7% has been allocated to other projects. 12

13. Main Projects Allocation (LOCAL ) ProjectsAllocation – TZS ( Billion) Construction of Natural Gas151 Kinyerezi I – 150 MW90 Rural Electrification269.2 Energizing rural Tanzania – Power supply to Ngara, Biharamulo and Mpanda (Orio) 22 Institutional Cooperation to TANESCO30 Transfers to TANESCO20 Total582.2 Only 6 Projects has been allocated 89% of the total local Development Budget

14. Lesson Learnt from above Allocation  Due to budget constraint some important projects have not allocated any fund.  Ministry has not been able to allocate the required budget to key projects.  Ministry should solicit some funds from different sources to cover the gaps. 14

15. Projects and Amount Required PROJECTallocation in 2014/15 (Local – Tsh.) Extra Required in 2014/15 220 kV Makambako – Songea Transmission 300,000,000. (USD 183,000) 13 mil. USD Kinyerezi I – 150 MW90,000,000,000 (USD 54.9 mil.) 53.3 mil. USD Total (USD)55.08366.3 15

16. Revenue collection – 2014/15 SectorAmount to be collected ( Billion) Mineral Sector209. 96 Energy Sector31.27 Administration0.15 Electricity Charges - REA28.00 Total269.38

17. Part Two: ESI REFORM & ROADMAP Process 17 TASKDATE The Consultant M/s PWC engaged by MEM to advise GoT on the reform agenda by providing a final Draft Reform Strategy and Roadmap on 2nd May, 2014. 1 st February, 2014 The Hon. Minister for Energy met DPs to among other things share progress on ESI reform. 4 th February, 2014

18. Part Two: ESI REFORM & ROADMAP Process 18 TASKDATE The Consultant M/s PWC met AfDB to gather views on the current situation of the energy market in Tanzania. 11 th February, 2014 The Consultant M/s PWC met DPs to gather views and opinions on ESI Reform Strategy and Roadmap 13 rd February, 2014 The Consultant M/s PWC met EWURA to gather views and opinions on ESI Reform Strategy and Roadmap. 13 rd February, 2014

19. Part Two: ESI REFORM & ROADMAP Process 19 TASKDATE The Consultant M/s PWC met TANESCO’s Management to gather views and opinions on ESI Reform Strategy and Roadmap. 14 th February, 2014 The Consultant M/s PWC met MCC to gather views on among other things status of Compact- II. 18 th Feb, 2014 The Consultant M/s PWC separately met REA and President Office – Planning Commission to gather views and opinions on ESI Reform Strategy and Roadmap 18 th Feb, 2014

20. Part Two: ESI REFORM & ROADMAP Process 20 TASKDATE The Consultant Ms PWC made a presentation to DPs 15 th April, 2014 Meeting held involving TANESCO Board of Directors, TANESCO Management, EWURA Management and REA Management to share the ESI Reform Strategy 1 st May, 2014 MEM met TANESCO Board of Directors and TANESCO Management to share the ESI Reform Strategy and Roadmap 23 rd May, 2014 MEM met TANESCO Labour Union Leaders (TUICO) to share the ESI Reform Strategy and Roadmap. 23 rd May, 2014

21. Part Two: ESI REFORM & ROADMAP Process 21 TASKDATE MEM consultation with EDPG, TANESCO, MoF and EWURA on ESI Reform Strategy and Roadmap 6 th June, 2014 Discussion with Cabinet Secretariat 15 th June, 2014 Discussion with inter Ministerial Technical Committee (IMTC) 18 th June, 2014 Approval by Cabinet20 th June, 2014

22. REFORM ROADMAP  Immediate Term (July 2014 – June 2015)  Short Term (July 2015 – June 2018)  Medium Term (July 2018 – June 2021)  Long Term (July 2021 – June 2025)

23. The Roadmap – Main Immediate Actions July 2014 – June 2015 Major ActivitiesTimeframe Cost (USD) Million Establish a Task Force with mandate to monitor the implementation of the Roadmap August 2014 100 Establish a Transformation and Change Management Team (TCMT) at TANESCO to manage the reform process August 2014 200 Initiate valuation of TANESCO’s generation, transmission and distribution assets December, 2014 300 Assess Human Capital Needs and prepare Capacity Building Programme March 2015 200 Carry out management information system audit June, 2015 300

24. The Roadmap – Main Immediate Actions July 2014 – June 2015 Major ActivitiesTimeframe Cost (USD) Million Reviewing of the Electricity Act, 2008, in particular, Section 41(6) June, 2015 0.50 Improve TANESCO financial performance December, 2015 100 Designate Grid Control Center as Independent System Operator (ISO); December, 2015 0.50 Review tariff structure and develop of Grid Codes to guide transmission and distribution operations December, 2015 1.00

25. The Way Forward  The implementation of ESI Reform Strategy and Roadmap will start in July, 2014.  We are open and inviting any stakeholders (including DP’s) to support our immediately activities.  Our implementing will cover immediate, Medium and Long term measures/actions 25

26. CONCLUSION  MEM is committed to implement ESI Reform Strategy and Roadmap with any stakeholder who is ready.  MEM is confident that DP’s will support initiative to achieve the desired outcome.  The budget gap for financing ESI Reform immediate activities is USD 1,201 million equivalent to TZS 1.96 trillion,  Concerted efforts from all stakeholders are required to make the reform success.

27. Thank You