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Overview of Tanzanian Electricity Industry
Frost & Sullivan, June 2011, Pages: 61
Tanzania has a developing electricity industry whose growth is mainly driven by an increase in electricity demand. Tanzania is also keen on diversifying its economy and developing energy intensive industries such as mining and manufacturing. GDP and per capita earnings growth will also lead to significant increases in electricity demand and attract investment into electricity generation, transmission and distribution. The state owned power utility TANESCO is also advancing a tariff system that reflects the costs of supplying electricity rather relying on off-balance sheet financing and government grants for survival. The outcome of future tariff reviews will have a significant bearing on the development of the industry.
This research service titled Overview of Tanzanian Electricity Industry assesses the current state of the Tanzanian electricity industry and analyses the changes that have occurred since 2007. This research service provides a strategic analysis of the industry challenges as well as market drivers and restraints. It outlines the major participants in the industry and the key legislations governing it. The research also offers a strategic analysis of future developments in the industry, details investment opportunities and provides conclusions and recommendations for industry participants.
Need to Meet Rising Demand, Coupled with Direct Foreign Investments, Set to Galvanise Tanzanian Electricity Industry
TANESCO, the Tanzanian state electricity utility, is currently unable to meet electricity demand and is encouraging local and international investment into the industry. This is creating significant opportunities for emergency power generators. “Growth in the Tanzanian electricity industry is driven by the development of the mining and manufacturing industries,” notes the analyst of this research. “Mining companies are already looking at ways to secure independent power for existing and future operations. This is because the viability of their core operations is heavily dependent on the availability of electricity.” As the Tanzanian national GDP and per capita income continue to grow, the demand from both urban and rural electricity consumers is set to increase. Interim emergency power generators can benefit from the lack of supply and position themselves to take up a permanent role within the industry, as is the case with independent power producer Aggrekko.
The increase in direct investment into the electricity industry is also set to push market expansion. As a result of regulatory changes made by the Government of Tanzania and the Energy and Water Utilities Regulatory Authority (EWURA), foreign investors have increased their investment into the electricity industry. For instance, Sichuan Hongda, a Chinese company, is intent on investing close to $3 billion in a 600 MW power plant and a coal mine that will supply raw materials to the power plant. The successful implementation of such a large-scale project is expected to increase investor confidence and lead to similar developments within the country.
Low Tariffs Dampen Enthusiasm
Low tariff levels and uncertainty about future increases threaten market prospects. TANESCO accepted an 18.5 per cent tariff increase, effective January 1, 2011, but deferred the three year tariff increase plan until a cost-of-service study had been conducted. “TANESCO had requested an increase in tariffs of approximately 21.3 per cent for 2011,” states the analyst. “Lower-than-expected tariff increases are likely to affect TANESCO’s forecast based on the price path and this is anticipated to restrain industry growth.”
Promisingly, there is an increasingly significant market for original equipment manufacturers (OEMs), given the number of maintenance and repair projects that are in the pipeline. “The connection of mining centres to the national grid is poised to create significant opportunities for OEMS and engineering consultants,” remarks the analyst. “Furthermore, TANESCO aims to improve maintenance, repair and overhaul (MRO) work on existing and future transmission and distribution infrastructure.”
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
- Generation
- Transmission
- Distribution
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