Document of The World Bank -
FOR OFFICIAL USE ONLY Public Disclosure Authorized
Report No. 4050-TA
STAFF APPRAISAL REPORT Public Disclosure Authorized
TANZANIA
FOURTHPOWER PROJECT Public Disclosure Authorized
June 29, 1983
-~~~~~~Z Public Disclosure Authorized Energy Division Eastern Africa Regional Office
This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS
1 Tanzania Shilling (TSh) = US$0.082 US$1 = TSh 12.2 1 TSh = 100 T cents
WEIGHTS AND MEASURES
I liter = 1.057 quarts 1 meter (m) = 3.28 feet 1 kilometer (km) = 0.621 miles 1 square kilometer (km2) = 0.386 square miles 1 kilovolt (kV) = 1,000 volts 1 kilowatt (kW) = 1,000 watts 1 megawatt (MW) = 1,000 kilowatts 1 megawatt hour (MWh) = 1,000 kilowatt hours 1 megavolt ampere (MVA) = 1,000 kilovolt ampere (kVA) 1 gigawatt hour (GWh) = 1 million kilowatt hours 1 kilo calorie (kcal) = 3.97 British thermal units (Btu) 1 ton of coal equivalent (tce) = 7,000,000 kilocalories 1 ton of oil equivalent (toe) = 10,500,000 kilocalories (kcal)
ABBREVIATIONS AND ACRONYMS
Acres = Acres International Limited AATP = Arusha Appropriate Technology Project BADEA = Arab Bank for Economic Development in Africa CIDA = Canadian International Development Agency EAPL = East African Power and Lighting Company Limited KfW = Kreditanstalt fur Wiederaufbau MWE = Ministry of Water and Energy NORAD = Norwegian Agency for Development OPEC = Organization of Petroleum Exporting Countries RUBADA = Rufiji Basin Development Authority SIDA = Swedish International Development Authority SIDO = Small Industries Development Organization SWECO = Swedish Consulting Group TANESCO = Tanzania Electric Supply Company Limited TARECO = Tanzania Rural Electrification Corporation TTI = Technical Training Institute
TANESCO's Financial Year (FY)
Calendar
This report was prepared by Messrs. J. Besant-Jones (Economist), V. Mastilovic (Engineer) and R. Mitchell (Financial Analyst) and is based on the findings of the appraisal mission which visited Tanzania in December 1981. Mission members included Ihsan Tuncay (Mission Leader), David Hutchins (Consultant) and Gerd Steinke. FOROICIAL USEONLY
TANZANIA
STAFF APPRAISAL REPORT
FOURTH POWER PROJECT
Table of Contents
Page No.
I. THE ENERGY AND POWER SECTOR
Energy Resources and Planning ...... 1 Renewable Energy Resources ...... 1 1980 Energy Balance ...... * 2 Energy Prices ...... 0.... 3 Power Sector ...... 4 Existing TANESCO Facilities ...... 5 Access to Service and Electrificationof Rural Areas ...... 6 Role of IDA/Bank ...... 0...... 6 Government Strategy in the Power Sector ...... 7
II. THE BORROWER, BENEFICIARY AND EXECUTING AGENCY
The Borrower ...... 8 The Beneficiaryand Executing Agency ...... 8 Accountingand Auditing ...... 8 Billing and Collection ...... o ...... 9 Personnel and Training ...... 9 Insurance ...... 10
III. DEVELOPMENTPROGRAM AND THE PROJECT
Demandand Market ...... 10 Development Program ...... 11 Project Objectives ...... 13 Project Description ...... 13 Cost Estimates ...... 14 Project Financing ...... 16 EngineeringConsultants' Services and Project Implementation ...... 17 Procurement ...... 17 Disbursement ...... 18 Project Monitoring and Evaluation ...... 18 EnvironmentalAspects ...... 18
IV. FINANCIAL ASPECTS
TANESCO's Past Financial Performance ...... 19 TANESCO 1980Cs Financial Position ...... 20
This documenthas a restricted distributionand may be used by recipientsonly in the performance of their officialduties. Its contentsmay not otherwisebe disclosedwithout World Bank authorization. - ii -
Page No.
Tariff Levels and Rate of Return ...... 21 TANESCO's Financing Plan ...... 23 Future Operations and Financial Performance ...... 25
V. ECONOMIC ANALYSIS
Need for the Project ...... 26 Least Cost Solution ...... 26 Power System Costs ...... 27 Economic Rate of Return ...... 29 Tariffs ...... 29 Risks ...... 30
VI. AGREEMENTSREACHED AND RECOMMENDATIONS...... 31
LIST OF ANNEXES
1. TANESCO - Existing Power Facilities 2. Statistical Data on TANESCO's Power System 3. TANESCO - Organizational Structure 4. TANESCO - Future Sales and Maximum Demand 5. Project Description 6. Project Cost Estimates 7. Implementation Schedule 8. Disbursement Schedule 9. Project Monitoring Guidelines 10. TANESCO - Income Statements, 1978-1990 11. TANESCO - Balance Sheets, 1978-1990 12. TANESCO - Cash Flow Projections, 1981-1990 13. Notes and Assumptions for Financial Projections 14. Economic Analysis - Least Cost Solution 15. Economic Rate of Return 16. Selected Documents and Data Available in the Project File
MAP IBRD 16231 TANESCO's Principal Power Facilities and the Proposed Project I. THE ENERGY AND POWER SECTOR
Energy Resources and Planning
1.01 Tanzania's energy resources are large and diverse but have not yet been exploited systematically. In addition to forestry resources, the country has coal deposits in the south-western area estimated at about 300 million tons of proven reserves. Despite their remoteness from the main population centers and harbors, exploitationon a sizeable scale appears feasible and is being examined under a recently approved I.D.A. assisted coal engineering project. Tanzania has si nificant natural gas deposits on Songo-Songoisland (about 800 billion ftf proven) and possible additional reserves at Kimbiji and Mnazi Bay where exploration is continuing. The potential for oil is being investigated although no significant discovery has yet been made. 1/ Tanzania also has a significant hydro power potential mostly sited in the basins of various rivers which drain into the Indian Ocean. The country's geothermal and uranium potential is unexplored. Tanzania has a general energy policy for the development of various energy forms, giving priority to renewable energy resources. However, a systematic approach to the development of existing resources, supply of fuel and its transportation,maintenance of equipment and training has yet to be established. A UNDP-Bank joint energy assessment mission is visiting Tanzania in mid 1983.
Renewable Energy Resources
1.02 Tanzania has so far concentratedits efforts on six types of renewable energy resources for development, i.e. biomass, hydro power, animal power, wind, solar and geothermal. At present, Tanzania depends mostly on biomass sources in the form of firewood for heating, cooking and some industrial processes, and on hydro power for electric energy.
1.03 Firewood and charcoal, which provide about 86% of Tanzania's total energy consumption, are the traditional sources of energy particularlyin the rural areas. About 90% of the population lives in the villages and depends almost exclusively on firewood. Current consumption is estimated at about 35 million m3 (about 2.1 m3 per capita per annum); and the annual average growth of consumption is about 1.7%. The household use of firewood as well as by industrialprocesses (such as tobacco curing, tea drying, fish smoking, heating, brewing, brick-makingand pottery) are causing sources to be fast depleted. The Government has formulated strategies to avoid deforestation by introducing simple technologiessuch as condensing wood residues into readily transportable briquettes and pellets, improving the design of wood stoves, and by reforesting and controlling wood harvesting. Tanzania has also made efforts to develop biogas and gasification by particle combustion projects in recent years. The Small Industries Development Organization (SIDO) and the Arusha
1/ The Bank financed an exploration project in 1980 to assess petroleum at Songo-Songo (IDA Credit 27-TA for US$30 million, June 30, 1980) and oil-gas exploration project for US$20 million (IDA Credit 1199-TA, January 13, 1982). -2-
Appropriate Technology Project (AATP), both government organizations,have about 16 planned projects (comprisingthe constructionof gas tanks with a total capacity of about 240 m3, at a cost of about US$30,000).
1.04 So far more than 70 potential sites for hydro power and irrigation have been identified in Tanzania, mostly by the UN Food and Agricultural Organization. The total hydroelectric potential has been estimated to be about 19,000 GWh per year production capability,with about 3,800 MW capacity, 2/ of which 247 MW 3/ has been developed. In addition to the large hydroelectric power potential, there are also a number of sites suitable for mini hydro stations mostly in rural areas far from the main power grid and the major population centers. About 20 mini hydro stations operate in Tanzania with a total capacity of 0.9 MW. The NorwegianAgency for Development (NORAD), Swedish InternationalDevelopment Authority (SIDA) and the Federal Republic of Germany - Kreditanstalt fur Wiederaufbau (KfW) are investigating about 30 sites with a total capacity of about 50 MW in the northern and southern parts of the country.
1.05 There are various geothermal areas mostly located in the north- east and south-west of the country in the Great Rift Valley. Investigations are continuing through SIDA and initial indications are promising.
1980 Energy Balance
1.06 The Ministry of Water and Energy (MWE) estimates Tanzania's total gross energy usage in 1980 to be about 5,000 thousand toe. No energy has been exported (except for sales to ships of about 50,000 tons of refined oil products from the Dar es Salaam refinery (TIPER) in 1980). About 87% of all energy consumed was provided locally (mainly firewood). Coal is predominantlyused in industry and transportation. About 13% of all energy used in 1980 was imported, almost entirely in the form of crude and refined oil products from the Middle East and North Africa. Details of energy consumptionin 1980 are shown follow:
2/ Estimated hydro power potential of major rivers is: Kagera River 280 MW (Rusomo-Kishandaprojects); Mara River 89 MW, Wami River 120 MW, Rufiji River 2,100 MW (Stiegler's Gorge project); Kilombero River 550 MW (Kingenenas/ShuguriFalls projects); Great Ruaha River 280 MW (Kidatu and Mtera projects); Nkiwe, Rumbila and Rumakali Rivers 160 MW; Songwe River 50 MW; Ntembwe, Kalumbo Rivers 60 MW; and Malagarasi River 100 MW.
3/ Wami/PanganiRivers (Hale station 20 MW, Pangani station 17 MW, Nyumba Ya Mungu station 8 MW); Great Ruaha River (Kidatu station 200 MW); Little Ruaha River (Iringa 1 MW); and Songwe River (Mbeya 1 MW). - 3 -
Tanzania's Energy Consumption (1980)
Local toe (thousand) c/ %
Firewood 4,300 86 Coal 5 - Electricity a/ 55 1 Subtotal 4,360 87
Importedb/
Liquidpetroleum gas 6 Motor fuel (premiumand regular) 110 2 Kerosene 73 1 Gas oil 249 5 Industrialdiesel 55 1 Fuel oil 126 3 Jet oil 67 1 Subtotal 686 13
TotalConsumption 5,040 100
Source: Ministryof Water and Energy
a/ Productionfrom hydro stations.Production from diesel stations is includedin the "Imported". Kilomberosugar estatesand other captiveplants producesome power from bagasse(about 10 GWh per annum),which is includedin electricity. b/ In 1980 616,904tons of crude oil and 255,203tons (872 thousand toe) of refined products were imported. c/ toe 1.0 = tce 1.5; toe 1.0 = 4,038 kWh
1.07 The Tanzanian Government has made substantial efforts to reduce oil usage in the country since the 1973/74 worldwide energy crisis. Total imports of crude oil and refined products in 1980 were about 872,000 tons. Some refined products were also exported to neighboring countries directly by the petroleum companies (i.e. Shell, BP and AGIP). The present level of net imports is approximately the same as it was in 1974/75, so that Tanzania has achieved about a zero growth rate in oil consumption (as against a GNP growth of 0.8% p.a., and a population growth rate of 3.4% p.a.) over the past six or seven years through conservationmeasures such as restriction on weekend travel by car and gas oil rationing. Crude oil is being refined at the TIPER refinery with a current production rate of about 500,000 tons per annum.
Energy Prices
1.08 The prices of oil products and other types of energy are controlledby the Government. -4-
Electricity is used mainly in industry and commerce, but it is also used for lighting water heating and air conditioning (to a small extent). Other fuels are used for cooking and water heating. The effect of different pricing policies on energy consumption and the possible need to change the tariff structure to a more economic basis will be subject of the electricity tariff study (paras. 5.14 - 5.15). The following table compares 1981 average energy prices (all prices as sold in Dar es Salaam):
Retail Retail US$ per (including (including Million taxes) Tax taxes) Kcal ------TSh------US$------
Firewood a/ (tonne) 150 - 18 12 Coal (tonne) 480 - 57 10 Electricity (MWh) 650 - 77 90 Liquid petroleum gas (cu ft) 5,265 360 627 60 Motor fuel (premium) (thousand liters) 9,350 1,432 1,113 107 Motor fuel (regular) 7,250 1,432 863 82 Kerosene (regular) 3,350 184 399 38 Industrial diesel 2,405 - 286 27 Gas oil 3,900 694 464 44 Fuel oil 2,134 - 254 24 Jet oil 3,849 160 458 44
a/ Firewood is practically "free in the rural areas.
Oil prices are based on the imported cost of crude oil and refined products plus transportation and tax. There are also subsidies and cross subsidies (e.g. between kerosene, industrial diesel and fuel oil). Price and taxation will be fully reviewed during the proposed energy assessment sector work (para. 1.01).
Power Sector
1.09 The total electrical energy consumption of the country in 1980 was about 880 GWh, which corresponds to a per capita energy use of about 44 kWh/year, and is among the low levels of electricity use in the Eastern Africa Region, reflecting the moderate level of industrial activity. Annual electricity consumption per capita in other East African countries is approximately as follows: Kenya 90 kWh, Mauritius 573 kWh, Madagascar 41 kWh, Ethiopia 22 kWh, Botswana 450 kWh.
1.10 The Tanzania Electricity Supply Company Ltd (TANESCO) is the country's main power producer, but a small amount of electrical energy (about 2%) is also generated by parastatals and private organizations which have captive power plants on sugar, tea and coffee estates, the oil refinery, textile factories and large farms. These power plants operate under license from TANESCO, which has so far issued about 95 licenses for diesel, steam and small hydro plants, corresponding to a total capacity of about 7.5 MW and producing about 20 GWh per annum. -5-
1.11 Another public organization, the Rufiji Basin Development Authority (RUBADA), established under MWE in 1975 to harness the multi-purpose potential of the Rufiji River, also has authority (by its Act) to plan, construct and generate power facilities in the Basin and to sell electric energy. This situation of confused responsibilitiescreates considerable difficulties and overlap in the planning of power sector activities. RUBADA has been concentrating on the preparation of hydro power projects at Stiegler's Gorge, Kingenenas and Shuguri Falls, rather than on projects for agricultural,industrial and social developmentof the Rufiji Basin. The result has been costly duplication in power sector planning by TANESCO and RUBADA, a situation which Tanzania, with its constraints in skilled manpower and finance, can ill afford and which has delayed identification and preparation of the proposed project. Furthermore, the Government is planning a new organization, also accountable to MWE, to be responsible for rural electrification, the Tanzania Rural ElectrificationCorporation (TARECO), whose prime objective would be the provision of relatively inexpensivepower to rural communities throughout the country through renewable resources of energy such as mini-hydro plants (para. 1.16). The Government has already employed a CIDA-financedenergy specialist for the establishmentof an energy planning unit in the Ministry of Water and Energy. In order to clarify the responsibilitiesand duties of each organization in the power sector, during negotiations the Government has agreed to employ consultants whose qualifications,experience and terms of reference shall be satisfactoryto IDA to prepare a power sector organizationstudy by December 31, 1984, and, after taking into account comments of IDA, to implement by December 31, 1985 all appropriate actions, based on recommendations of that study. Similarly, TANESCO has agreed to employ consultants with qualifications, experience and terms of reference satisfactory to IDA to prepare, by December 31, 1984, a long-range power sector development study for the timely identificationof the least cost development alternatives for the country.
Existing TANESCO Facilities
1.12 TANESCO has an extensive grid system in the eastern part of the country which serves the coastal strip including the Dar es Salaam, Morogoro, Tanga, Arusha, Moshi regions and, through submarine cable, Zanzibar. TANESCO also has 15 isolated service areas scattered throughout the country, but mostly located in the northwestern, southwestern and southeasternzones of Tanzania. The total installed capacity of TANESCO's power plants is about 380 MW, of which 247 MW is hydro (interconnected system only) and 133 MW is diesel (mostly isolated systems). TANESCO has about 4,840 km of powerlines of various voltages and cables throughout the country.
1.13 TANESCO is organized into the coastal grid system (para. 1.12) and into zones: the Northwest (NW) zone comprises the towns of Dodoma, Singida, Iringa, Shinyanga, Musoma, Mwanza, Sumbawanga,Tabora, Bukoba and Kigoma; the Southwest (SW) zone, Iringa, Mbeya, Songea and Tukuyu; the Southeast (SE) zone, Mtwara, Lindi and Nachingwea. Detailed information regarding TANESCO's existing facilities is given in Annex 1 and shown on -6 - the map (IBRD 16231). The total system losses are about 13%, including distributionsystem losses and station use, which appears to be reasonable when the scattered power plant locations and long distances of power transportation are taken into account (Annex 2). TANESCO routinely conducts studies to identify further economic reductions of system loss.
1.14 The following table shows TANESCO's installed and available capacity of power plants, lengths of powerlines, number of consumers and peak demands in various zones of the country in 1981:
Installed Available Lengthof Capacity Capacity Powerlines(km) Numberof Peak Zones MW MW and Voltages ConnectionsDemand (MW)
Grid 313.0 260.4 3,961 (220,132, 66, 81,556 122.0 33, 11-kV) North-West 44.1 28.0 551 (33, 11-kV) 19,261 20.0 South-West 7.1 6.0 163 (33, 11-kV) 6,634 5.7 South-East 5.5 2.0 165 (33,11-kV) 3,472 2.0
Total 369.7 296.4a/ 4,840 110,923 149.7
a/ The differencebetween installed and availablecapacities is mainly due to deratingdiesel stations (para. 3.08)
Access to Serviceand Electrificationof Rural Areas
1.15 The Government has given high priority to industrial and urban electrificationfor many years. Only about 1.2 million (less than 7% of total population) have access to electricity. This is in the high range for East African countries. Comparativepercentages of population supplied with electricityare: Kenya 6%; Lesotho 3.5%; Malawi 2%; Sudan 8.5%.
1.16 The Government'sprogram for the electrificationof rural areas covers the electrificationof villages and small towns. TANESCO has so far electrified a few villages and small towns through government grants and soft loans through bilateral assistance. Since this operation is generally expected to be unprofitable,the Government has decided, on the basis of a MWE study, to establish a rural electrification corporation in order to accelerate development of village electrification. Where possible this will be by renewable resources - for example, small hydro schemes in the Kigoma, Rukwa and Ruvuma regions.
Role of IDA/Bank
1.17 This would be the Bank Group's fourth lending operation in Tanzania's power sector. The first was Loan 518-TA for US$5.2 million to cover part of TANESCO's development program for the years 1967 through 1970; the second was Loan 715-TA for US$30 million and a supplementaryloan for US$5 million to cover part of constructionof the First Stage of the Kidatu Hydroelectric Scheme which was completed in 1975 (Project Performance Audit Report, December 19, 1979); and the third was for the Second Stage of the Kidatu Hydroelectric Project with Loan 306-T-TA for US$30 million and a Supplementary Special Action Credit of US$7.0 million, which was completedin 1981 and for which the project completion report has already been issued.
1.18 The most important lesson related to previous Bank operations in Tanzania is related to project cost overrun. In order to prepare realistic cost estimates and a correspondingfinancing plan, cost estimates should be reviewed by an independent cost consultant as early as possible in the preparation of the project, preferably before the appraisal of the project. This is now a standard recommendation for any project with substantial civil works. The Bank's requirement of a panel of experts in dam constructionhas been particularly valued by TANESCO. Retention of full-time advisors for construction supervision has also been a positive feature of previous projects. The Bank's concern for the environment has resulted in detailed studies on various aspects, and TANESCO has satisfactorilyimplemented recommendations directly related to the project, though implementationof certain recommendationswill be long term. The Bank has systematically guided and encouraged TANESCO's comprehensive training program, and the program's successful achievement of objectives shows the effects of cooperation between the implementationagency and the Bank. The Bank has played and continues to play a constructive and catalytic role in the preparation of projects and in coordinating cofinanciers'efforts.
1.19 The Bank's intentions for future lending for the power sector will be formulated on the basis of the long-range power development study (paras. 1.11 and 3.11). To ensure that proper considerationcan be given in the study to the major options for power development in Tanzania, the Bank is also financing studies into energy natural resources in Tanzania that will provide major inputs to the long-range power development study. These studies cover natural gas exploration and utilization and preliminary studies for hydroelectric resources (IDA Credit 1060-TA, August 8, 1980). Development of coal is presently under investigation (para. 1.01). The Bank has also recommended study of the feasibility of installing thermal generation capacity (para. 3.07) that would consider the potential for the use of domestic natural gas resources for power generation.
Government Strategy in the Power Sector
1.20 The Government continues to give high priority to the development of the power sector in view of its importance for the overall economic development of the country, emphasizing its essential role in industrialization. With bilateral aid the Government hopes to pursue a rural electrification program (para. 1.16). Recognizing the need to - 8 - formulate a comprehensive national energy development plan, the Government intends to set up an energy planning unit in the Ministry of Water and Energy (para. 1.11).
II. THE BORROWER, BENEFICIARY AND EXECUTING AGENCY
The Borrower
2.01 The Government of Tanzania would be the borrower. The proceeds of the proposed IDA credit would be onlent to TANESCO.
The Beneficiary and Executing Agency
2.02 The beneficiary and executing agency would be TANESCO, a parastatal limited liability company accountable to the MWE, and responsible for public power supplies throughout mainland Tanzania. TANESCO supplies about 130,000 consumers (connections) or about 4% of the total population. It was established in 1931 as a private company and in 1964 the Government bought all the issued shares not already owned, from the East African Power and Lighting Company, Limited (EAPL). Under TANESCO's license, 4/ which expires in 2012, TANESCO has the right to first refusal of any additional areas of public supply of electricity in Tanzania, and is required to operate in accordance with sound commercial principles, which it does. TANESCO's board of directors is appointed by the Government and the managing director is a presidential appointee. The present incumbent is a professional power specialist who was appointed in 1980 from within the ranks of the organization. TANESCO's organizational structure is shown in Annex 3. Further improvements are needed in TANESCO's organization and management practices in order to improve the quality of services and company efficiency. Therefore, TANESCO has agreed (i) to employ consultants with qualifications and terms of reference satisfactory to IDA to prepare TANESCO's management study by June 30, 1985; and (ii) after taking into account IDA's comments to implement agreed recommendations of the study by January 1, 1986.
Accounting and Auditing
2.03 TANESCO's accounting staff are competent and procedures are good, so that information has been readily available and financial control reasonably effective. TANESCO has in the past maintained adequate records and submitted audited accounts regularly. However, since 1980 the computer which TANESCO uses to maintain its records has been operating only intermittently. As a result, TANESCO's audited accounts for 1980 were submitted to the Bank later than required under the existing project agreement. Billing and other accounting procedures are also severely affected and the accounts for 1981 have only recently been finalized. TANESCO has purchased a new computer, which is being tested. When in full operation, it will enable audited accounts to be presented regularly in the future, and will also help TANESCO to bill promptly, control overdue
4/ Issued in 1957 under Electricity Ordinance No. 3 of 1957. -9- accounts more effectively (para. 4.03), and generally bring accounting records up to date.
2.04 The government-ownedTanzania Audit Corporation (TAC) has been auditing TANESCO's accounts since 1971. The audit covenant under Loan 1306-TA requires TANESCO to have its financial statements audited by independent auditors acceptable to the Bank and to submit its audited financial statements to the Bank within five months after the close of the fiscal year has been substantially met, except in FY80 and FY81 when the audited statementswere received by the Bank as much as one year late. It is anticipated that in the future with the new computer operative, TANESCO will be able to have its accounts ready for audit on a more timely basis. The performance of the auditors has been satisfactory. The convenant has been repeated in the proposed Credit Agreement.
Billing and Collection
2.05 Meters are read monthly and the readings are sent to Dar es Salaam from the branch offices for processing on the computer, which prepares the bills. These are then distributed to the consumers by the respective branch offices. Computer breakdowns have disrupted this process so that outstanding accounts are excessive. The steps proposed to remedy this situation are described in para. 4.03.
Personnel and Training
2.06 The Bank Group has a long-standing involvement in TANESCO's training program and manpower development. Dating from the appraisal of the first power project in 1967, TANESCO's progress in manpower development gives cause for satisfaction. TANESCO established a training school and training program in the mid-sixties and later with the help of the SIDA and the Bank, TANESCO has developed a long-term and sound training program with appropriate objectives for manpower development. TANESCO has an active manpower developmentand training unit and the Technical Institute (TTI) at Kidatu, where at technician level, electricians, general mechanics and diesel mechanics are being trained. The TTI workshops and laboratoriesare reasonably equipped and include a hydro power plant control board simulator. Expatriate trainers on 3-year contracts,equipment and teaching materials were provided by SIDA on a grant basis at the time of the establishment of the TTI (1974). At present, almost all trainers are Tanzanians, who are supported by TANESCO's operational staff for specific technical courses. Through comprehensive management training programs, which were components of previous Bank power projects, since 1975 TANESCO has reduced expatriate staff at headquartersand major power plants from 50 to 6. At present, all managerial positions are capably held by Tanzanians and this is a remarkable achievement. The expatriates are specialistsand advisors employed mainly in the planning, design and construction departmentsand for the overhaul of special equipment such as large diesel engines and hydroelectricunits. The ratio of 18 consumers per employee is reasonable due to the scattered power facilities covering the entire country. TANESCO has a total staff of about 6,300. - 10 -
2.07 TANESCO's demand for engineers and techniciansis growing as its power facilitiesexpand. Although the TTI and Bank/SIDA training programs have met the requirements for technicians and administrative personnel, there is a shortage of engineers and some management staff. The project therefore includes a training component, consisting of the training of four engineers to be employed in the operation of the proposed Mtera power plant. The project also includes provision for a continuationof the power management training program included under Loan 1306-T-TAto upgrade middle and top management staff, particularly for planning, construction and system control activities. Combined with the ongoing training programs, TANESCO will be able to train about 125 individualsbetween 1982 and 1986, to meet TANESCO'smanpower needs, which is adequate.
2.08 TANESCO is expected to prepare its next training program in 1983 and to implement it in the period 1984-87. About 75 people of various categorieswould be involved in the project's related training program.
Insurance
2.09 Insurance of TANESCO's major assets is considered adequate. It is effected through the National Insurance Corporation, the sole government-ownedinsurance company, which in turn re-insures through the European insurance market for plant and equipment, including thermal power sets.
III. DEVELOPMENTPROGRAM AND THE PROJECT
Demand and Market
3.01 TANESCO'selectricity sales growth has been rapid during the last two decades. From 1962 to 1980 annual sales increased from 159 GWh to 738 GWh, with an average annual growth of about 8%. This growth rate was reduced to about 5% per annum between 1973 and 1977 due mainly to the restraint on growth imposed by the high cost of oil, but recoveredwith an average annual rate of about 9% between 1977 and 1980.
3.02 A comprehensiveload forecast study covering the period 1981-2000 was carried out in 1981 for the interconnectedsystem, for each TANESCO region and for the various zones of the country by Acres International Limited of Canada (Acres). It was based mainly on historical growth trends for domestic and small consumers and on projected individual growth for industrial and other major consumers. The proposed expansion of the grid to the isolated systems in the NW and SW zones and expectationsof economic growth over the next two decades have been taken into consideration. The load forecast was revised and updated by TANESCO during the appraisal to incorporate the revised constructionprograms of planned future industrial consumers (Annex 4).
3.03 The revised load forecast estimates an average yearly growth from 1981 to 1990 at about 6.6% for the interconnected system, including Zanzibar but excluding NW, SW, and SE expansions. Including the expansion, - I1 - the growth is expected to be about 9%. This is lower than the historical growth rate due to expectations of slower economic growth. Since Tanzania's independence in 1968, TANESCO has been expanding its grid to service areas as far as economic constraints have permitted. It is envisaged that TANESCO will connect the SW zone (Iringa, Mufindi and Mbeya) to the grid in 1983 and the NW zone from 1984-1986 (Dodoma in 1984, Shinyanga in 1985 in 1985, Tabora, Mwanza and Musoma in 1986). Some connecting power lines between the grid and the SW and NW zones are under construction, and are being financed by the Canadian International Development Agency (CIDA) and the Italian Government, including for the connection of the proposed Mtera power station to the grid via Iringa and Dodoma.
3.04 Electricity sales and average yearly growth rates by TANESCO consumer groups summarizedbelow:
Sales Sales Average Annual ----GWh---- in Total (%) Growth Rate (%) Consumer Groups 1975 1980 (average 1975 - 1980 1975-1980)
Domestic 86.1 155.9 20.7 12.6 Commercial 56.5 87.5 10.5 9.1 Industrial 339.6 482.4 68.2 7.3 Public lighting 4.9 6.2 0.6 4.7
Total 487.1 732.0 100.0 8.5
Expansion of the interconnected system will enable reduction in the operation of the diesel stations in the isolated systems, including the second largest system (Mwanza) and thereforewill provide savings from fuel imports (about 50,000 toe in 1988).
3.05 The industry is by far the largest consumer group, and it is expected that it will remain so for the foreseeable future. The national load forecast for 1982-1990 (Annex 4) shows total electricity consumption increasingat a growth rate of 8.9% per annum.
DevelopmentProgram
3.06 The proposed project is part of TANESCO's development program (1983-1988),which will meet the growth in demand in the expanded grid. This program also includes some small diesel stations to meet demand in isolated areas and expansion of transmission/distributionsystem. By 1988 TANESCO's total firm capacity (including the proposed project) will increase to about 335 MW, which will be sufficient to meet the expected system maximum demand of about 300 MW in 1990 with adequate system reserves. This is the least-cost development program for constructionof generating and transmissionadditions needed to supply future loads. The costs of the program are summarized below: - 12 -
Cost of TANESCO's Development Program a/ (1984 - 1988)
TSh US$ % ---millions----
1. Proposed project 2,862.1 234.7 48 2. 220-kV and 132-kV grid extensions (including thermal generation & system compensation equip.) 1,717.7 140.9 29 3. Rural electrification b/ 728.4 59.7 12 4. Other c/ 684.7 56.1 11
Total 5,992.9 491.4 100
a/ Including interest during construction. See Annex 12 for details. b/ Includes electrification of 20 townships and construction of mini- hydro stations. c/ Includes some capacitor banks, feasibility studies and system reinforcement, and a new technical school.
3.07 According to simulation studies performed by the consulting firm that carried out the feasibility study for the project, the Swedish Consulting Group (SWECO), a protracted dry period of at least 3 years, as occurred in 1975-1977, would result in the occurrence of power shortages during the peak demand period (around December) from 1985 onwards. The consultants give a probability of 1 in 10 for the occurrence of a 3-year dry period. To avoid drastic load shedding under such circumstances, TANESCO would need to anticipate such an occurrence by conserving stored water for hydro power generation and by introducing load management measures. TANESCO will explicitly conduct an investigation into the adequacy of such measures, the potential dislocation to users and the means of minimizing economic costs. The investigation will consider the justification for installing thermal generation capacity in 1985 or later as back-up capacity to the hydro-based power system.
3.08 SWECO have also carried out studies to evaluate the future performance of TANESCO's 220, 132-kV and lower voltage transmission systems and rehabilitation of the Ubungo diesel station, which had been derated due to problems with the quality of the cooling water, an inefficient cooling system and excessive vibrations. Three small hydropower plants and the power distribution network in the capital area require major overhauls and rehabilitation after many years of intensive utilization. Maintenance and operation of power facilities have been satisfactory; but there have been problems in supplying spare parts and consumables. Furthermore SWECO recommended that various power system compensation equipment should be installed, to obtain better voltage conditions and lower system losses. A system control center, to be constructed in Dar es Salaam, has also been recommended because the existing control center is very small (part of the Ubungo substation), old and is not equipped to control the proposed extended system. As recommended by the consultants, construction of a suitable control center is included in the project. - 13 -
3.09 The consultants'recommendations on transmissionand distribution expansion have been included in TANESCO's long-termgeneration/transmission distribution constructionprogram. A transmissionline (220-kV) from the Mtera switchyard to Iringa, not a part of the project, is required to convey project output to the interconnectedpower system. Government and TANESCO have agreed to complete the construction of Mtera-Iringa line by January 1, 1987 to provide adequate transmission capacity for the power generatedunder the project.
Project Objectives
3.10 The main project objective is to increase the electricity generating capacity to meet the growth in power demand through 1990. The project will develop indigenous renewable energy resources thus saving on foreign exchange expendituresby substitutingless expensive hydropower energy and imported oil. Further benefits would be increased job opportunities and additional emploment possibilities during the constructionperiod. The project will also help lay the basis for improved power sector institutions and for TANESCO's tariff policy, power system control and load dispatching practices. The proposed project will supply power to the isolated areas through the expanded interconnectedsystem and will replace power production from diesel sets and thus provide substantial fuel cost savings (NW, SW and SE zones, Annex 1). Additionalobjectives of the project are to maintain and further improve TANESCO's operations through continuing their training program and assisting TANESCO in planning system development through a study of long term power development.
Project Description
3.11 The project is an integral part of the Great Ruaha River generation complex comprising both Kidatu and Mtera, which would be operated and regulated as a cascade system. The description of the proposed project is as follows:
(a) constructionof a water intake at the existing Mtera reservoir on the Great Ruaha River; a headrace tunnel and a vertical penstock system leading to an underground powerhouse with two 40-MW hydroelectric units; from thence a tailrace tunnel (about 10.5 km long) to the Great Ruaha River; constructionof a switchyard and administration buildings, a storehouse, a workshop and TANESCO staff houses at Mtera;
(b) constructionof a system control center at Dar es Salaam;
(c) rehabilitationof the existing Ubungo diesel station and other power system facilities (para. 3.08);
(d) training of TANESCO's engineers and managerial staff to improve TANESCO's operations and its system control and load dispatching practices; and - 14 -
(e) consultancy services for construction supervision and for carrying out studies of: (i) structure of power tariffs; (ii) long range power development; (iii) organization of the power sector; (iv) management system of TANESCO; and (v) rehabilitation of existing power generationand distributionfacilities.
3.12 The proposed Mtera hydroelectric power plant will be located undergroundnear to the existing Mtera dam which was completed in late 1980 as part of the Kidatu Hydroelectric Project Stage II (LN 715-TA). The Mtera power plant will comprise an inlet channel and an intake with trash racks in the existing Mtera reservoir, a short headrace tunnel, two penstocks with intake gates, an underground powerhouse with control block and a tailrace tunnel of 10.5 km length with galleries. An administration building with relay room, transformer cells and a switchyard will be situated in the open above the power station. The proposed powerhousewill have two units (40 MW each, when using the available maximum gross head of about 105 meters).
3.13 The Mtera site already has some essential facilities for construction activities (such as access roads, air strip, contractors camps, etc.) which were built during the constructionof the Mtera dam and can be further utilized for the constructionof the power plant. TANESCO and its consultanthave the necessary knowledge and experience of the site and surrounding area regarding the availability and properties of local materials, such as rock, sand, etc., which would enable a quick start to the project.
3.14 Design of the Mtera project was completed in October 1981 and certain revisions to parts of this design were made during the appraisal in November/December1981 on the basis of the recommendationsof the advisory panel of TANESCO and the Bank consultant who had reviewed the design in November 1981. The bid documents have already been prepared by SWECO, and in order to meet the project timetable, bid documents for the main civil, mechanical and electrical works to be included in the project were issued in October 1982 and bids were opened in March 1983. Construction is expected to begin in late 1983 and to be completed in mid 1988. It is also expected that the construction of the control center, which would be financed by the Federal Republic of Germany (KfW), would start in April 1984 and be completedby August 1985. TANESCO would prepare an engineering report (includingconsultants' inputs) for the constructionof the system control center by June 30, 1983. A full description of the Mtera power plant and the detailed constructionschedule are given in Annexes 5 and 7.
Cost Estimates
3.15 The estimated project cost, without interest during construction, is TSh 2,403.8 million (US$197.1million) of which about 74%, amounting to TSh 1,784.8 million (US$146.4 million), is in foreign exchange. Total financing requirement,including interest during construction,is estimated to be TSh 2,862.1 million (US$234.7million). The local costs include TSh 309.8 million (US$25.4 million), about 19% of the total base cost, for duties and taxes. The summarized cost estimates (Annex 6) follow: - 15 -
Summaryof ProjectCost Estimate (TSh 1.0 = US$0.082) % of ProjectComponents Local Foreign Total Local Foreign Total Total TSh million --US$ million---
1. Civilworks 201.0 584.4 785.4 16.5 47.9 64.4 27 2. Mechanical& ElectricalWorks 102.4 294.8 397.2 8.4 24.2 32.6 14 3. SystemControl Center 6.5 35.6 42.1 0.5 2.9 3.4 1 4. Rehabilitationof Ubungo Dieselstation and other facilities 14.5 184.4 198.9 1.2 15.1 16.3 7 5. Studies 6.6 17.9 24.5 0.5 1.5 2.0 1 6. Training - 9.0 9.0 - 0.7 0.7 - 7. Engineering & Consultancy Services 68.1 117.7 185.8 5.6 9.7 15.3 7 BaseCost 399.1 1243.8 1642.9 32.7 102.0 134.7 57
Contingencies
8. PhysicalContingency 23.0 179.5 202.5 1.9 14.7 16.6 7 9. Price Contingency 196.8 361.6 558.4 16.1 29.7 45.8 20 Subtotal 219.8 541.1 760.9 18.0 44.4 62.4 27
TOTALPROJECT COST 618.9 1,784.8 2,403.8 50.7 146.4 197.1 84
1O.Interest during Construction 458.3 - 458.3 37.6 - 37.6 16
TOTALFINANCING REQUIREMENT 1,077.2 1,784.9 2,862.1 88.3 146.4 234.7 100
3.16 The cost estimates are based on contractors' offers for recent similar civil, mechanical and electrical works mainly in Europe and also in other parts of the world. The base costs are expressed in mid 1983 prices. During the appraisal mission, the project costs were revised to take into account the major revisions to the design of the project and also recommendationsmade by TANESCO's cost consultant (A.A. Mathews of USA) who has prepared a report on project costs in which, among other things, local conditions were also considered. Physical contingencies for different project components, ranging from 10% to 18% on the base cost, have been added. The price contingenciesare based on the constant exchange rate and price escalation shown in the following table:
1986and 1983 1984 1985 thereafter ForeignCosts % 8.0 7.5 7.0 6.0 Local Costs % 14.0 13.0 12.0 12.0
3.17 The project cost has been compared with the prices of the opened bids for the civil works and adjusted accordingly. - 16 -
Project Financing
3.18 Project financing arrangements are well advanced. At the Government'sinvitation, representatives of the Federal Republic of Germany (KfW), Kuwait Fund for Arab Economic Development,NORAD, SIDA, IDA and the French and Italian Governments held two meetings (in 1982 and 1983) to review the project preparationsand discuss its financing. A Memorandum of Understanding among the above parties has been prepared for the consideration and approval of all involved parties. Co-financiers have agreed to make their financing available to finance the foreign exchange cost of the project and to cooperate fully with each other on all matters relating to the execution of the project and on other matters of common interest. The amounts of financing for the project indicated by individual co-financiersare as follows: In US$ million (equivalent)
France 5.0 Germany (Kfw) 20.0 Italy 19.0 Kuwait Fund 20.0 Norway (NORAD) 30.0 Sweden (SIDA) 30.0 IDA 35.0
Total 159.0
The above amounts reflect early 1983 exchange rates and are subject to possible currency exchange fluctuations. The final amounts would be adjusted to correspond to the actual project financing requirements. The Government and TANESCO will finance the balance of the project's local costs. The projects financing plan would be as follows:
Local Foreign Total ------US$ million------
A. Project Costs
(i) IDA 3.0 32.0 35.0 (ii) Co-financiers - 114.4 114.4 (iii) TANESCO 22.3 - 22.3 (iv) Government of Tanzania 25.4 - 25.4a/
Total 50.7 146.4 197.1
B. Interest During Construction
TANESCO 37.6 - 37.6
Grand Total 88.3 146.4 234.7
a/ Duties and taxes - 17 -
3.19 The proposed IDA credits of US$35 million would be made to the Government on the standard terms. Under a separate subsidiary loan agreement, the Governmentwould onlend the IDA credit to TANESCO for a term of 20 years, with 5 years grace period and an interest rate of 11% per annum. Cost overruns and foreign exchange risks would be borne by TANESCO. Conditions of credit effectiveness shall be: (M) execution of the subsidiary loan agreement, (ii) notification by Federal Republic of Germany (KfW) and SIDA that all conditions precedent to initial disbursements of their grants have been fulfilled, (iii) signing of the Norwegian grant, and (iv) evidence satisfactory to IDA showing that the French and Italian grants have been made available for the project.
EngineeringConsultants' Services and Project Implementation(Annex 7)
3.20 TANESCO would be responsiblefor project implementation,assisted by engineering consultants (SWECO) who were responsible for preparing the feasibility study and bid documents (para. 3.07). TANESCO has signed a separate contract with these consultants for the constructionsupervision. TANESCO employes a part-time advisory panel, which consists of an engineering geologist and three civil engineers specializing in dam construction and underground excavation. The average manmonth cost (including about 1,600 manmonths of salary, international travel and subsistence)is estimated at about US$11,000. The above arrangements for consultants' services are acceptable. During negotiations TANESCO has agreed to employ engineering consultants and two full-time experts for the constructionsupervision of the project, whose qualifications,experience, and terms and conditions of employment shall be satisfactory to IDA. TANESCO has also agreed to employ the part-time advisory panel to assist in the supervision of construction and advise in the event of unforeseen problems arising during project construction.
3.21 TANESCO staff have considerableexperience in the constructionof transmission and distribution facilities and hydroelectric power plants. TANESCO has already a well-established construction supervision department. Rehabilitation of TANESCO's generating and distribution facilitieswould require proper attention. ThereforeTANESCO has agreed to employ consultants with qualifications,experience and terms of reference satisfactory to IDA to prepare the rehabilitation study of TANESCO's existing power facilities by June 30, 1984.
Procurement
3.22 Works: Procurement for the main constructionworks, including the headrace and tailrace tunnels, the underground power house and the administrationbuilding, would be through internationalcompetitive bidding procedures acceptable to the joint financiers (Federal Republic of Germany (Kfw), Kuwait Fund, NORAD and SIDA) which are in accordance with Bank guideline. The remaining and minor civil construction works would be financed by Italy and TANESCO. Contracts for civil works and' goods, estimated to cost less than US$100,000 and not likely to interest foreign bidders, would be awarded on the basis of the local competitive bidding procedures which were found to be satisfactoryto IDA, and in which foreign bidders also have the opportunity to participate. - 18 -
3.23 Goods: Equipment, vehicles and furniture, would be grouped in appropriate contract packages and procured in accordance with the guidelines of the particular financing agency who would finance the component.
3.24 Contract Review: All contract packages for civil works estimated to cost over US$2.0 million equivalent and all contracts for goods estimated to cost US$250,000 or more to be financed by IDA would be subject to IDA's prior review of procurement documentation. Furthermore, all contracts related to the consultant'sservices, studies and training would be subject to IDA's prior review.
Disbursement
3.25 IDA funds would be disbursed against: (a) 37% of foreign expendituresand 20% of local expendituresfor civil works; and (b) total foreign costs of studies, training expert's services, and equipment and materials for rehabilitationof power system facilities. No withdrawals shall be made after March 31, 1984 in respect of payments for the main civil works unless IDA has been notified by the Kuwait Fund and NORAD that all conditions regarding their disbursements have been fulfilled (para. 3.19). Furthermore,no withdrawals shall be made in respect of payments for the rehabilitation of the power system facilities until IDA has received the rehabilitationstudy (para. 3.21)
3.26 If any of the IDA funds remain undisbursed after project completion, they would be cancelled. The proposed closing date would be June 30, 1989 to allow for payment of retention money. A disbursement schedule (Annex 8) is based on the project implementation schedule and follows in general the sector and IDA disbursement profile for East and West Africa.
Project Monitoring and Evaluation
3.27 During negotiations the reports and records necessary to monitor progress of the project and its evaluation on completion have been agreed. Proposed guidelines for a project monitoring system are given in Annex 9.
EnvironmentalAspects
3.28 The existing Mtera dam was constructedon the Great Ruaha River (completed 1981, financed under Loan 1306-T-TA) as part of the Kidatu Second Stage Hydroelectric Project. A general ecological review of the Mtera site and the reservoir had been completed in 1970, financed by SIDA. A series of detailed studies of all environmental aspects was completed between 1972 and 1978, including the expected environmental changes below the Mtera reservoirduring the constructionof the Kidatu dam (Loan 715-TA, completed 1971). These studies did not indicate negative effects sufficient to jeopardize the feasibility of the construction of the dam. The studies' recommendationswere discussed by the Government, the Bank, SIDA, and KfW and implemented as agreed between 1978 and 1981. They included the successfulrelocation of about 2,000 persons to the new ujamaa - 19 -
village established by the Government and TANESCO, the establishment of health programs and a nature reserve, and a government program for tapping the potential minimum yield of 3,000 tons per year of fish from the Mtera reservoir. Implementation of the recommendations has been reviewed in the completion report on Loan 1306-T-TA. No adverse effects of the damming have been observed so far.
3.29 Construction of the proposed project will have no significant impact on the environment. There are no permanent settlements on the stretch of the river between the dam and the tailrace tunnel. Although the discharged water in the river between the dam and the tunnel outlet will be considerably reduced during the dry season of the year, the minimum flow of 1.0 m3 /sec required by the Government's "Grant of Water Right Certificate No. 4187", will be fulfilled at all times.
IV. FINANCIAL ASPECTS
TANESCO's Past Financial Performance
4.01 Over the five years 1976-81, TANESCO's sales revenues increased by an annual average of about 21% as a result of average annual increases of 10% in GWh sales and a 42% tariff increase in December 1979, whereas operating expenditure increased at an annual rate of only about 19%, despite fuel cost increases of nearly 23% per annum. However, due to a slow down in economic activity during 1981, sales increased only 7% for the year. A summary of TANESCO's income statements (Annex 10) for 1976-81 follows:
1976 1977 1978 1979 1980 1981
GWh Sold 490 516 588 653 738 790 AverageTariff (T) cts/kWh 40.3 48.2 46.6 46.2 65.0 64.5
------TSh Million------
Revenuefrom Sales 197.7 248.9 274.0 301.9 480.0 509.6 Less: Cost of Operations 142.0 184.3 198.1 220.1 267.0 363.6 Net OperatingRevenue 55.7 64.6 75.9 81.8 213.0 146.0 Less: Interestcharged to Operations 36.3 37.3 37.6 45.6 48.6 43.5 Non-OperatingGains (Losses)a/ (19.1) (4.1) (1.0) 11.0 13.8 4.2
Net Surplus 0.3 23.2 37.3 47.2 178.2 106.7
Rate of Return (Revalued Asset Base) 3.4 3.9 2.3 1.9 6.8 2.1
Operating ratios through 1979 were moderate at around 73% until 1980, when the ratio improveddramatically to 55% as a result of the tariff increaseeffected in in December1979.
a/ Includescompensating exchange gains and losses - 20 -
TANESCO's 1980 Financial Position
4.02 Annex 11 shows TANESCO's actual balance sheets for 1978 through 1981. TANESCO's fixed assets in operation increased by only 6% from 1978 through 1980 but by 63% in 1981, when Kidatu II came into operation. Depreciation is charged on a realistic basis and for 1981 averaged some 3.4% of average gross fixed assets in operation. The 1981 debt:equity ratio of 53:47 was conservative, with 78% of debt relating to loans for Kidatu I and Kidatu II. Bank Group lending (TSh 615 million) comprised 46% of TANESCO's debt, followed by Federal Republic of Germany (KfW) 20% and SIDA 17%. Borrowing terms were generally concessional over about 25 years (including 5 years grace) at interest rates ranging from 3-1/4 to 9%. In 1980 and 1981, however, TSh 98 million (about 7% of TANESCO's debt) was incurred through suppliers credits at 5% to 8.5% with repayment over 6 to 10 years without a grace period. A schedule of debt as of December 31, 1981 follows:
Grace and Currency Repayment Interest of Origin/ Outstanding Period Rate Amount of at 12-31-81 (years) (%) Loan (TSh million)
CommonwealthDev. Corp 5-17 7.25 £ 3.0 11.3 IBRD Loan 518-TA 3-18 6.0 US$5.2 19.7 IBRD Loan 715-TA 5-21 7.25 US$35.0 298.1 Kingdom of Sweden 5-21 7.25 SK 83.0 111.5 Government of Canada 10-15 3.25 C$ 2.0 12.2 IBRD Loan 1306-TA 7-19 8.5 US$30.0 297.2 Kingdom of Sweden 5-20 6.3 SK 80.0 120.0 Federal Republic of Germany (Kfw) Loan 76-65-300 5-20 8.5 DM 60.0 218.2 Federal Republic of Germany (Kfw) Loan 75-65-120 10-15 6.0 DM 13.1 48.6 GovernmentLoan 0-21 6.25 TSh 1.0 0.2 Tanzania Investement Bank No. 47 2-13 9.0 TSh 7.5 4.2 Hawker Siddley Power-Eng. Ltd. 0-6 7.25 £ 0.9 11.3 Mirrless BlackstoneLtd. 0-6 7.25 £ 3.0 38.6 ADB Loan 0-12 7.5 UA 8.0 42.0 CommonwealthDev. Corp. 0-12 8.5 £ 3.4 15.7 National Ind. of Norway 0-8 2.5 NOK16.3 18.5 O.Y. Wartsila - Finland 0-7 8.5 US$ 2.2 16.1 Energgoinvest- Yugoslavia 0-10 5.0 DM 12.4 32.4 Banque Nationale De Paris 0-5 1.75 US$ 1.4 9.7 Banque Nationale De Paris 0-6 8.0 FF 30.7 21.4 1,346.9 Total Debt OutstandingDecember 31, 1981 - 21 -
Debt service for 1980 was covered 2.7 times and 1981 was covered about 3.1 times by net cash generation. TANESCO has complied with the debt service covenant of Loan 1306-T-TA which will be maintained by the proposed credit. This covenant states that TANESCO shall not incur any debt without IDA approval other than that incurred for the project unless internal generation is at least 1.5 times the maximum debt service requirements.
4.03 On December 31, 1981 TANESCO had a bank overdraft of TSh 25 million, mainly attributable to ineffective collection of customer accounts; accounts receivables totaled TSh 298 million (an average of 213 days of sales). To cover these overdraft situations, TANESCO has maintained lines of credit for very short terms from the National Bank of Commerce. Although TANESCO reduced receivablesto a level of 90 days sales by December 10, 1982, the major problem is that about 60% of accounts receivables are owed by government and parastatal organizationswhich have not been subjected to regular "disconnectionfor non-payment" practiLes. Computer breakdowns have limited TANESCO's ability to apply the disconnection practice to the other 40% normally subject to these practices. During negotiationsagreement was obtained from the Government and TANESCO that by December 31, 1983 TANESCO will maintain its accounts receivable at a level which will not exceed 60 days of sales and that TANESCO will submit to the Association a semi-annualsummary of outstanding accounts subdivided between Government (includingparastatal) and other and aged in three categories- under 30 days, 30 to 60 days, and over 60 days.
4.04 A further contributingcause of TANESCO's 1981 liquidity shortage is the high inventory level, equivalent to 9% of its gross fixed assets in operation. TANESCO is aware that its inventory includes a relatively high proportion of obsolete stock and intends not only to reduce such stocks, but to reduce its overall inventory level to about 4% of its gross fixed assets by 1986. With the increased hydro generation, the reduction of stocks of fuel oil should help TANESCO towards its objective.
Tariff Levels and Rate of Return
4.05 Under Section 4.04 of the Project Agreement of the Special Action Credit 55-TA, TANESCO agreed to revalue assets every two years and, under Section 4.05, to maintain tariffs at a level sufficient to achieve an annual rate of return of not less than 7% on average net fixed assets in operation so revalued. TANESCO's assets were to be revalued for this purpose using the average of the Dar es Salaam (a) Retail Price Index for Wage Earners earning between TSh 2,000 and TSh 4,000 per annum; and (b) the Cost of Living Index for Middle Grade Civil Servants earning between TSh 8,000 and TSh 20,000 per annum, with both indices adjusted to exclude food items (letter dated August 12, 1976 from TANESCO to the Bank, Loan 1306-T-TA). The application of this formula has produced revaluationsof 55% in 1976, 26% in 1978 and 33% in 1980. TANESCO believed that these revaluations are excessive and unrealistic and they have experienced difficulty justifying them to Government when submitting tariff increase proposals. TANESCO's tariffs were increased by about 50% in 1976 and again by 42% in December 1979 to an average of 65 T cents/kWh (6.96 US cents/kWh at the official rate of exchange). This was not sufficient to meet the loan covenant, except in 1980 (6.8%), and it is expected that with the inclusion of Kidatu II in the asset base, only about 2% will be achieved - 22 - for 1981. Effective January 1, 1983 TANESCO has increased its average tariff level by 50% from 65 T cents/kWh to 97.5 T cents/kWh.
4.06 Since Loan 1306-T-TAwas made, both TANESCO and IDA have become aware of the shortcomingsof this revaluation formula for the purpose of increasing tariffs. Therefore, for use until an index acceptable to the Government,TANESCO and IDA is available (para. 4.05), during negotiations the Government's and TANESCO's agreement was obtained to the following measures: (a) increase of TANESCO's average tariff level by an additional 20% to 117 T¢/kWh effective January 1, 1984; and (b) thereafter, to maintain average tariff levels so that TANESCO's internal sources contribute to capital expenditure a level not less than 25% of its capital expenditure for the years 1985 and 1986 and 40% in each year thereafter. For this purpose, capital expenditureswill be computed on a 3-year moving average (the preceding year, current year and following year). Government and TANESCO would determine a realistic and acceptable asset revaluation formula by December 31, 1984 wh-ch could be utilized in a rate of return measure of the adequacy of tariff levels as a replacement for the above cash generation formula with a rate of return requirement which would produce similar financial results. TANESCO would, with the agreement of IDA, have the option of substituting the rate of return method for the above cash generation procedure.
4.07 Additional increases of TSh 4¢t in 1987 and 1988 have been assumed, raising the average tariffs to T¢ 125/KWh. These increases have been determined as necessary to meet the requirements of the agreed cash generation goals (para. 4.06, b). However these increases will result in rates of return after 1984, when the rate of return is expected to be 7.7%, below the 7% rate of return required under Loan 1306-T-TAas follows: 1985 - 5.7%, 1986 - 5.6%, 1987 - 4.4% and 1988 - 3.7% (Annex 10). These rates of return reflect current replacement cost of TANESCO's fixed assets based on the following assumed cost escalation: 1983 - 10%, 1984 - 9%, 1985 and 1986 - 8.5% and thereafter 9%. As the revenues produced by the proposed tariffs are adequate to meet a significant portion of the construction costs while maintaining a relatively strong cash position, it would appear that Tanzania's concern about the revaluation formula might be valid (para. 4.05). Additionally under Section 21 of TANESCO's license dated March 1, 1957, TANESCO cannot charge more than 120 T¢/KWh for light or 60 T¢/KWh for power without obtaining the specific permission of the "Governor (now presumably the President). Therefore, this section would have to be eventually revised or deleted. Government gave assurance that the required license revisions would be obtained without difficulty.
TANESCO's Financing Plan
4.08 Annex 12 shows TANESCO's estimated cash flow for 1981 through 1990. During the project period of 1984-1988 TANESCO's construction program envisages expenditure of TSh 5,988 million (US$491 -million), including interest during constructionof TSh 890 million (US$73 million), of which about 48%, TSh 458 million, is in respect of the proposed project. In addition to the proposed project borrowing of about TSh 1,818 million (para. 3.18), the financing plan for this period includes major foreign borrowing of TSh 1,128 million (US$93 million), to finance some 42% of the ongoing and other future construction,including the completion of - 23 - major grid extensions. The financial forecasts do not include provision for expenditure on new thermal plant installed as back-up generation capacity (para. 3.07). From 1984 through 1988, including the proposed project, TANESCO intends to borrow TSh 2,946 million for its construction program (US$242 million), of which the IDA proposed credit of TSh 423 million (US$35 million) is 14%. The proposed credit is about 23% of the borrowing for the project and, although there is no requirement for other lenders to do so, it has been assumed in this report that most would, like IDA, require their grants and loans to be onlent to TANESCO at 11% over 20 years including 5 years grace with TANESCO bearing the foreign exchange risk. The present commercial lending rate in Tanzania is government-controlledat about 11% and TANESCO would be eligible for a lower rate of 10%. Therefore, 11% appears to be a realistic rate of interest. TANESCO's financing plan for 1984 through 1988 includes increased government equity of TSh 1,073 million (US$88 million), and the Government agreed to provide such sums as become necessary to enable TANESCO to complete the Iringa-Mteraline which is vital to the proposed project (para. 3.09). As this requirement is estimated to be only 5% of the funds required during the period, its provision should not be overly burdensome to Government.
4.09 TANESCO's financing plan for 1984 through 1988 is summarized as follows: - 24 -
Financing Plan 1984-1988
TSh US$ % ---millions----
Requirements for Funds
Construction Program Ongoing Works 1,060.6 87.0 15 Future Projects a/ 1,638.9 134.4 24 Proposed Project 2,399.3 196.7 35 5,098.8 418.1 74 Interest during Construction 889.6 72.9 13 Total Construction Program 5,988.4 491.0 87 Working Capital Increases 928.0 76.1 13
Total Requirements 6,916.4 567.1 100
Sources of Funds
Internal Generation 3,836.4 314.6 55 Less: Debt Service 1,059.0 86.9 15 Net Internal Generation 2,777.4 227.7 40
Borrowings Proposed Project Proposed IDA Credit b/ 423.1 34.7 6 Other Financiers c/ 1,394.7 114.4 20 1,817.8 149.1 26
Ongoing and Future Projects 1,128.4 92.5 16 Total Borrowings 2,946.2 241.6 43
Contributions Government 1,072.6 87.9 15 Consumer 120.2 9.9 2 Total Contributions 1,192.8 97.8 17
Total Sources 6,916.4 567.1 100
a/ For details of future projects see Annex 14. b/ An amount of TSh 3.7 million (US$0.3 million) will be available to finance the organization study which will be performed by Government and therefore is not shown in the schedule. c/ Funds from Kuwait, Germany (KfW), NORAD, SIDA and the French and Italian Governments. - 25 -
Future Operations and Financial Performance
4.10 Projected income, balance sheet and cash flow statements for 1983/90, together with notes and assumptionsused in their development,are shown in Annexes 10 through 13. The projections indicate that TANESCO's financial performance and condition would be satisfactory throughout this period. During this period electricity sales are forecast to increase about 7% per year while revenues, reflecting demand increases and tariff increases in 1983, 1984, 1987, 1988 and 1990, will increase an average of about 19% per year. Expenses, including depreciationbased on the revalued asset basis, are expected to increase an average of about 15% per year. Key financial indicators during the project constructionperiod follow:
Year 1983 1984 1985 1986 1987 1988
Operatingratio (revaluedbasis) 72 64 70 66 73 75 Current ratio 2.3 3.4 3.6 4.6 5.1 5.6 Debt/equityratio 38/52 39/61 39/61 38/62 37/63 35/65 Debt/servicecoverage 2.5 3.1 3.0 4.0 3.7 4.2 Constructioncash generation % 28 34 25 42 45 54
4.11 The financial statements both actual and forecast reflect the liability and payment of income tax at a rate of 50% of net taxable income which excludes depreciation and includes a capital investment allowance. TANESCO's entitlement to the application of this capital investment allowance for the years 1975 through 1980 is currently being reviewed by Government. If this applicationis not allowed, TANESCO will be subject to significantlyincreased tax liabilities both in the past and in the future for which no provision has been made. During negotiations IDA and the Government discussed this subject and the consequencesif this tax relief were not provided to TANESCO from 1978 through the project construction period. - 26 -
V. ECONOMIC ANALYSIS
Need for the Project
5.01 In 1980 TANESCO commissionedAcres InternationalLtd. to carry out a power sector study. The consultants recommended that planning, engineering and financing should proceed immediately for the construction of a 60-MW thermal power station by 1986. This was to be either coal-fired at a (then) proposed new mine at Songwe-Kiwira or an oil-fired power station at Dar-es-Salaamusing residual oil from the local refinery. The consultants also recommended that the feasibility study for Mtera, which was being carried out by SWECO (para. 3.08), should be completed and the engineeringand preparationof contract documents should proceed subject to a review of the load growth of Tanzania. SWECO's feasibility report concluded that additional generation would be required by 1986 to meet their "standard" load forecast. Subsequently during appraisal, TANESCO's load forecasts were reviewed with SWECO and it was agreed that the TANESCO forecast,which was lower than the "low case" forecasts of either Acres or SWECO, should be adopted for planning purposes. Under the TANESCO forecast,additional generation capacity is required in 1988.
Least Cost Solution
5.02 The only existing technically feasible alternative to the Mtera project in 1988 is the construction of an oil-fired steam power plant at Dar-es-Salaam. If a gas-field is developed in time, a gas turbine plant would also be an option for the next unit of generation capacity. There are a number of options for subsequent development based on hydroelectric, natural gas and coal potential. A detailed account of the economic evaluation for determiningthe least-cost solution is given in Annex 14.
5.03 A number of potential sites for hydroelectric generation have been identified in Tanzania including sites at Stiegler'sGorge, Kingenenas and Shuguri Falls. Stiegler's Gorge has been the subject of a planning report carried out by A/S Hafslund (Norway), whereas the planning of projects at Kingenenas and Shuguri Falls is only in the conceptual stage. None of these sites nor any other of the potential hydroelectricsites are possible alternatives to the Mtera project in 1988 since none could be developed and constructedin time.
5.04 Proved gas reserves of about 800 BCF5/ have been confirmed at the Songo-Songo off-shore field (para. 1.01). However, the Tanzanian Government has stated its firm policy to use the Songo-Songogas reserves for the manufacture of fertilizers. Exploration activities are also in progress at other on-shore and off-shorelocationsincluding Kimbiji and Mnazi Bay off-shore fields, although reliable estimates of reserves at these locations are not yet available. The possibility of new gas discoveriesis a factor in the planning of long-term power development,and
5/ BCF = billions of cubic feet. - 27 - therefore natural gas is considered to be an option for power generation even though at present it is not possible to identify specifically the gas reserves that would be available.
5.05 An opportunity cost of gas for power generation equal to US$3.0/MCF delivered to plant boundary is used in the evaluation basic case. This delivered value represents in theory the highest economic value of gas in alternative uses to power generation. The value of US$3.0/MCF is derived from analysis by the mission of the terms of a proposed agreement for production of urea from Songo-Songo gas.
5.06 Progress in developing coal mines has not been sufficiently advanced for a coal-fired thermal station to be operational by 1988. The mission considers it realistic to assume that a coal-fired plant could be brought into operation by 1991 supplied from new local coal mines. 6/ However, the main load center for the power distribution system lies in the coast and adjacent inland areas, especially in the Dar-es-Salaam and Morogoro region, which are 800 to 900 km from the coal fields. The capital costs of a transmission system supplying power from coal-fired stations located near to the coal fields to the main load center would be high, probably equivalent to about US$1,000 per kW of installed capacity at the coal field. As a result, this option would be a high cost program for meeting the power demand in the main load center. However, it would be an attractive option for meeting demand in western Tanzania once the demand in this region increased to a level that could sustain the economic production of power from coal-fired units.
Power System Costs
5.07 The costs of the options for a long-term power development program are composed of capital (generation and associated transmission works), operating and maintenance and fuel costs. The capital costs of existing hydroelectric installations, including Mtera dam, and of committed investments in extending TANESCO's interconnected system are considered to be sunk costs and therefore to have zero economic cost. The capital costs for Mtera and Stiegler's Gorge hydro projects are based on information contained in the reports by Acres, SWECO and Hafslund, updated to mid-1983 price.terms.7/ Economic costs are expressed in terms of domestic currency by converting foreign cost components at a shadow exchange rate equivalent to TSh 20 = US$1.
5.08 A number of programs for long-term development have been evaluated for this report. The criteria used for evaluation is the present value of the total costs of a program discounted at a rate corresponding to
6/ Songwe-Kiwira and Mchuchuma coal fields located in Tukuyu area; estimated proved reserves 300 million tons; estimated inferred deposits 1.3 billion tons; initial development is likely to be open-cast mining in Mchuchuma.
7/ Estimated capital costs, including associated transmission costs, excluding duties, taxes and interest, in constant mid-1982 price terms, are as follows: Mtera - US$155 million; Stiegler's Gorge Phase I - US$760 million; Phase II - US$213 million. - 28 - the opportunity cost of capital in Tanzania. In the basic evaluation case, this rate is taken to be 10 percent. Energy production in an average hydrological year is credited to installed hydro capacity, and is taken from simulation studies carried out by the consultants (paragraph 5.07). Details of the capacity additions and energy balances used for some of the programs evaluated are given in Annex 14.
5.09 Since the availability of gas for power generation is presently unproven (paragraph 5.04), the evaluation of a least-cost solution from programs that are known to be feasible at this stage excludes programs that include gas as a source of power. The options for development therefore cover hydro (Mtera and Stiegler's Gorge schemes), coal and oil. The options for the next increment of generation capacity, required by 1988, is limited to Mtera or oil-fired steam plant in Dar-es-Salaam. The results of the evaluation of the programs in this category are given in Annex 14. The least-cost option for the next increment of generation plant is Mtera. Thereafter, a coal-fired steam generation plant located near to proven coal reserves in southwest Tanzania would be an economic proposition. The evaluation also shows that the Stieglert s Gorge hydroelectric site would be an economic option for development from the mid-1990s onwards. The equalizing discount rate between Mtera and an oil-fired plant as the next unit of capacity is 32 percent.
5.10 The results of the evaluation of development programs that include gas generation plant, which assumes that natural gas would be available for power generation, are also given in Annex 14. The evaluation shows that the Mtera hydroelectric scheme is a significantly lower cost option than gas turbine plants with gas costed at US$3.0 per thousand cubic feet. If gas did not have an economic alternative use to power generation, then a cost of US$3.0 per thousand cubic feet would not be justified. This would be the case if alternative gas-consuming projects could not be implemented for a certain increment of proved gas reserves. In such a case, the cost of gas used for power generation would be taken to be gas-field development and operating costs only. Based on presently uncommitted Songo-Songo field develpment costs, the economic costs of proceeding with either Mtera or a gas plant as the next increment in generation capacity are about equal. However, if sunk costs for the Songo-Songo field are also included, then natural gas would be a higher cost option than Mtera.
5.11 The sensitivity of the evaluation conclusions have been tested for increases in capital costs of the hydro schemes and to exchange rates of 12.18 and 30 Tanzanian shillings to the US dollar. If the capital costs of Mtera are 20 percent higher than envisaged, Mtera would still be more economic than an oil-fired plant or a natural gas plant with gas costed at US$3.0 per thousand cubic feet. The Mtera project also remains economically more attractive than an oil-fired plant within the range of exchange rates analyzed. Details of the sensitivity analysis are given in Annex 14. - 29 -
5.12 In summary, the proposed Mtera project is the least cost solution in the absence of availabilityof natural gas for power production. If gas reserves become available for power generation but have alternative uses, Mtera is still the least cost solution. If the gas reserves have no alternative uses, there is no significant difference in terms of economic costs between Mtera and a gas plant as the next increment of generation capacity. In addition, there are other factors that are relevant to the selection of the next power project, and the following factors favor the selection of Mtera. The Mtera project would be owned and operated by TANESCO, who have a proven track record in the operation of hydroelectric scheme. Furthermore,hydroelectric schemes are relatively simple to operate with low risk of mechanical breakdown. In contrast, for gas power plants a new institutionwould need to be involved in operating the gas field, there are substantial risks of mechanical breakdown and to date there is no Tanzanian organization that has experience in the operation of gas-fired power generation and gas-field delivery systems. As a result, there would be a substantial risk of delays and cost increases with the gas alternative.
Economic Rate of Return
5.13 The economic rate of return of the project is the discount rate at which the present value of the capital and operating costs of the project equals the present value of the incremental benefits from the project measured by value of production according to average tariff yield. Costs are economic values based on the assumptions used to derive the least-cost power program. Average tariff yield is used as a measure of the value of benefits from the project although it is recognized that this method undervalues consumers' willingness to pay and that therefore an element of consumer surplus is not included in the benefits. Therefore, the estimate of economic rate of return is conservative. Details of the economic costs and benefits used to derive the rate of return are given in Annex 15. Including the 50% tariff increase effective January 1, 1983 (para. 4.05), the economic rate of return from the project is 10.1 percent.
Tariffs
5.14 An indication of the correct average tariff level according to economic principles is given by the long-run marginal cost (LRMC) of electric power, which is derived from the identified least-cost power development program. The LRMC is taken to be equal to the average incremental cost of energy, which is calculated from the ratio of discounted present value of total costs of the program to discounted present value of the quantity of electrical energy produced under the program. The total costs are economic values for capital and operating costs used in the derivation of the least-cost solution. The discount rate used is the opportunity cost of capital which is taken to be 10%. The costs and quantity of production from existing power facilities are not included. The LRMC of power is estimated to be as follows in 1983 price terms and with system losses of 20 percent of sales: - 30 -
- if gas is not available for power TSh/kWh produced: 1.83 generation: TSh/kWh sold: 2.20 (from Mtera + Coal + Stiegler's (US cents 11.0/kWh sold) Gorge 1995 option)
- if gas is available for power TSh/kWh produced: 1.50 generation at US$3.0/MCF: 8/ TSh/kWh sold: 1.80 (from Mtera + Nat. Gas Option) (US cents 9.0/kWh sold)
- if gas is available for power TSh/kWh produced: 1.07 generationwith no alternative TSh/kWh sold: 1.28 economic use: (US cents 6.4/kWh sold) (from All Nat. Gas Option) 9/
The average yield from tariffs, including the 50 percent increase, is projected to be TSh 0.975/kWh sold in 1983 price terms. Therefore, the average tariff is equal to about 44 percent of LRMC if gas is not available for power generation, and to 54 percent or 76 percent of LRMC under the alternativegas prices.
5.15 A tariff study based on LRMC was included in the previous loan (Loan 1306-T-TA) and carried out and partly implemented by TANESCO satisfactorilyso far. However, the present tariff structure is still far from an LRMC base and a new tariff study is necessary to take the proposed long range power development study into consideration,including current development plans reflecting the prospects for availability of gas. Therefore, the project includes a provision for a tariff study, to be funded by IDA, to examine and make recommendations regarding the most appropriate structure for TANESCO's tariff. During negotiations, Government and TANESCO agreed to TANESCO's execution of a study with the assistance of consultants acceptable to IDA to be completed by July 31, 1985 to determine appropriate tariffs based on TANESCO's LRMC, and to the implementationof the agreed recommendationsby January 1, 1986.
Risks
5.16 Although the future load growth accepted in this report is lower than the past growth and takes the existing economic recession into considerationand also assumes that it will continue, there is a slight chance that the actual growth could be lower than the estimates due to possible further economic deterioration. In that case, projects following Mtera power project would be rescheduled. A further point of consideration is that of the extremely high tariff increases that are required in order to satisfy the cash generation provisions; however, substantial tariff increases have been achieved in the past, which suggests there is no undue risk in this respect. No major physical risks are anticipated in implementing the proposed project beyond those that are normally expected in the constructionof a project of this type and size.
8/ MCF = thousands of cubic feet.
9/ Based on uncommitted Songo-Songo gas-field costs, i.e. excluding sunk costs. - 31 -
5.17 The impact of variable hydrologicalconditions and particularly dry periods on the power supply reliabilityin Tanzania has been studied in detail by the consultants (Acres, Canada and SWECO, Sweden) (see para. 3.07). This involved a simulation of the behavior of the power system over a lengthy hydrological period assuming satisfaction of an assessed load demand. For computer model simulation purposes, operating rules have been elaborated for water management aimed at meeting the power demand by the most economic combinationof hydro and thermal generation. The results of the simulation calculationshave determined the power generation from each power source in order to satisfy the load demand over the whole period under given hydrologicalconditions. Separate simulation models have been used to determine the energy characteristicsof the project and to carry out related operational costing and economic analyses. Detailed calcula- tions have indicated that it would not be economicallyjustifiable to add thermal capacity to avoid a possible power shortage with a small risk of occurrence. The hydrologicalrisks adopted in the consultants'studies are considered to be appropriate in view of the project's hydrological and other features as well as characteristics of the Tanzanian power system generation mix.
VI. SUMMARY OF AGREEMENTS REACHED AND RECOMMENDATIONS
6.01 During negotiationsthe Government agreed:
(a) to employ consultants to prepare a power sector organization study by December 31, 1984 and after comments from IDA implement the agreed recommendationsby December 31, 1985 (para. 1.11); and
(b) to make available to TANESCO equity funds necessary to complete the Iringa-Mteraline (para. 4.08).
6.02 The Government and TANESCO agreed:
to increase TANESCO's tariff level 20% effective January 1, 1984 and maintain TANESCO's tariffs at a level sufficient to generate adequate cash to meet at least 25% of its average capital expendituresfor 1985 and 1986 and 40% thereafter (para. 4.06).
6.03 TANESCO agreed:
(a) to employ consultants to prepare a management study by June 30, 1985 and after IDA comments to implement the agreed recommendationsby January 1, 1986 (para. 2.02);
(b) continue to employ external auditors acceptable to the Bank and submit audited annual accounts within five months after the close of the financial year (para. 2.04);
(c) to complete constructionof Iringa-Mteraline by January 1, 1987 (para. 3.09);
(d) to employ consultantsand two full-time experts for construction supervisionof the project (para. 3.20); - 32 -
(e) to employ consultants to prepare the rehabilitation study of power facilities by June 30, 1984 (para. 3.21);
(f) not to incur long-term debt without IDA's approval (para. 4.02);
(g) to maintain customer accounts at a level which will not exceed 60 days of sales by December 31, 1983 and forward IDA semi-annual summaries of these accounts (para. 4.03);
(h) to determine a revaluation formula acceptable to IDA by December 31, 1984 with the option of reestablishing a rate of return measure (para. 4.06) and
(i) to execute a tariff study by July 31, 1985 and after comments from IDA implement the agreed recommendationsby January 1, 1986 (para. 5.15).
6.04 The following conditions of effectivenesswere agreed:
(a) execution of the subsidiary loan agreement (para. 3.19); and
(b) evidence has been received that funds from Federal Republic of Gemany (KfW), SIDA, NORAD, France and Italy are available (para. 3.19).
6.05 Conditions of disbursementof Credit proceeds were establishedas follows:
(a) no withdrawals shall be made after March 31, 1984 on main civil works unless IDA has been notified by Kuwait Fund and NORAD that conditions of disbursement of their loans have been fulfilled (para. 3.25); and
(b) no withdrawals shall be made for rehabilitation until IDA has received the rehabilitationstudy (para. 3.25).
6.06 With the above agreements, the project would be suitable for an IDA credit of US$35 million equivalent. The Credit would be made available to the Government for a term of 50 years, including a grace period of 10 years, to be relent to TANESCO though a subsidiary credit agreement acceptable to the Association (para. 3.19). ANNEX I - 33 Page 1 of 4
TANZANIA
FOURTH POWER PROJECT
TANESCO - Existing Power Facilities
Existing Power Network
1. The existing TANESCO power supply facilities are scattered all over the country as shown on the map (IBRD 16231). The power system can convenientlybe grouped into four, covering the grid and the NW, the SW, and the SE zones. The grid, an interconnectedpower system which operates at 220 kV, 132 kV and 66 kV, covers the coastal strip including Zanzibar, Dar es Salaam, Morogoro, Tanga, Moshi and Arusha regions. Importantpower plants and transmissionlines on the grid are shown on pages 3, 4 and 5 of this annex. Total energy consumptionand maximum demand of the grid in 1980 were 627 GWh and 118 MW. The other three zones include isolated load centers which are mainly the local Government'sadministrative central cities. For these cities, the installed and available capacities,maximum demand and consumptionsare shown on pages 3 and 4.
2. The operating voltages and the length of the main power transmissionlines and distributionsystems located in various zones are given on page 5.
3. TANESCO has an effective communicationsystem throughout the country. It has used land mobile radio-telephoneequipment satisfactorily for more than ten years. Maintenance crews working on transmissionlines and almost all importantpower plants and substationsare linked by radio-telephone. A powerline carrier (PLC) communicationnetwork has been used throughout the grid satisfactorily. The primary means of communicationbetween the regional administrativecenters and the headquartersin Dar es Salaam is the public telephonesystem as operated by the Tanzania Posts and TelecommunicationsCorporation.
4. TANESCO has an obsolete grid control center (load dispatching center) at Dar es Salaam,which is too small to cope with the all-switching operations, load dispatching,frequency control, reactive power supply and voltage control operations for the extended grid. A new control center would be built under the proposed project to handle and improve these operations. - 34 -ANNEXI Page 2 of 4
Installedand AvailableCapacity, MaximumDemand and Energy Sales of TANESCO
Regions(1980)
---Capacity(MW)--- Maximum Energy Zones, Regionsand PowerStations InstalledAvailable Demand(MW) Sales(GWh)
The Grid Zone (includesZanzibar)
Kidatuhydroelectric station a/ 200.00 200.00 Kikuletwahydroelectric station 1.20 1.20 NyumbaYa Munguhydroelectric station b/ 8.00 8.00 Hale hydroelectricstation c/ 21.00 17.00 PanganiFalls 17.50 17.50
TotalHydro d/ 247.70 243.70
Ubungodiesel station 46.60 15.00 Ubungogas turbine 15.00 - Arushadiesel station 3.70 2.70
TotalThermal 65.30 17.70
TotalGrid Zone 313.00 261.40 117.61 626.51
The NW Zone
Dodomaregion diesel 2.86 1.98 1.82 8.69 Mpwapwaregion diesel 0.42 0.34 0.23 0.83 Grigidaregion diesel 0.69 0.48 0.52 1.53 Taboraregion diesel 2.23 1.60 1.20 5.53 Kigomaregion diesel 0.77 0.58 0.73 3.26 Shinyangaregion diesel 1.67 1.30 1.06 4.23 Mwanzaregion diesel 27.00 15.00 8.56 41.89 Musomaregion diesel 7.50 6.00 4.06 15.93 Burbodaregion diesel 1.36 1.03 1.07 4.40
TotalNW Zone 44.50 28.30 19.25 86.29
a/ It has a reservoirat Mterawith a livestorage capacity of 3,200million m 3 and at Kidatu125 millionm 3. Averageproduction of the existingKidatu is about 1,290 GWh/yearwith a firm productionof (96%probability) about 850 GWh/year. b/ It has an 875 millionm 3 reservoircapacity. Thisis mainlyan irrigationproject. c/ Its reservoiris heavilysilted and almostfilled. Totalaverage production of hydro stationsother than Kidatuis about220 GWh/yearwith a firmproduction of (96% probability)about 190 GWh/year. d/ Averageand dry year productiongiven in Annex5, page 4. 35 ANNEX1 Page 3 of 4
Installed and Available Capacity, Maximum Demand and Energy Sales of TANESCO(continued)
Regions (1980)
Capacity (MW) Maximum Energy Zones, Regions and Power Stations Installed Available Demand (MW) Sales (GWh)
The SW Zone
Iringa region hydro 1.22 1.22 Iringa region diesel 0.75 0.70 1.78 7.98 Mbeya region hydro 0.34 0.27 1.56 5.66 Mbeya region diesel 2.47 2.08 Tukuyu region diesel 1.20 1.05 0.90 4.43 Njombe, Songea and Sumbawangaregions diesel 1.23 0.53 0.47 1.99
Total SW Zone 7.21 5.85 4.71 20.06
The SE Zone
Mtwara and Lindi regionsdiesel 4.87 3.19 1.18 1.60 Nachingwearegion diesel 0.95 0.40 0.34 1.06 Kilwa and Mafia Island region diesel 1.56 1.28 0.34 0.65
Total SE Zone 7.38 4.87 1.86 3.31
Total All Zones 372.09 299.42 143.43 736.17 - 36 - ANNEX 1 Page 4 of 4
Length of Principal Transmissionand DistributionLines of TANESCO
Transmission/DistributionLine 220 kV 132 kV 66 kV 33 and 11 kV ------(km)------
Kidatu - Dar es Salaam 307 Hale - Dar es Salaam 280 Hale - Moshi 275 Hale - Tanga 60 a/ Morogoro - Chalinze 83 Myumba ya Mungu - Arusha 131 Dar es Salaam - Zanzibar b/ 41 Dar es Salaam - Zanzibar ci 38 Grid distributionlines 2,703 NW zone distributionlines 551 SW zone distributionlines 163 SE zone distribution lines _ 165
Total 307 777 131 3,582
a/ On wood poles, others are steel towers. b/ Overhead transmissionline in the mainland. c/ Submarine cable in the Indian Ocean. - 37 - ANNEX 2
TANZANIA
FOURTH POWER PROJECT
Statistical Data on TANESCO's Power System
1976 1977 1978 1979 1980
InstalledGeneration Capacity (MW)
InterconnectedSystem Hydro 147 147 147 147 247 Diesel 40 51 51 51 51 Gas turbine 15 15 15 15 15 Total 202 213 213 213 313
Isolated Systems Hydro 1 1 1 1 1 Diesel 26 31 51 51 59 Total 27 52 52 52 60 Total Generating Capacity 229 245 265 265 373
Power Production (GWh) InterconnectedSystem 480 540 593 653 686 Isolated Systems 79 82 89 104 110 Purchasefrom captive plants 3 3 3 3 3 Total 562 622 685 757 797
Sales of Energy (GWh) InterconnectedSystem 418 442 491 547 627 Isolated Systems 72 74 97 107 101 Total 490 516 588 654 738 StationUse 11 12 16 18 12 Total Consumption 501 528 604 672 750
Total Losses in % 12.2 17.8 17.7 12.6 7.1
Peak Demand (MW) Interconnectedsystem 84.9 91.4 99.2 110.9 117.6 Isolated systems (arithmeticsum) 17.7 17.2 19.0 25.5 26.1 Total (arithmeticsum) 102.6 108.6 118.2 136.4 143.7
Number of Consumers 1976 1977 1978 1979 1980
Domestic 57,806 61,695 80,707 88,729 94,819 Comnercial 16,776 16,554 21,089 23,749 24,421 Industrial 1,195 1,120 2,301 3,099 3,348 Public Lighting 370 299 382 393 951 Others 1/ - 10,111 638 604 176 Total 76,147 89,779 105,117 116,574 123,715
1/ Consumers reclassifiedin 1978 TANZANIA ELECTRIC SUPPLY COMPANY LIMITED COMPANY ORGANIZATIONAL STRUCTURE
| Ministry of Wafer | |-ad Erergy
Board of Directors
MetaragingDirector
Company Secretary Chief Internal Auditor
I Ii I Auditor
DCortrrt of Dlannitntieoorate of D finn Directorate of Manpower Directorate of
D irector Director Director l Development and Adminidtration | Dpironto Diretor Direto
co
agergm;;... ;;; ; f MMar g f Public l lgerManager | Mangser Manpower| g Matnaerg Construction | | Planning LMF < I PalReions Personnalend PveDle opmaent Principal n Man r Adminiratin and Tranigpe;ti..
Cli-f~~~~~~~~~~~~~~~oli eir esne Chiefz;Cii Chief Pronnect Trinn Chief letrialtiin Engineer Enginerer ReaIn /Amnerto fie Engineer ChiefElectrical ChiefPlanningL- ChiefTrameialio Engineer ad DitibE tigieer Engineer
ChiefSuvyr Chief DacignogmnL | Cif | ea Chief Commercil
EgneCchoe fD Supplies Pci Chief SyLtem L t X | Analyst k | ~~~~~~~~~~~~~~~~~~~~~~~~~~Engineerr
EngneeAnan M er Poam ngl Accou--ants Supplies Analyst Offioer nine Maae Coto Engnee
Accountants SuppliesReioa
Comp utea
World Bank-23545 39 - ANNEX 4 Page 1 of 3
TANZANIA
FOURTH POWER PROJECT
Future Sales and Maximum Demand
1. TANESCO, in accordance with sound engineeringpractice, regularly revises the load forecast for the preparationof the next month's budget and the yearly forecast for the next year's budget. In 1981 ACRES InternationalLimited of Canada also prepared a comprehensiveload forecast - high, low and standard - on the basis of IDA and TANESCO terms of reference.
2. ACRES' load forecasts through 2015 were developed for each zone, and for the entire country to enable isolated and interconnectedsystems to be developed to meet forecast demand. The load forecast,mainly based on historical growth trends for domestic and small customers and projected individual growth for the industrial and other major consumers, is very sensitive to the variation of future industrial consumptionbecause of its 68% of the total sales. During the appraisal the mission reviewed the forecast of individual industrial customers (existingand future) and revised the ACRES' forecast as summarizedbelow:
Load Forecast for Extended Grid
---1985------1990------1995--- MW GWh MW GWh MW GWh
ACRES' High Forecast 262 1,530 406 2,379 727 4,260 ACRES' Standard Forecast 237 1,397 354 2,084 576 3,395 ACRES' Low Forecast 214 1,268 307 1,816 454 2,688 Revised Forecast 225 1,164 299 1,699 400 2,272
3. The revised load forecast was based on interviews with the implementingagencies of the existing and future industrial projects and the ministries involved. Progress of construction,financing situationand the availabilityof raw materials, etc. of each project (about 90 existing and future industrialsetup and projects) were factors taken into account. The expansion of the grid to the new isolated systems, i.e. NW and SW zones, and the likelihoodof the current economic recession continuing for about two more decades (throughoutthe study period, 1981-2000)and lower capacity operationof the existing industrial factorieshave also been taken into consideration. The revised load forecast is shown on the following pages: - 40 - ANNEX 4 Page 2 of 3
TANZANIA
FOURTH POWER PROJECT
Revised Energy Forecast (GWh)
Consumption Individual attributable Existing Consumptionof to the Grid Extended Year Zanzibar Grid NW and SW NW and SW Grid
1981 22 703 127 - 725 1982 26 748 146 - 775 1983 31 814 186 14 a/ 860 1984 33 886 136 95 bI 1,014 1985 35 954 284 174 c/ 1,164 1986 37 1,017 317 317 d/ 1,372 1987 39 1,078 344 344 1,462 1988 41 1,132 362 362 1,536 1989 43 1,188 379 379 1,612 1990 45 1,248 404 404 1,698 a/ Iringa l Dodoma and Mbeya c-/ Shinyangaand Tabora d/ Mwanza and Musoma
Revised Capacity Forecast (MW)
Additional Load Existing from the Expansion Extended Year Zanzibar Grid to NW and SW Zones Grid
1981 5 119 124 1982 6 127 - 133 1983 6 139 35 181 1984 7 152 44 203 1985 7 164 53 225 1986 8 175 60 243 1987 8 186 65 259 1988 9 195 68 272 1989 9 205 72 286 1990 10 245 75 300 - 41 - ANNEX 4 Page 3 of 3
TANZANIA FOURTH POWERPROJECT INSTALLED AND FIRM CAPACITY AND MAXIMUM DEMAND OF TANESCO'SGRID
MW 410 - MTERA L----'DIESEL 400 - UNIT No. 2 RETIREMENTS
390 - L 1
380 MTERA
370 - UNIT No. 1 \j |SYSTEM 360 - REHABILITATION RESERVES OF DIESEL STATIONS (LARGEST HYDRO 350 - AND LARGEST THERMAL UNIT) 340 DIESEL CAPACITY DIESEL OF TABORA AND CAPACITY OF 330 SHtNYANGA MWANZA EXTENSION AND MUSOMA 320 - EXTENSION
310 - DIESEL CAPACITY OF 300 - DODOMA, MUFINDI AND 290 - MBEYA EXTENSION 280 DIESEL AND HYDRO CAPACITY OF DIESEL I 270 IRINGA RETIREMENTS
260 260 ~EXTENSiON\
250-
240 - INSTALLED CAPACITY 230 -
220 -
210 -
200 -
190 _ MAXIMUM DEMAND OF EXTENDED 180 _ FIRM CAPACITY GRID OF EXTENDED 170 - GRID
160-
1 50
140 -
130
120
110 _
100 I I I I I I I 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991
World Bank - 23611 -42 - ANNEX 5 Page 1 of 5
TANZANIA
FOURTH POWER PROJECT
Descriptionof Mtera Power Plant
Project Area
1. The project area is shown on the map (IBRD 16231) and a summarized project descriptionis given in Chapter III. A fuller descriptionof major components is given below, with a summary of the project's early history and a brief descriptionof its important features of geology, topography,hydrology, drilling programs and method of construction.
Background
2. The Bank's involvementin the developmentof the Great Ruaha River (one of the major tributariesof the Rufiji River) goes back to 1969 when the Bank initiallyappraised a project which mainly consistedof constructionof a dam and an undergroundpowerhouse at Kidatu site with two 50-MW hydroelectricunits. This first stage of developmentwas financed under the second power loan (Loan 715-TA, December, 1970 for US$30 million). The second stage consisted of the constructionof the Mtera dam (175 km upstream of Kidatu dam) and additional two 50-MW hydroelectric units at the existing Kidatu powerhouse (Third Window Loan - 1306-T-TA, July, 1976 for US$30 million). The project completion report for this loan, dated November 30, 1982, is under review. The proposed project is the third and ultimate developmentof the Great Ruaha River, consisting of the constructionof an undergroundpowerhouse with a capacity of two 40-MW hydroelectricunits, bringing total ultimate installed capacity of the Great Ruaha River to 280 MW when the project is completed in 1987.
Topography and Hydrology of Great Ruaha River
3. The Great Ruaha River rises in the mountainousSouth-Western region of Tanzania, close to the northern tip of Lake Malawi, where the rainfall is one of the heaviest in the country (about 910 mm last 45 years average). From there it flows in a northeasterlydirection until it reaches Mtera, where other major tributariesjoin it and the flow turns in a southeasterlydirection. The river falls about 175 m over a distance of 34 km before it reaches the Mikumi-Ifakararoad bridge at Kidatu and then it enters a long flat plain flowing at a gentle gradient towards the east until it joins the Rufiji River.
4. At Mtera where the power station would be located, the average flow is about 125 m3/sec which corresponds to a calculatedannual flow of about 3,900 million m3 (based on direct dischargemeasurements obtained - 43 - ANNEX 5 Page 2 of 5
over a period of 25 years from 1955 to 1979 and supplementedby earlier rainfall measurements)1/. Annual and seasonal flow variations are great and may show a ratio of as high as 100 to 1.
Mtera Dam
5. The Mtera dam was inauguratedin early 1981 and is located about 6 km downstream of the earlier Mtera road bridge on the Dodoma-Iringa highway. The dam is a concrete buttress dam with spillway and spillway chute on the south bank of the river and a bottom outlet on the river bank. The main data of the dam is as follows:
Calculatedmaximum river discharge:
1% probability,m 3/sec 2,500 0.1% m3/sec 4,000 0.01% m3/sec 6,000 Reservoir capacity - dead - million m3 - live - million m3 3,200 a/ Reservoir, million m3 600 Full supply level, elevation m 698.5 Minimum supply level, elevation m 690.0 Total crest length, m 260 Maximum height above river bottom, m 45 Crest level of dam, elevation m 701.5 Maximum spillway discharge capacity m 6,000 Bottom outlet discharge capacity, m3/sec 600
a/ Could supply sufficientwater for average year production for three subsequent dry years.
Mtera Power Plant
6. Geologicalinvestigations in the proposed project area comprise study of landsat images, aerial photographs,seismic tests, field mapping and 8 diamond drilling of about 1,360 lineal meters (both in the tunnel and powerhouse cavern). Two holes are in the powerhouse/penstockarea and 6 are along the alignment of the 10.5 km tailrace tunnel. The advisory panel of TANESCO and the independentBank consultant consider the extent of this work is consistentwith the usual requirementsof a feasibilitystudy for the preparationof bid documents. The quality of rock (mainly granite) is
1/ Calculatedfigures from the model are:
1% probability - 16,400 million m3 50% probability - 3,000 99% probability - 540 - 44 - ANNEX 5 Page 3 of 5
shown to be unusually good and the panel and the Bank consultant are agreeable with this conclusion. The Mtera power plant comprises an inlet channel, intake with trash racks, a short headrace tunnel (about 100 m), two vertical penstocks (about 100 m each) with intake gates, an underground powerhouse with control black, and tailrace tunnel of 10.5 km length with merge galleries. An administration building with reading room, transformer calls and a switchyard are situated in the open above the powerhouse. The proposed powerhouse contains two Francis type units, each with a capacity of 40 m when using the available maximum gross head of about 105 m.
7. Main data for the proposed power plant is as follows:
Full supply level in the reservoir, elevation m 698.5 Minimum supply level in the reservoir, elevation m 690.0 Water levels at tunnel outlet, elevation m at 96 m3 /sec (flow for 80 MW output) at 4,000 m3 /sec 593.2 Generator capacity per unit MVA 48.0 Headrace tunnel lengthi m 100.0 Headrace tunnel size m~ 55.0 Number of penstocks, m 2.0 Diameter of penstocks, m 3.2 Length of penstocks, m 110.0 Size of powerhouse cavern, m 45 X 13.5 x 25 Surge gallery area, m 2 3,000.0 Tailrace tunnel, length, km 10.5 Tailrace tunnel cross section, m 2 55.0
8. The inlet channel is situated in the reservoir area just upstream of the right alignment of the Mtera dam. Part of the excavation for the channel will have to be carried out under water. A cofferdam will be provided to enable the major part of the excavation to be carried out in dry. The works will be carried out during periods of low water levels in the reservoir.
9. The entrance of the headrace tunnel for the power plant will be to concrete situation located just upstream of the Mtera dam on the right river bank. The intake will be placed sufficiently deep to avoid any deleterious effects from vorteces created by the 8.5 m drawdown allowed for in the reservoir. The intake will be equipped with trash racks with appurtenant cleaning equipment. From the intake the water will flow in the unlined headrace tunnel.
10. Each penstock intake will be provided with a cylinder gate upstream of which a wheel gate will be arranged in a separate shaft, common to both the penstock intakes. The penstocks will be steel lined and surrounded by concrete over the entire length. - 45 - ANNEX 5 Page 4 of 5
11. The powerhousewill be of the underground type located about 125 m below the ground surface. The machinery hall will be for two hydroelectricunits with auxiliary equipment. The turbines will be of the vertical Francis type, directly coupled to the generators. Access to the powerhousewill be obtained via an access tunnel about 600 m in length.
12. Water will be discharged to the tailrace tunnel through steel and concrete lined draft tubes. At the end of draft tube, a gate will be installed. From the draft tubes, the water will be passed back to the river through the unlined tailrace tunnel. It is anticipatedthat some parts of this tunnel will be strengthenedby means of concrete cubes, shotcrete lining and holting. The tunnel would be excavated from eight faces.
13. The power cables from the generators will be passed through a cable shaft from the machinery hall to the transformers,located in the switchyard at above ground level. The power plant will be connected to the system at Iringa and Dodoma by 220-kV power transmissionlines which will be financed by CIDA.
14. The average production of the project will be about 350 GWh per year, the firm production about 220 GWh per year. 2/ The plant load factor will be about 50% average and 31% firm. The hydro production of-the TANESCO system is shown below: 2/
Dry Year Average Year Production Production --- GWH ------GWh-
Wami/Pangani River System
Hale, Pangani Falls, Nyumba Ya Mungu and Kikulekwa 190 220
Great Ruaha River System
Kidatu 850 1,290 Mtera 290 350
Total 1,330 1,860
2/ With a probabilityof about 96% (Annex 1, page 2). -46- ANNEX 5 Page 5 of 5
Operations
15. The existing Kidatu power station (200 MW) and the proposed Mtera power station (80 MW), together with existing dams at Kidatu (live reservoir capacity: 125 million m3) and Mtera (live reservoir capacity: 3,200 million m3) comprise a cascade system on the same river (Great Ruaha). Regulation of the river is very important to produce maximum possible energy from the river water depending on the load pattern and the system demand for capacity and energy. Therefore,upon an earlier Bank request (in 1979) consultantsof TANESCO (SWECO) have recently prepared a study reported titled "Great Ruaha Power Projects Water Management, 1981." In this report necessary informationis given in the form of several diagrams to explain how to operate the reservoirs at Mtera and Kidatu under various conditionsin a year, e.g. various load demands, various water levels in the reservoirs,etc. The diagrams also show when production of thermal power shall be started up in the system in order to avoid power shortages during dry periods. -47 - ANNEX 6 Page 1 of 6
TANZANIA
FOURTH POWER PROJECT
Project Cost Estimates (TSh 1.0 = US$0.082)
Project Items Local Foreign Total Local Foreign Total - TSh million------US$ million------
PART A
1. Main Civil Construction works 84.1 539.5 623.6 6.9 44.2 51.1 2. Duties & Taxes 100.9 - 100.9 8.3 - 8.3 Subtotal 185.0 539.5 724.5 15.2 44.2 59.4
Contingencies
3. Physical contingency 18.2 92.3 110.5 1.5 7.6 9.1 4. Price contingency 102.6 165.2 267.8 8.4 13.5 21.9 Total contingencies 120.8 257.5 378.3 9.9 21.1 31.0
TOTAL PART A 305.8 797.0 1,102.8 25.1 65.3 90.4 -48 - ANNEX 6 Page 2 of 6
Local Foreign Total Local Foreign Total ------TSh million------US$ million------
PART B
1. Other works (water supply and sanitation, elevators operators camp ) 7.5 44.9 52.4 0.6 3.7 4.3 2. Duties & Taxes 8.5 - 8.5 0.7 - 0.7 subtotal 16.0 44.9 60.9 1.3 3.7 5.0
Contingencies
3. Physical contingency 2.2 7.3 9.5 0.2 0.6 0.8 Price contingency 8.6 14.5 23.1 0.7 1.2 1.9 Total contingencies 10.8 21.8 32.6 0.9 1.8 2.7
TOTAL PART B 26.8 66.7 93.5 2.2 5.5 7.7
PART C
1. Mechanical works (gates, trash racks and penstock steel linings) 5.6 40.8 46.4 0.4 3.4 3.8 2. Duties & Taxes 9.9 - 9.9 0.8 - 0.8 Subtotal 15.5 40.8 56.3 1.2 3.4 4.6
Contingencies
3. Physical contingency - 5.8 5.8 - 0.5 0.5 4. Price contingency 9.3 14.0 23.3 0.8 1.1 1.9 Total contingencies 9.3 19.8 29.1 0.8 1.6 2.4
TOTAL PART C 24.8 60.6 85.4 2.0 5.0 7.0 - 49 - ANNEX 6 Page 3 of 6
Local Foreign Total Local Foreign Total -----TSh million ------US$ million------
PART D
1. Turbines, pipework and crane 13.0 93.0 106.0 1.1 7.6 8.7 2. Duties & Taxes 23.3 - 23.3 1.9 - 1.9 Subtotal 36.3 93.0 129.3 3.0 7.6 10.6
Contingencies
3. Physical contingency - 13.3 13.3 - 1.1 1.1 4. Price contingency 21.4 32.0 53.4 1.8 2.6 4.4 Total contingencies 21.4 45.3 66.7 1.8 3.7 5.5
TOTAL PART D 57.7 138.3 196.0 4.8 11.3 16.1
PART E
1. Generators 5.5 67.3 72.8 0.5 5.5 6.0 2. Duties & Taxes 15.7 - 15.7 1.3 - 1.3 Subtotal 21.2 67.3 88.5 1.8 5.5 7.3
Contingencies
3. Physical contingency - 9.0 9.0 - 0.7 0.7 4. Price contingency 13.0 22.7 35.7 1.1 1.9 3.0 Total contingencies 13.0 31.7 44.7 1.1 2.6 3.7
TOTAL PART E 34.2 99.0 133.2 2.9 8.1 11.0
PART F
1. Transformers 1.2 13.4 14.6 0.1 1.1 1.2 2. Duties & Taxes 3.0 - 3.0 0.2 - 0.2 Subtotal 4.2 13.4 17.6 0.3 1.1 1.4
Contingencies
3. Physical contingency - 1.8 1.8 - 0.1 0.1 4. Price contingency 2.8 4.6 7.4 0.2 0.4 0.6 Total contingencies 2.8 6.4 9.2 0.2 0.5 0.7
TOTAL PART F 7.0 19.8 26.8 0.5 1.6 2.1 -50- ANNEX 6 Page 4 of 6
Local Foreign Total Local Foreign Total ------TSh million ------US$ million------
PART G
1. Electrical works a/ 6.5 80.3 86.8 0.5 6.6 7.1 2. Duties & Taxes 18.7 - 18.7 1.5 - 1.5 Subtotal 25.2 80.3 105.5 2.0 6.6 8.6
Contingencies
3. Physical contingency - 10.8 10.8 - 0.9 0.9 4. Price contingency 15.4 27.2 42.6 1.3 2.2 3.5 Total contingencies 15.4 38.0 53.4 1.3 3.1 4.4
TOTAL PART G 40.6 118.3 158.9 3.3 9.7 13.0
PART H
1. System control center b/ 6.5 35.6 42.1 0.5 2.9 3.4 2. Duties & Taxes ------Subtotal 6.5 35.6 42.1 0.5 2.9 3.4
Contingencies
3. Physical contingency - 4.4 4.4 - 0.4 0.4 4. Price contingency 2.5 8.4 10.9 0.2 0.7 0.9 Total contingencies 2.5 12.8 15.3 0.2 1.1 1.3
TOTAL PART H 9.0 48.4 57.4 0.7 4.0 4.7
PART I
1. Rehabilitation of Ubungo diesel station c/ 3.3 44.6 47.9 0.3 3.7 4.0 2. Duties & Taxes _ - - - - - Subtotal 3.3 44.6 47.9 0.3 3.7 4.0
a/ Auxiliaries. h/ Construction of center, supply of supervisory control, and data acquisition equipment. c/ Spare parts for engines, generators, fuel oil, and cooling systems. - 51 - ANNEX 6 Page 5 of 6
Local Foreign Total Local Foreign Total - TSh million ------US$ million------
Contingencies
3. Physical contingency - 4.9 4.9 - 0.4 0,4 4. Price contingency 1.2 8.6 9.8 0.1 0.7 0.8 Total contingencies 1.2 13.5 14.7 0.1 1.1 1.2
TOTAL PART I 4.5 58.1 62.6 0.4 4.8 5.2
PART J
1. Rehabilitation of other power facilities 11.2 139.8 151.0 0.9 11.5 12.4 2. Duties and Taxes ------Subtotal 11.2 139.8 151.0 0.9 11.5 12.4
Contingencies
3. Physical contingencies 0.9 14.6 15.5 0.1 1.2 1.3 4. Price contingencies 1.9 28.0 29.9 0.1 2.3 2.4 Total contingencies 2.8 42.6 45.4 0.2 3.5 3.7
TOTAL PART J 14.0 182.4 196.4 1.1 15.0 16.1
PART K
1. Studies 6.6 17.9 24.5 0.5 1.5 2.0 2. Duties and Taxes - - - Subtotal 6.6 17.9 24.5 0.5 1.5 2.0
Contingencies
3. Physical contingency - 2.6 2.6 - 0.2 0.2 4. Price contingency 1.6 2.6 4.2 0.1 0.2 0.3 Total contingencies 1.6 5.2 6.8 0.1 0.4 0.5
TOTAL PART K 8.2 23.1 31.3 0.6 1.9 2.5 - 52 - ANNEX 6 Page 6 of 6
Local Foreign Total Local Foreign Total - TSh million ------US$ million------
PART L
1. Training - 9.0 9.0 - 0.7 0.7 2. Duties & taxes ------Subtotal - 90 90 0.7 07
Contingencies
3. Physical contingency - 0.9 0.9 - 0.1 0.1 4. Price contingency - 3.1 3.1 - 0.3 0.3 Total contingencies - 4.0 4.0 - 0.4 0.4
TOTAL PART L - 13.0 13.0 - 1.1 1.1
PART M
1. Engineering and consultancy services 14.1 117.7 131.8 1.2 9.6 10.8 2. Duties & taxes 54.0 - 54.0 4.4 - 4.4 Subtotal 68.1 117.7 185.8 5.6 9.6 15.2
Contingencies
3. Physical contingency 1.7 11.8 13.5 0.1 1.0 1.1 4. Price contingency 16.5 30.7 47.2 1.4 2.5 3.9 Total contingencies 18.2 42.5 60.7 1.5 3.5 5.0
TOTAL PART M 86.3 160.2 246.5 7.1 13.1 20.2
TOTAL PROJECT COST 618.9 1,784.9 2,403.8 50.7 146.4 197.1
Interest during construction 458.3 - 458.3 37.6 - 37.6
TOTAL FINANCING REQUIREMENT 1,077.2 1,784.9 2,862.1 88.3 146.4 234.7 TANZANIA FOURTH POWER PROJECT PROJECT IMPLEMENTATION SCHEDULE
YEAR OF CUNSTRUCTION 19R1 1982 1983 1984 1985 1988 1917 1988
QIUARTER 1 2 3 74_ 2 3 4 1 2 3 4 2 3 4 2 4 1 _ 3_ 4 2 1 1 2 1
777/7' 7/ /~~~~~~~~77 PREPARATIONOF TENDER DOCUMENTS . / / 7/ // / / / ' ' / TENDERIN G AND EVALUATION 7)//7 / 7 AWARD CIVIL CONTRACTS7 57 , / . 7 '7 AWARD MECHAN ICAL AND ELECTRICAL CONTRACTS . . / /, . / .. , . ..
MOBILIZATION AND PREP WORKS " -.-. 7
CIVILWORKS ROADS ,/ / . / 7 ' I ""' . */ . *, II ., 7 7
COFFER DAMS / , // / , , . 1 / /
EMPL_OCYERS VILLAGE EACAVATION , , . , ' . / . / / ,./ ',
CONCRETE WORKS / / , . 6, / t...... / / '7
ENTRANCE IANLDING EXCAVATION //,, // .// 7 ,, , ,,, i, * . ,, ,/
ACONCRETE VORKS /K / /,// / , / . I . / / i I u , ./ ... , ,,
, . ,,, ,,, , '/,. ' I ' ''' I ''. '1 I i1/''' . /77',7/ 77 ''' /7 FTADRACEAND ______~ ESLCAVATION~ ~ ~ ~ ' /. '/ I / ...... / /. T -l 7 77 mm 7/,/
CONCRETE WORKS 'QIP '77 ' , j / / . / t " - , i ,/ , t .
EHINSTCK ALLWIT EXCAVATIONE / l/, 1'M o o. .I. 1''' / / / 7 / 7, / / DRAFTFORCBLES.ETC ECAVATION LIFT OF7/Aj7DITS'~~~p.sm . // .77/ ' / . / CONCREATEN.' WRKS RK | ~ 7/77 ~~~~/7S 'Es 'E * 7 / / . / "O ROCK SUPORTS 77...... I.11111 111 lis . .... loll lolls7 7"<16 1/f. i''''''o4 o /"..7,
hRAFTT REGAT S,// / / 77 / , /, ./ I / ' ' $/. / 7 /'/7 '77_/7/7r,_ , ,
_A____AC U7N7N _T 777 / 777 / .. / ... . //. / 7/ 77
'7 .7.r '7'/77 MN//TARINRY9LATS CANCRETEORK TRANSFOR ERS///777 // . ///, //| //. ITI//$$/'//7 _t7/' 7 / 7 / I m 77 /1 7/ 7_ _ 77
7'777 77/777 .7 7 j 77.~~~~~~~0 7-o 7/77 777770777ON
AECCESSE TWORKSPOCKETEEL 777 7NIT 77 777 77 7. fi *f
ROKSUPRTA7NE7/77/ 777 llEli 111111f111 Ils111 It.mii ,li131ii,595 SSE1I1 "77 7 / /// 777 /7 / /// 7 77 ______77EETAtN// T_WLR TUNNELKSE WITH ADITS2I* AND TUNEL GT **I
*______*"' DESI"GN/Eh5~INTKEUND ANDp M UTLT,g 115 ,m
ST ION~~~~~~~~~~~~~~~~~~~~~~~ I '77 777 77 ,51111IlS / 7 WTERT ADUPOPLY ETION$'7// 77 7 " " 777 STUDfES STUDY FOR POWER77/77 777 7/ 7 777 /7777TOR77 LIFTEORGANIZAT7ION I ~ ~ '7"~ 7 . ,,,
TRAJNJNG PR~EPENDRSATEDNOF" R,II-R- --WORKS FORTUBUN;7<>'' GTE '" '''T- mI WORKSFORUNIT 77727 /7 //7 -9',- - - 77/ illit OTHERWORK7S 7 /7 7 7'~7 77 7 7/ 7 '77 777 7 M M0ESIN ND ANFACU'NTAEADULTG ~ 7/77777 - - Sl jm 7 15 7 / -0-0.41IN" 77T77RAN777SPOR/TATION 77777 77 7,d W.7 777 2353 1 TFAN9PORTATIDN_ SORMRS - 54 - ANNEX 8 TANZANIA FOURTH POWER PROJECT DisbursementSchedule (Thousandsof US$) Cumulative Undisbursed IDA Fiscal Euarterly Disbursements at end of Disbursements Disbursements at end of Quarter Quarter 1983/1984 June 30, 1984 8,00o0/ 8,000 27,000 1984/1985 Sept. 30. 1984 300 8,300 26,700 Dec. 31, 1984 700 9,000 26,000 March 31, 1985 1,500 10,500 24,500 June 30, 1985 1,700 12,200 22,800 1985/1986 Sept. 30, 1985 2,000 14,200 20,800 Dec. 31, 1985 2,100 16,300 18,700 March 31, 1986 2,500 18,800 16,200 June 30, 1986 2,700 21,500 13,500 1986/1987 Sept. 30, 1986 3,000 24,500 10,500 Dec. 31, 1986 2,600 27,100 7,900 March 31, 1987 1,800 28,900 6,100 June 30, 1987 1,600 30,500 4,500 1987/1988 Sept. 30, 1987 1,300 31,800 3,200 Dec. 31, 1987 1,000 32,800 2,200 March 31, 1988 800 33,600 1,400 June 30, 1988 600 34,200 800 1988/1989 December 31, 1988 500 34,700 300 March 31, 1989 300 35,000 Closing Date: December 31, 1988 1/ Advanced payment for main civil works - 55 - ANNEX 9 Page 1 of 2 TANZANIA FOURTH POWER PROJECT Project Monitoring Guidelines 1. There are a number of areas described in the various chapters which are key elements in the efficient operation of the utility and the success of the project. The main areas for establishing a monitoring system are described below (see also para. 3.14). 2. The principal implementation steps to be compared monthly with planned target dates are as follows: A. Mtera Power Plant Civil Electrical & Mechanical Works Preparation of bid documents March 1982 Invitiation to bid October 1982 Bid closing March 1983 Contract awards July 1983 Construction of civil works start September 1983 Erection of mechanical & electrical work start October 1985 Commissioning of first Unit January 1987 Commissioning of second Unit May 1988 B. Construction of Control Center Preparation of design March 1983 Preparation of bid documents July 1983 Invitation to bid August 1983 Bid evaluation November 1983 Contract awards February 1984 Construction starts April 1984 Commissioning August 1985 C. Rehabilitation of Ubungo Diesel Station Completion of Rehabilitation Report May 1983 Placing orders for spare parts September 1983 equipment and material Rehabilitation starts January 1984 Completion October 1985 l - 56 - ANNEX 9 Page 2 of 2 D. Studies Appointment of consultants Sept 30, 1983 Completion of tariff study July 31, 1985 Completion of reorganizationstudy Dec 31, 1984 Completion of long range developmentstudy Dec 31, 1984 Completion of TANESCO Management Study June 30, 1985 Completion of RehabilitationStudy June 30, 1984 E. Training Completion of the training programs Sept 30, 1983 Training starts March 1984 Completion June 1987 3. Records will be maintained comprising the targets against actual results in: General a) hydro production (in kWh); b) diesel plant production (in kWh); c) purchase from captive plants (in kWh); d) power consumption (in kWh, by classification); e) consumptionof plant auxiliaries (in kWh); f) fuel consumptionof diesel stations (in kcal/kWh and gr/kWh); g) losses (by classification) h) equipment and transmissionfailures; i) number of interruptionsand their durations; j) number of consumers (by classification) Administrativeand Financial k) number of staff (by classification) 1) average tariff level (in cents per kWh) m) rate of return on average revalued net fixed assets; n) debt service coverage; o) operation ration; p) number of days' sales outstanding q) debt/equity ratio r) revisions to project cost estimate and related financing s) overdue accounts receivable - 57 - -lZE 10 TANZANIA TANZANIAELECTRIC SUPPLY CCNPANY,LTD. INCafE STAT12ENTS (TSh Millions) --- Actual --- -Provisional-- -Estimated------1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 GWh - Sold 588 653 738 790 795 851 910 974 1042 1115 1193 1277 1366 Average (T) cents/kWh Sold 46.6 46.2 65.0 64.5 65.0 97.5 117.0 117.0 117.0 121.0 125.0 125.0 147.0 Sales Revenues 274.0 301.9 480.0 509.6 516.7 829.7 1064.7 1139.6 1219.1 1349.2 1491.3 1596.2 2008.0 Operating Expenses Generation 76.2 87.2 114.3 153.6 177.5 236.5 265.1 295.6 204.5 296.5 278.7 339.5 391.1 Transmission & Distribution 16.2 21.0 31.3 36.5 34.3 39.1 45.1 51.6 60.7 70.1 80.3 92.1 105.8 Administration 53.6 57.2 74.5 103.3 94.8 109.1 125.4 144.3 165.7 185.8 208.1 233.1 261.0 Depreciation 42.1 44.7 46.9 70.2 184.6 210.5 249.2 306.0 377.1 433.6 544.6 655.7 719.0 Income Tax 10.0 10.0 ------Total Expenses 198.1 220.1 267.0 363.6 491.2 595.2 684.8 797.5 808.0 986.0 1111.7 1320.4 1476.9 Operating Income 75.9 81.8 213.0 146.0 25.5 234.5 379.9 342.1 411.1 363.2 379.6 275.8 531.1 Other Income (Losses) (1.0) 11.0 13.8 4.2 10.0 (277.6) 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Net Income before Interest 74.9 92.8 226.8 150.2 35.5 (43.1) 389.9 352.1 421.1 373.2 389.6 285.8 541.1 Interest 37.6 45.6 48.6 43.5 81.2 109.1 118.7 112.8 112.6 120.0 128.4 371.5 380.6 Net Income (toss) 37.3 47.2 178.2 106.7 (45.7) (152.2) 271.2 239.3 308.5 253.2 261.2 (85.7) 160.5 Retained Earnings Adjustment Provision for Deferred Taxation (18.9) - (2.9) (27.6) (33.0) (48.2) (57.7) (42.6) (82.9) (142.5) (90.8) (77.8) (54.2) Transfer to Capital Reserve (14.0) (47.3) (175.0) (87.0) Dividend (7.8) - - 7.8 Depreciation transfer to Valuation Reserve - - 64.0 83.9 105.7 131.7 164.8 203.8 252.8 311.9 Net Retained Earnings (3.4) (0.1) (0.3) 0.1 (78.7) (136.4) 297.4 302.4 357.3 f75.5 374.2 89.3 418.2 Balance Brought Forward 4.2 0.8 0.7 1.0 .9 (77.8) (214.2) 83.2 385.6 742.9 1018.4 1392.6 1481.9 Retained Eamings (Deficit) 0.8 0.7 1.0 .9 (77.8) (214.2) 83.2 385.6 742.9 1018.4 1392.6 1481.9 1900.1 Rate of Return - - - 2.1 1.1 5.5 7.7 5.7 5.6 4.4 3.7 2.2 4.1 - 5 - ANNEX 11 TANZANIA TANZANIAELECTRIC SUPPLY C(fPANY, LTD. BAIANCE SHEETS (TSh Killions) -- Actual -- -Estimatedd-- 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 Assets Fixed Assets Plant in Operations Revalued 1472.5 1527.7 1568.0 2562.4 4906.7 6322.0 6969.0 9351.3 10760.6 12364.4 16679.3 18292.0 20053.3 Less Depreciation 319.8 361.6 407.6 476.9 1214.2 1546.1 1934.4 2404.8 2986.3 3688.7 4565.3 5631.9 6857.8 Net Plant In Operation 1152.7 1166.1 1160.4 2085.5 3692.5 4775.9 5034.6 6946.5 7774.3 8675.7 12114.0 12660.1 13195.5 Plant Under Construction 438.1 705.6 1231.9 602.4 994.4 715.8 2162.9 1787.8 2221.1 2590.6 384.5 968.9 2507.5 Net Fixed Assets 1590.8 1871.7 2392.3 2687.9 4686.9 5491.7 7197.5 8734.3 9995.4 11266.3 12498.5 13629.0 15703.0 Long-term Investments - 1.2 4.5 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 6.8 Current Assets Cash - 6.0 - - 80.2 139.2 449.5 473.5 727.8 905.9 992.9 1013.2 851.4 Accounts Receivable 66.4 94.8 167.6 297.6 129.2 138.6 177.8 190.3 203.6 225.3 249.1 266.6 285.2 Inventories 103.4 160.0 193.3 240.3 268.3 245.3 194.3 212.5 194.3 189.3 227.3 219.3 224.3 Other Receivables & Advances 26.9 40.4 57.8 52.7 52.7 52.7 52.7 52.7 52.7 52.7 52.7 52.7 52.7 Prepaymoets, etc. 11.0 5.2 39.8 23.9 23.9 23.9 23.9 23.9 23.9 23.9 23.9 23.9 23.9 Total Current Assets 207.7 306.4 458.5 614.5 554.3 599.7 898.2 952.9 1202.3 1397.1 1545.9 1575.7 1437.5 Less: Current Liabilities Accounts Payable 15.0 11.4 45.0 59.8 58.7 66.7 71.8 77.4 71.3 83.4 84.9 94.7 104.0 Advance on Works Orders 73.3 91.3 99.8 113.5 113.5 113.5 113.5 113.5 113.5 113.5 113.5 113.5 113.5 Customers Deposits 9.6 12.4 15.3 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 18.1 Tax Payable 11.6 21.6 21.6 21.6 ------Other 26.3 40.1 57.2 57.2 57.2 57.2 57.2 57.2 57.2 57.2 57.2 57.2 57.2 Overdraft 0.2 - 12.9 25.1 ------Total Liabilities 136.0 176.8 251.8 295.3 247.5 255.5 260.6 266.2 260.1 272.2 273.7 283.5 292.8 Net Current Assets 71.7 129.6 206.7 319.2 306.8 344.2 637.6 686.7 942.2 1124.9 1272.2 1292.2 1144.7 Total Assets 1662.5 2002.5 2603.5 3013.9 5000.5 5842.7 7841.9 9427.8 10944.4 12398.0 13777.5 14928.0 16854.5 Equity and Liabilities Equity Capital 577.7 577.7 577.7 767.0 1099.7 1203.3 1656.8 1977.9 2136.8 2216.8 2275.9 2275.9 2275.9 Advances for Capital 70.8 170.9 299.6 207.8 ------Total Capital 64d.5 748.6 877.3 974.8 1099.7 1203.3 1656.8 1977.9 2136.8 2216.8 2275.9 2275.9 2275.9 Capital Reserves 115.3 74.3 249.3 498.1 498.1 498.1 498.1 498.1 498.1 498.1 498.1 498.1 498.1 Consumers Contributions 26.9 35.0 48.4 52.9 69.2 87.1 106.8 128.5 152.3 178.5 207.3 239.0 273.9 Retained Earnings (Deficit) 0.8 0.7 1.0 .9 (77.8) (214.2) 83.2 385.6 742.9 1018.4 1392.6 1481.9 1900.1 Revaluation Reserve - - - 1591.6 1896.9 2242.4 2565.2 3024.0 3558.9 4135.9 4973.3 5800.8 Total Equity 791.5 858.6 1176.0 1526.7 3180.8 3471.2 4587.8 5555.3 6554.1 7470.7 8509.8 9468.2 10748.8 Deferred Tax Provision 109.8 109.8 112.7 140.3 173.3 221.5 279.2 321.8 404.7 547.2 638.0 715.8 770.0 Long-term Debt IBRD and IDA 409.2 542.7 620.5 615.0 654.8 743.5 822.1 880.7 980.1 1014.8 1004.2 961.6 915.5 Other 352.0 491.4 694.3 731.9 991.6 1406.5 2152.8 2670.0 3005.5 3365.3 3625.5 3782.4 4420.2 Total long-term Debt 761.2 1034.1 1314.8 1346.9 1646.4 2150.0 2974.9 3550.7 3985.6 4380.1 4629.7 4744.0 5335.7 Total Equity and - 1662.5 2002.5 2603.5 3013.9 5000.5 5842.7 7841.9 9427.8 10944.4 12398.0 13777.5 14928.0 16854.5 Liabilities _ _ _ - 59 - ANNEX12 TANZANIA TANZANIAELECTRIC SUPPLY CCMPANY, LTD. CASHFPLW (Tsh millions) -Actual------Estimated ------Sijmsary Internal Sources 1981 1982 1983 1984 1985 1986 1987 1988 1984-88 1989 1990 Net Income (loss) before Interest 150.2 35.5 244.5 389.9 352.1 421.1 373.2 389.6 1925.9 285.8 541.1 Depreciation 70.2 184.6 210.5 249.2 306.0 377.1 433.6 544.6 1910.5 655.7 719.0 Total Internal Sources 220.4 220.1 455.0 639.1 658.1 798.2 806.8 934.2 3836.4 941.5 1260.1 Internal Requirements Increase/(Decrease) in Working Capitall! 124.7 (117.1) (21.6) (16.9) 25.1 1.2 4.6 60.3 74.3 (.3) 14.3 Debt Service (excluding IDC) 67.8 161.5 185.6 208.8 209.9 199.9 216.3 224.1 1059.0 511.9 539.3 Total Internal Requirements 192.5 43.8 164.0 191.9 235.0 201.1 220.9 284.4 1133.3 511.6 553.6 Net Available from Internal Sources 27.9 176.3 291.0 447.2 423.1 597.1 585.9 649.8 2703.1 429.9 706.5 Construction and Capital Requirements: Ongoing Works 197.6 418.8 446.4 596.7 191.7 86.0 90.7 95.5 1060.6 104.3 113.9 Future Projects 147.9 165.2 156.9 621.1 607.1 166.9 58.0 185.8 1638.9 557.2 1492.5 Proposed Project - - - 236.4 480.2 601.0 625.0 456.7 2399.3 - - Total Construction 345.5 584.0 603.3 1454.2 1279.0 853.9 773.7 738.0 5098.8 661.5 1606.4 IDC 22.6 8.0 42.7 70.9 135.8 193.8 231.1 258.0 889.6 34.5 47.2 Total Construction & Capital Requirements 368.1 592.0 646.0 1525.1 1414.8 1047.7 1004.8 996.0 5988.4 696.0 1653.6 Balance to Finance 340.2 415.7 355.0 1077.9 991.7 450.6 418.9 346.2 3285.3 266.1 947.1 Financed by: Consumers Contributions 4.5 16.3 17.9 19.7 21.7 23.8 26.2 28.8 120.2 31.7 34.9 Equity Contributions - Ongoing 105.3 16.1 - Future Projects - 108.8 103.6 423.2 259.6 82.0 764.8 - Proposed Project - - - 30.3 61.5 76.9 80.0 59.1 307.8 Total Equity 105.3 124.9 103.6 453.5 321.1 158.9 80.0 59.1 1072.6 Borrowing Ongoing Works 62.2 245.3 240.5 322.6 80.4 403.0 Future Projects 156.0 134.5 52.0 410.6 229.0 67.6 18.2 725.4 254.7 750.4 Proposed Project: IDA Credit 106.5 88.6 131.7 69.5 26.8 423.1 Other 75.3 274.9 322.9 403.1 318.5 1394.7 Total Borrowing 218.2 379.8 292.5 915.0 672.9 522.2 490.8 345.3 2946.2 254.7 750.4 Total Financing 328.0 521.0 414.0 1388.2 1015.7 704.9 597.0 433.2 4139.0 286.4 785.3 Increase/(Decrease) in Cash (12.2) 105.3 59.0 310.3 24.0 254.3 178.1 87.0 853.7 20.3 (T61.8) Cumlative Cash (Overdraft) 51) 80.2 139.2 449.5 473.5 727.8 905.9 992.9 992.9 1013.2 1.4 Net Available from Internal Sources 27.9 176.3 291.0 44727 423.1 597.1 585.9 649.8 - 429.9 706.5 Less: IDC 22.6 8.0 42.7 70.9 135.8 193.8 231.1 258.0 - 34.5 47.2 Net Internal Sources after Debt Service 5.3 168.3 248.3 376.3 287.3 403.3 354.8 391.8 362.7! §659.0395.4 3 Years Moving Average of Construction Reg. 554 552 878 1104 1177 969 789 724 9582/ 1002 1328 % Available from Internal Sources 1 30 28 34 25 42 45 54 38 39 50 1/ Excluding cash or overdrafts. 2/ 1983-1988 average. - 60 - ANNEX 13 Page 1 of 3 TANZANIA FOURTH POWER PROJECT Notes and Assumptionsfor Financial Projections 1. In preparing the financial projections TANESCO's FY80 actual financial statements have been used as a base. Income Statements Revenues 2. Existing tariffs assumed to be increased by 50% in January 1983 to 97.5 (T) cents/kWh, by a further 20% to (T) cents 117.0 in 1984 and by an additional (T) cents 4 in 1987 and 1988 to (T) cents 125.0 in 1987. Sales as per TANESCO forecasts agreed during negotiations. Operating Costs Generation 3. Fuel/lubricatingoil expenditures are based on engineering estimates of plant utilization and an assumed price escalation of 15% per annum (1980 cost: TSh 0.58/kWh). No energy purchases are assumed beyond 1981. Price increases of 10% per annum but no volume increases have been assumed for salaries and wages, repairs and maintenance, and other generation expenses. The staffing at Mtera is effectively static since staff are already in place for maintenance and control of the existing Mtera dam. Salaries assume annual scale increases of 3-4% plus general wage increases equal to approximately 30% of inflation. The absence of volume increases for repairs and maintenance for thermal stations reflects recent purchases of sets from Mirrlees Blackstone and Wartsila. Transmissionand Distribution 4. Salaries and wages are assumed to increase 10% annually; provision has also been made for additional staffing as follows: 1982-46, 1983-44, 1984-50, 1985-34, 1986-66, to maintain the additional grid system. Repairs and maintenance are assumed to increase 10% annually in price and 5% in volume. Other transmissionand distributionexpenses are taken to rise 10% per annum in price and 10% in volume. Administration 5. Volume increases have been taken at 5% per annum through 1986 and 2% thereafter. Annual salaries escalation is assumed at 10%. - 61 - ANNEX 13 Page 2 of 3 Depreciation 6. An average rate of 3.75% of gross fixed assets in operation has been used. Income Tax 7. Income tax has been calculated at 50% of the net income plus the depreciation charged in the accounts, but less the tax allowances on the assets. Deferred taxation has been reserved at 50% of the difference between the net assets for tax purposes and the net assets shown in the balance sheets. Interest 8. The IDA Credit, SIDA and NORAD loans for the project are assumed to be onlent at 11%. Interest rates of other lenders are based on TANESCO's previous experience. Balance Sheets and Cash Flow Projections Fixed Assets 9. Fixed assets and related accumulated depreciation are on a revalued basis in Annex 11. Accounts Receivable 10. It has been assumed that accounts receivablewould be equivalent to the following number of days of sales revenue: 1982-90 days, 1983-75 days and thereafter60 days. Inventories 11. Inventories,expressed as a percentage of average revalued gross fixed assets, are assumed as follows: 1982 4.75%, 1983 3.5%, 1984 and 1985 2.35%, 1986 1.75%, 1987 and 1988 1.25%, thereafter 2%. 1980 was 12-1/2% but the base did not include Kidatu II and inventories included a significantamount of obsolete stocks. Consumer Contributions 12. Consumer contributionshave been taken at TSh 400 per consumer. Accounts Payable 13. These are estimated at 10% of cash operatingexpenses. - 62 - ANNEX 13 Page 3 of 3 Long-term Debt for Future Projects 14. Each future project has been identifiedwith actual or potential lenders, if known. Debt service has been based on TANESCO's historical pattern for such loans to (or onlent by) the Government (9% interest)with durations varying with TANESCO's experience of each lender's normal repayment terms. Terms for unidentified future lenders (e.g. for a coal-fired generating station) has been assumed at 9% over 27 years, including 7 years grace period with 100% foreign cost being borrowed. Local cost is assumed to be financed by TANESCO. - 63 - ANNEX 14 Page 1 of 21 TANZANIA Economic Analysis - Least Cost Solution 1. The evaluation of the most economic option for new power facilities in 1988 has to be set in the context of long-term power development. There are two related issues involved in determining the least cost long-termpower program. The first issue concerns the selection of the next unit of power generation capacity which is required by 1988. The only existing technicallyfeasible alternative to the Mtera project in 1988 is the construction of an oil-fired steam power plant at Dar-es- Salaam, although this would result in an increase in oil imports and therefore, greater expenditure of scarce foreign exchange. If a gas-field is developed in time, a gas turbine plant would also be an option for the next unit of generation capacity. The second issue concerns the type of power plant selected for additional generation capacity subsequent to 1988. According to TANESCO's load forecast, the first stage of such additional capacity would be required in 1990 or 1991 depending upon the amount of capacity commissionedin 1988. There are a number of options for subsequent development based on hydroelectric, natural gas and coal potential. HydroelectricOptions 2. A number of potential sites for hydroelecticgeneration have been identified in Tanzania including sites at Stiegler's Gorge, Kingenenas and Shuguri Falls. Stiegler's Gorge has been the subject of a planning report carried out by A/S Hafslund (Norway), whereas the planning of projects at Kingenenas and Shuguri Falls is only in the conceptual stage. None of these sites nor any other of the potential hydroelectricsites are possible alternativesto the Mtera project in 1988 since none could be developed and constructedin time. 3. The first phase of the Stiegler's Gorge hydroelectricprojectl/ could be completed by 1992 if the project was started before end 1984. Subsequent phases would be completed as required to meet increased load. The firm energy potential of existing hydro stations (Kidatu), Mtera and Stiegler'sGorge hydro projects would be sufficient to meet TANESCO's load forecast to about the year 2012, and therefore these hydro projects form an option for a long-term power development program. Howevever, the power potential of the Stiegler's Gorge project is large relative to the 1/ Stiegler's Gorge installed capacity and firm energy: Phase I 300 MW/2,150 GWh; Phase II 600 MW/1,570 GWh; Phase III 300 MW/1,150 GWh; Phase IV 900 MW/1,050 GWh. - 64 - ANNEX 14 Page 2 of 21 total load of TANESCO's system and, even with the proposed phasing, much of the potential output would not be usable during the initial years of operation. The amount of unused potentialwould be reduced as the date for installing the first phase is put back due to growth in TANESCO's system load. Therefore, there are further options in which implementationof the first phase of the Stiegler's Gorge project is delayed to 1995 or beyond, and thermal power plants are installed before the first phase of the Stiegler's Gorge project. The other identified potential sites for hydroelectric generation (paragraph 2) are not considered as firm options for new power generation facilities in 1991 since insufficientpreparatory investigationshave been carried out to provide reliable technicaland cost data. Natural Gas Option 4. Proved gas reserves of about 800 BCF2/ have been confirmed at the Songo-Songo off-shore field. Exploration activities are also in progress at other on-shore and offshore locations including Kimbiji and Mnazi Bay off-shore fields, although reliable estimates of reserves at these locations are not yet available. The possibility of new gas discoveriesis a factor in the planning of long-termpower development. 5. The Tanzania Government has stated its firm policy to use the Song-Songo gas reserves for the manufactureof fertilizers. According to a draft gas suply agreement between the Tanzanian Petroleum Development Corporation (TPDC) and Kilwa Ammonia Co. (KILAMCO),TPDC has undertaken to dedicate 602 BCF of gas reserves at Songo-Songofor KILAMCO's use for the manufacture of fertilizers. This agreement is conditional on success in raising financing for the fertilizer project and on proving the existence of adequate reserves. Therefore, if the agreement becomes binding, there would be about 200 BCF of gas reserves at Songo-Songo available for power generation. 6. In the present state of knowledge about Tanzania's energy resources, there are two strategies worth considerationfor the use of gas for generating power. The first strategy involves using gas turbines primarily as reserve and peak generation capacity by taking advantage of the lower capital costs of gas turbines relative to other plants. Under this strategy, gas generation capacity would be installed as the next station following the Mtera project and would be required by 1991. 2/ BCF = billions of cubic feet. - 65 - ANNEX 14 Page 3 of 21 Additional units could be installed subsequentlydepending on the economic attractiveness of other available power plants. The quantity of gas reserves that would need to be dedicated to power generation under this strategy would not be more than 100 BCF. Therefore, such use of gas for power developmentwould be planned as a supplementaryuse of gas to a major gas user, such as a fertilizer project. 7. The second strategy takes into account the possibility that substantial gas reserves will be discoveredin addition to the Songo-Songo field. Under this strategy, gas generation plant would be used to meet base load and would be the main type of plant commissioned. The period over which such a program could be enacted would depend on the quantity of gas reserves that would be available for dedication to power generation. A power program based entirely on gas turbine installationsto meet TANESCO's load forecast projected at a growth rate of 5 percent per year for a 30 year period up to 2016, would require the dedication of about 2.5 trillion cubic feet of gas reserves. This quantity greatly exceeds presently proved reserves in Tanzania and therefore, this strategy remains hypotheticalun- less sufficient new reserves are discovered. Nevertheless,this strategy is worth consideration as a possibility for power development in theory whilst explorationis in progress for new gas reserves. 8. An opportunity cost of gas for power generation equal to US$3.0/MCF delivered to plant boundary is used in the evaluation basic case, whether the gas is supplied from the Songo-Songo field or a new as yet unproved field. The net economic value of gas is the delivered value less gas field and gas delivery system costs. This delivered value represents in theory the highest economic cost of gas required for power in alternative uses to power generation. The value of US$3.0/MCF is derived from analysis by the mission of the terms of a proposed agreement for production of urea from Songo-Songo gas. In practice, the value of US$3.0/MCF could be lower than the value for the opportunity cost of gas for generating power, since a use for gas other than for manufacturing fertilizerwould not be considered as giving the opportunitycost for power unless the economic value of gas in this use is higher than US$3.0/MCF. For instance, if gas reserves of the order of 3 trillion cubic feet are proved in a new gasfield, as would be required for the long-term base-load use described in paragraph 7, one alternativeuse for the reserves would be exports of LNG which at present offers a return to gas that is at least as high as from the manufacture of fertilizers. Coal Option 9. Coal is another option for new power generation capacity installed after 1988. Progress in developing coal mines has not been sufficiently advanced for a coal-fired thermal station to be operational by 1988. The mission considers it realistic to assume that a coal-fired plant could be brought into operation by 1991 supplied from new local coal - 66 - ANNEX 14 Page 4 of 21 mines. A 100 MW coal-fired plant could be constructed in the vicinity of one of the coal-fields in Tanzania,3 / and would require about 350,000 tons per year of coal at full production. Due to high costs of transportation from coal-field to the coast, the economic value of coal mined in Tanzania for export would be very low. Therefore, development of Tanzanian coal reserves will have to be based on domestic utilization. The proved reserves are sufficient to meet the requirements of the series of coal-fired power plants that would be needed to meet TANESCO's load forecast to beyond the year 2016 projected at a growth rate of 5 percent per year. 10. The main load center for the power distribution system lies in the coast and adjacent inland areas, especially in the Dar-es-Salaam and Morogoro region which are 800 to 900 km from the coalfields. The existing grid zone, which covers this region, presently accounts for about 85 percent of the total energy sold by TANESCO (Annex 1). The capital costs of a transmision system supplying power from coal-fired stations located near to the coal fields to the main load center would be high, probably equivalent to about US$1,000 per kW of installed capacity at the coal-field. As a result, the cost of power delivered to the main load center from this source would be more than US cents 10 per kWh even if coal was to be supplied at a low cost to the power station, such as US$ 25 per ton from open-cast mines. Although this coal option would be a high cost program for meeting the power demand in the main load center. it would be an attractive option for meeting demand in western Tanzania once the demand in this region increased to a level that could sustain the economic production of power from coal-fired units. Power could be delivered to this region at an economic cost of the order of US cents 5 per kWh from a coal-fired station located near to an open-cast mine. According to the present power demand forecast (Annex 4), demand in the Mbeya and Mwanza regions could be sufficient from the mid 1990s for economic development of a coal-firedpower station in western Tanzania. Power System Costs 11. The costs of the options for a long-term power development program are composed of capital (generation and associated transmission works), operating and maintenance and fuel costs. The capital costs of existing hydroelectricinstallations, including Mtera dam, and of committed investments in extending TANESCO's interconnectedsystem are considered to be sunk costs and therefore to have zero economic cost. The capital costs for Mtera and Stiegler's Gorge hydro projects are based on information contained in the reports by Acres, SWECO and Hafslund, updated to mid-1983 3/ Songwe-Kiwira and Mchuchuma coal-fields located in Tukyu area; estimated proved reserves 300 million tons; estimated inferred deposits 1.3 billion tons; initial developmentis likely to be open-cast mining in Mchuchuma. - 67 - ANNEX 14 Page 5 of 21 price terms.4/ The capital costs of oil-fired steam plants are based on a unit rate of US$1,200/kW installed, for gas turbine plants of US$600/kW installed, and for coal-fired plants of US$1,600/kW installed. The economic cost of gas used for power generation is taken to be US$3.0 per thousand cubic feet (paragraph 8).5/ The economic cost of coal supplied to power stations is based on an assumed cost of supply from local open-cast mines of US$25/ton. The economic value of petroleum products is based on import parity prices and is assumed to increase at 2.0 percent per year in constant price terms in line with World Bank projections. All costs are expressed in constant 1983 prices. Economic costs are expressed in terms of domestic currency by converting foreign cost components at a shadow exchange rate equivalent to TSh 20 = US$1. 12. A number of programs for long-term development have been evaluated for this report. The criteria used for evaluation is the present value of the total costs of a program discounted at a rate correspondingto the opportunitycost of capital in Tanzania. In the basic evaluationcase, this rate is taken to be 10 percent. Energy production in an average hydrological year is credited to installed hydro capacity, and is taken from simulation studies carried out by the consultants (paragraph 11). Details of the capacity additions and energy balances used for some of the programs evaluated are given at the end of this Annex. 13. Since the availabilityof gas for base-load power generation as an alternative to the Mtera project is presently unproven (paragraph7 of this Annex), the evaluation of a least-cost solution from programs that are known to be feasible at this stage excludes programs that include gas as a source of power. The options for development therefore cover hydro (Mtera and Stieglers Gorge schemes - paragraph 2), coal (to supply western areas of Tanzania and separately, the main load centers in eastern Tanzania - paragraph 9) and oil station (located in the Dar-es-Salaamarea - paragraph 1). As noted in previous paragraphs in this Annex, the options for the next increment of generation capacity, required by 1988, is limited to Mtera or oil-fired steam plant in Dar-es-Salaam. The results of the evaluation of the programs in this category are summarized below for the evaluation basic case (for which the assumptions are described in paragraphs 8, 11 and 12 of this Annex). Details of the costs for some of the programs are given at the end of this Annex. 4/ Estimated capital costs, including associated transmission costs, excluding duties, taxes and interest, in constant mid-1983 price terms, are as follows: Mtera - US$100 million; Stiegler's Gorge Phase I - US$760 million; Phase II - US$213 million. 5/ Equivalentto about US$3 per million BTU. - 68 - ANNEX 14 Page 6 of 21 PowerDevelopment Program Present Value Option Year of Cirmissiondng Additioral Generating Capacity of Total Gosts (T&hmilon) 1988 1991/2 1994/5 Siequently A Mtera Coal Coa Coal 11560 B Oil Coal Coal Coal 12966 C Oil Mtera Coal Coal 12303 D MAtera Oil Oil St. Gorgel/ (1995) 10776 E Mtera Coal2/ Coal2/ St. Gorge2/ (1995) 10760 1/ Firstphase of Stiegler's Gorge 2/ Coal-firedplant onnrected to existingtransmission system only (100 MW) 14. The evaluation of options that exclude gas generation plant shows that Mtera is the least-cost option for the next increment of generation capacity. Thereafter, a coal-fired steam generation plant located near to proven coal reserves in the southwest of Tanzania would be an economic proposition. This plant (Option E) would supply the load centers in western Tanzania connected to the grid system (see Annexes 1 and 2) and it may also be possible to transmit some power to eastern Tanzania along the 220 kV line from Mbeya to Dar-es-Salaam that will have already been constructed. The evaluation also shows that the Stiegler's Gorge hydroelectricsite would be an economic option for development from the mid 1990s onwards. The equalising discount rates for some of these options are as follows: Equalizing Discount Lower Cost Option at Discount Rates Optionsl/ Rate (EDR) (%) Below EDR Above EDR A and B 32 A B A and C 22 A C A and D 11.3 D A D and E 10.5 E D 1/ Defined in table to paragraph 13. 15. The evaluation of development programs that include gas generation plant, which assumes that natural gas would be available for base-load power generation, is summarized below for the basic evaluation case. Details of the costs for some of the programs are given at the end of this Annex. - 69 - ANNEX 14 Page 7 of 21 PowerDevelopment Progran PresentValue Option Yearof QxnissioningAditional Gererating Capacity of TotalCosts (TShmW1ions) 1988 1990 1993 Subsequently F Mtera Nat.Gas Nat.Gas Nat.Gas 8799 G Nat.Gas Mtera Nat.Gas Nat.Gas 9015 H Nat.Gas Nat.Gas Mtera Nat.Gas 9329 I Nat.Gas Nat.Gas Nat.Gas Nat.Gas 9736 J Oil Nat.Gas Nat.Gas Nat.Gas 10508 K Mtera St.Gorgel/ (1992) Nat.Gas 11486 L Mtera Nat.Gas Nat.Gas St.Gorge 1/ (1995) 10217 M Mtera Nat.Gas Nat.Gas Nat.Gas & St.Gorge 1/ (2000) 8718 1/ FirstPhse of Stiegler'sGorge. The evaluation shows that in the basic case the Mtera hydroelectricscheme is a lower cost option than gas turbine plants with gas costed at US$3.0 per thousand cubic feet. An oil-fired generation plant is not an economic option to Mtera or gas turbine plant. The economic attractivenessof the Stiegler's Gorge project increases as its implementationdate is delayed, and by the year 2000 Stiegler's Gorge becomes attractive relative to natural gas priced at US$3.0 per thousand cubic feet at 10 percent discount rate. The equalizing discount rates for some of these options are as follows: Optionsl/ Equalizing Discount Rate Lower Cost Option at Discount Rates (EDR) (x) Below EDR Above EDR F and G 32 F G F and I 20 F I F and J 28 F J F and L above 50 F L F and M 10.2 M F 1/ defined in table above. The evaluation shows that options that include natural gas are significantlymore attractive in economic terms than options that are based on the absence of natural gas supplies for power generation (paragraphs13 and 15). 16. A key assumption in the above evaluation is that there would be an alternative use for gas to power generation that has an economic value equivalent to US$3.0 per thousand cubic feet of gas. The sensitivity of the evaluation to this assumption is shown below, in which gas-field future capital and operating costs are charged to power, and gas consumed for power generation is given zero opportunity cost. In the case that gas does not have an economic alternative use to power generation, the economic costs of proceeding with either Mtera or a natural gas plant as the next increment of generating capacity are about equal. Therefore, this case defines the break-even value of gas for power in comparison to the Mtera project, which is equivalent to an average cost of gas for power of - 70 - ANNEX 14 Page 8 of 21 US$1.32/MCF at 10% discount rate. The inclusion of the sunk costs of the Songo-Songogas-field would add about US$110 million in present value terms to the discounted cost of the natural gas option at 10 percent, which is equivalent to about TSh 2200 million at the shadow exchange rate of TSh 20/US$1.0, and in this case the Mtera project would be clearly the least-costoption. Powr DevewlopmentProgran PresentValue Option Year of Cosmissioning Additional Generating Capacity of Total Costs'/ (TSh Million) 1988 1990 1993 ibsequently Fl Mtera Nat.Gas Nat.Gas Nat.Gas 7235 Gl Nat.Gas Mtera Nat.Gas Nat.Gas 7749 1 Nat.Gas Nat.Gas Nat.Gas Nat.Gas 7172 1/ Gas-field capital and operatings costs are based on estimates made by consulting engiLeers (Williams Bros.) for the &Sogo-Songofield (excluding sunk costs), with an additionalamual aLlcaance of US$7mi11ion for expatriate mmsagement. 17. The sensitivity of the above conclusions has been tested for changes in assumptionsfrom those used in the basic case concerning capital costs of hydroelectric schemes, estimates of which are subject to greater uncertainty than other cost estimates. The cases examined are capital cost estimates for Mtera increased by 20 percent and for Stiegler'sGorge by 30 percent, which results in the following incremental increases in the present values of total costs discounted at 10 percent for those options which include these schemes: M4tera:+20% to capital costs--installedby 1988: +TSh 285 millions --installed by 1990: +TSh 236 millions --installed by 1993: +TSh 177 millions Stiegler'sGorge: +30% to capital costs --installed by 1995: +TSh 1812 millions --installed by 2000: +TSh 1028 millions With a capital cost increase of 20 percent, Mtera would still be more economic than an oil-fired power station or a natural gas station with gas costed at US$3.0/MCF as the next increment in capacity in 1988 (paragraph 15).6/ A 20% increase in Mtera capital costs would raise the break-even cost of gas for power relative to Mtera from 1.32 to 1.50 US$/MCF. An increase of the order of 30% in the capital cost of the Stiegler's Gorge project would strengthen the economic justification for delaying its implementation(paragraph 13). 6/ The present values of total costs for programs based on Mtera and natural gas costed at US$3.0/MCF, with Mtera capital costs increased by 20 percent, are as follows (TSh millions): Option F: Mtera (1988)/NaturalGas: 9084 Option G: Nat. Gas/Mtera (1990)/Nat.Gas: 9251 Option H: Nat. Gas/Mtera (1993)/Nat.Gas: 9506 - 71 - ANNEX 14 Page 9 of 21 18. The sensitivityof the above conclusionshas also been tested to the value adopted for the shadow exchange rate. The results of the sensitivityanalysis are given on page 10 of this Annex for shadow exchange rates of 12.18, 20, and 30 Tanzanian shillings to one US dollar. The analysis shows that (a) the Mtera project remains more economic than an oil-fired steam plant or a natural gas plant with gas valued at US$3.0/MCF within this range; (b) the economic attractivenessof Mtera increases with higher shadow exchange rates; (c) Mtera is more economic than a natural gas plant with gas charged at gas-field capital and operating costs with exchange rates above TSh 20/US$, and is less economic at lower exchange rates. Tanzania Power Development Program (1984-2016) Economic Evaluation (1982 Prices) Sensitivity to Exchange Rate Present Value of Total Costs (TSh Millions) Power Development Program 10% Discount Rate 15% Discount Rate Option Year of Commissioning Additional Generating Capacity Exchange Rate (TSh/US$) Exchange Rate (TSh/US$) 1988 1990 1993 Subsequently 12.18 20 1/ 30 12.18 20 30 2, _ Gas has Opportunity Value of US$3.0/MCF Delivered to Power Generation Station F Mtera Nat. Gas Nat. Gas Nat. Gas 5,954 8,799 12,439 3,159 4,648 6,553 G Nat. Gas Mtera Nat. Gas Nat. Gas 5,995 9,015 12,878 3,188 4,797 6,855 H Nat. Gas Nat. Gas Mtera Nat. Gas 6,082 9,329 13,480 3,202 4,892 7,053 I Nat. Gas Nat. Gas Nat. Gas Nat. Gas 6,203 9,736 14,359 3,172 4,945 7,281 J Oil Nat. Gas Nat. Gas Nat. Gas 7,018 10,508 15,003 3,657 5,421 7,705 N Gas has Zero Opportunity Value and Gas-field Costs are Charged to Power Generation F1 Mtera Nat. Gas Nat. Gas Nat. Gas 5,038 7,235 10,094 3,079 4,476 6,295 Gl Nat. Gas Mtera Nat. Gas Nat. Gas 5,162 7,749 10,980 3,299 4,924 7,046 II Nat. Gas Nat. Gas Nat. Gas Nat. Gas 4,686 7,172 10,513 2,868 4,392 6,452 No Gas is Available for Power Generation A Mtera Coal Coal Coal 7,696 11,560 16,500 4,297 6,462 9,254 B Oil Coal Coal Coal 8,748 12,966 18,759 4,850 7,205 10,444 1/ Basic Case TSh 20 - US$1; discount rate 10% > 2/ MCF - thousands of cubic feet P D x o - 0 H, TANZANIAPOWER DEVELOPMENT PROGRAM BASICDATA EXCHANGERATE TSH/USA OFFICIAL 12.18 (II03 PRICESI SHADOW 20.00 (------NATURAL SAS------3 HTERAHYORO DIESEL(FUELOIL)$ OIL(HEAVY) STATIONSTATION ASSOC. COAL(STEANI STIE6LERSGORGE Pt STIEGLERSSORGE P2tt UNITS STATION& ASSOC. UNITS STATIONASSOC. UNITS STATIONASSOC. UNITS SOLECYC COMB CYC UNITS TRANS.UNITS STATIONASSOC. UNITS STATIONASSOC. UNITS STATIONA ASSOC. TRANSH. TRANS. TRANS. /STATION TRANS. TRANS. TRANS. CAPITALCOSTS UStMILL. 100 USO/KN o 0 USA/KN 1200 0 USS/KN 600 1500 USt/KN 1600 900 USHMILL. 700 60 USYMILL III U USS16 36 (LUIT 1) FOR.EXCH.COHP.W 8ff 0 U e5 0 65 80 80 80 70 80 70 0 8RFFICIALRATE TSH16 1218 TS14/NN 0 0 T5t4/H 840 0 TS14/MW 731 TSt6 438TS14/MW 1949 1096 TS16 8526 731 TSt6 1352 0 ISHADONRATE TSHt6 1906 T954/1M 0 0IS4/MW 1298 0 TSt4/NN 1130 TSt6 664 TStt4/M 2950 1659 TSt6 02358 1106TSt6 1960 0 PROPORTION/YEAR(ll 1 J3 0 0 0 0 0 0 0 0 10 0 0 0 2 21 0 0 Us 0 25 0 15 0 13 0 1o 0 3 24 0 0 30 0 45 33 30 33 13 0 40 0 4 24 0 0 40 0 20 34 40 34 14 0 40 0 5 1o 0 0 15 6 10 33 15 33 14 H 10 0 13 33 13 34 ANNUALOLM COSTS 10 33 FOR.EICHCONP. i(Z 40 70 0 50 0 so s0 0 s0 0 40 0 40 0 2OFFICIALRATE TSHt6 7 TSt6 8 0 TSt4/1N 28 0 TS$4/MW 15 45 0 TS14/N 34 0 TSt6 16 0 TSt4/NN 4 0 OSHADOWRATE TSH86 9 TSt6 12 0 TS$4/NN 37 0 TSt4/N 20 59 0 TS4/MN 45 0 rst6 20 0 TSt4/N 5 0 FUELCOSTS N/A N/A N/A N/A N/A N/A FUELCONSUMPTION TONS/WNH 260 TONS/6H 280 HCF/GWH 13000 8600 TONS/GWH 546 0 0 FUELPRICE USA/TON 250 HON/TON 190 US)/NCF 3 3.00 USA/TON 24 0 0 FOR.EXCH.CONP.(21 100 100 100 100 70 0 0 FUELCOSTS AOFFICIALRATE TS74/6(8H 79 tSt4/6NH 65 1384/6(8H 48 31 TS14/G6W 16 0 0 aSHAOOWRATE TS14/6WN 130 TSt4/6NH 106 TSt4/GWH 78 52 TS84/GWH 23 o 0 FUELPRICE RATE OF 2.00 2.00 0 0 0 0.00 0 INCREASE(I/YEAR) I EXISTINGPLANT ttFIRSTUNIT Units: TSh * 6 = TSh millions TS * 4/MW = TSh ten thousand/MW TS * 4/GWh TSh ten thousand/GWh US$ MILL = US$ millions ~ H C - 74-_ ANNEX 14 Page 12 of 21 ~~~~~°°|°O- n-4 00 - 10 i 10 9 . 0-f 100< 910 o010_0- t o 00 _. I = _ o0 o00001001 i to10 Z -J = ffi _o _ ea - °In In In In V In V' ° ° )n In 0 0 101 00 I' to o u0 _1 m _0 0 0 0 0 00 0 00 In _ In Oooooooooov I .E _0 I i 0 n 0 0n i 0 i 0 n 0 0 o 0 --n U a~~~~~ t _ - o ~ ~ ~ a Ia --a *.°C- S 0.. >N4 NI -: to = 0-g Ia oa: 9 9 - 4mi eS_nwr nNZX+°aX°^s~o_~r u, _a o9 ZJ 0 L ~~~~IaI._SwO, oSS^o< sS° 0~ ~ 0 0 11 010 -10 09to.00B910to19)01 00 0- -I 11911111 011111 01111111111111111 o It ~~~~~~11 09-9 e0_= I Li o I 0. I L O = 0 0 o m I 0 0O*_-= °oo ro O-O - cI 0 = g*a*>evo ao sr oao _ 75 _ E3¢ lh~~~~~WEI Fage 13 of 21 a ce. . 0oa o o ooo WI - a _ _O e Ir. m o o_a - _ WIt' o s el-cc- - I C' i, -g o - C. tvca mI oI o. o o on WI o- o- o~ o oa oS o oooS e ao k-- = « X->XvF =~~ 0 = C ~ j-: 0 -ao 0 Ca O~- 00 0 .0 LI 101 L j 0 0010 CL. ~I Y = 0 m0 Idae0 0LIO~~~, *W e i 0o 0 ~ I I- ~- I° 0><>oa°°a°aaaaa - 76- . ANNEX 14 Page 14 of 21 orWf -z - _o ,-. 0 - 0 _e_oWn- r m-cn- rncr 0o _ - O r 0I IN N IN InboN1001 < °0 m I -CD I 0--_ . 0Z I 0- -o 000000000000000000000000000 0 00 000 ,a e I uI S I 0 I o 0 1 o- 00o00000o00000o0o00000o0000oo00o00000 O -aa >~~~~L - Z0 0- 0- C 0 0- O00-0-I 01 00.0 N1 00 0I 0- -(4 0 0-O _ CDI 2 INs> °r°ISNsININI ttsd1 1 0 0101 0-* 010 CU . ° eLa 0 00-_. t o -L o cJ e e- + S. 10 '° 0o IN 0° 10 10 0 . 0 - S °0 0 10 IN m0 m- 10 a - 10 0 0 101 eS e _ a 0 - o LI._ ° S S S S S SS IS - 0 S 0-0 O o n 0 0 0 0 0 0 0 0 0 o 0, 0,,o - Co S e- 0 C 00 ___o SI 0 I _- _ I LIC I 0- _ _ _ 0 I o 5 _ O_r-U7orm o_ or O_0 -n r 10N01 01 Cr 004 IN0I 0111 0.-.1 0 C .0001 o o °S~Z IN 0s_ 0_ 00 1_ . 0 IN_ 000 100_ IN10 ( 00-1 0 I . - TANZANIAPONER DEVELOPMENT PROGRAM ECONOMICCOSTS (TSHKILLION) OPTION:OIL+COAL EVALUATIONCASE BASIC (------CT PITAL COSTS------<---- -& COSTS------> (------FUEL COSTS------> TOTAL YEAR HYDRO OIL (HEAVY) NATURALGAS COAL MTERADIESEL OIL NAT.6AS COAL DIESEL CIL AT.GAS COAL COSTS STATIONASS.TRAN STATION ASS.TRAN STATION ASS.TRAN 1984 0 0 0 0 0 0 0 0 1985 0 99 0 0 0 0 0 17 0 0 0 0 0 0 0 It5 1986 0 296 0 0 0 0 0 17 0 0 0 14 0 0 0 326 187 0 460 0 0 0 0 0 5 17 0 0 0 SO 0 0 0 532 198 0 362 0 0 0 255 0 11 17 14 0 0 6 26 0 0 690 1989 0 99 0 0 0 509 315 11 17 28 0 0 12 115 0 0 1105 1990 0 0 0 0 0 934 325 1t 17 29 0 0 21 219 0 0 1553 1991 0 0 0 0 0 1018 630 11 17 28 0 34 44 278 0 6 2067 1992 0 0 0 0 0 1189 640 11 17 28 0 34 14 323 0 23 2278 1993 0 0 0 0 0 1189 640 11 17 28 0 69 5 237 0 60 2254 1994 0 0 0 0 0 764 630 11 17 28 0 103 8 170 0 92 1823 1995 0 0 0 0 0 934 325 11 0 28 0 103 0 157 0 118 1676 199S 0 0 0 0 764 630 11 0 29 0 239 0 174 0 139 194 1997 0 0 0 0 934 325 11 0 28 0 138 0 163 0 166 1765 IS98 0 0 0 0 764 630 11 0 28 0 172 0 178 0 190 1974 199 0 0 0 0 934 325 If 0 28 0 172 0 164 0 220 1954 2000 0 0 0 0 764 630 11 0 28 0 207 0 213 0 242 20S5 2001 0 0 0 0 934 325 11 0 28 0 207 0 17 0 277 1960 2002 0 0 0 0 764 630 11 0 28 0 241 0 187 0 308 2169 2003 0 0 0 0 934 325 11 0 28 0 241 0 194 0 341 2073 2004 0 0 0 0 764 630 11 0 28 0 276 0 197 0 375 2282 2005 0 0 0 0 934 325 11 0 28 0 276 0 193 0 413 2179 2006 0 0 0 0 764 630 11 0 28 0 310 0 189 0 452 2394 2007 0 0 0 0 934 325 11 0 28 0 310 0 192 0 492 2292 2008 0 0 0 0 1019 630 11 0 29 0 345 0 178 0 537 2747 2009 0 0 0 0 1443 640 11 0 28 0 345 0 178 0 581 3226 2010 0 0 0 0 1697 955 11 0 28 0 379 0 178 0 628 3877 2011 0 0 0 0 1697 955 11 0 28 0 414 0 180 0 677 3962 2012 0 0 0 0 1697 955 11 0 29 0 448 0 191 0 729 4049 2013 0 0 0 0 1697 955 11 0 28 0 493 0 181 0 7B3 4138 2014 0 0 0 0 1443 955 21 0 28 0 517 0 180 0 840 3974 2015 0 0 0 0 934 640 11 0 28 0 552 0 184 0 899 3247 2016 0 0 0 0 255 315 I1 0 28 0 596 0 288 0 961 2344 PRESENTVALUE OF TOTAL COSTS I I 5 27386 10 12966 IS 7205 PRESENTVALUE OF ENERGY FROM ADDITINALCAPACITY (8WH) I 7 5 16150 10 589s5 15 2496 o AY.INCREMENTALCOSTENERGY I I 5 1.70 ITSH/KHtI 10 2.20 15 2.89 TANZANIAPOWER DEVELOPMENT PROGRAM CAPACITYADDITIONS AND ENERGY BALANCE OPTION-MTERA+NAT.BAS-SAS TURBINE (------CAPACITYADDITIONS ------) LOAD EXISTINGCAPACITY 6------NEN CAPACITY------) TOTAL CAPACITY ENERGY(------ENERGYBALANCE------I YEARDEHAND HYDRODIESEL HYDRONAT.6AS NAT.GAS COALCAPACITY RESERVE DEMANDEX.HYDRO DIESEL HTERA OIL NAT.GAS COAL (NM) (Mn) (MN) (MN) (NW) (NW) (M) (NW) (21 (GNH) (B1H) (GNH) (GW") (GNH) (G6H) (6GH) 1984 1985 225 244 77 321 43 1164 1164 0 1986 242 -3 319 31 1373 1363 10 1997 259 0 318 23 1462 1427 35 0 0 1989 271 0 80 398 47 1536 1510 4 22 0 1989 285 -3 395 39 1612 1510 8 94 0 (990 300 -14 381 27 1699 1510 14 175 0 0 1991 315 -1 30 410 30 1784 1510 28 246 0 0 1992 330 -1 30 439 33 1873 1510 9 304 50 0 1993 347 -19 60 480 38 1967 1510 3 350 104 0 1994 364 -9 471 29 2065 1510 5 350 200 0 (995 382 -27 60 504 32 2168 1510 0 350 308 0 1996 401 504 26 2277 1510 0 350 417 0 1997 421 60 564 34 2391 1510 0 350 531 0 1998 442 564 27 2510 1510 0 350 650 0 1999 465 60 624 34 2636 1510 0 350 776 0 2000 488 624 29 2769 1510 0 350 908 0 2001 512 60 684 34 2906 (510 0 350 1046 0 2002 538 684 27 3051 ISIO 0 350 1191 0 2003 565 60 744 32 3204 1510 0 350 1344 0 2004 593 744 25 3364 1510 0 350 1504 0 2005 623 -60 120 804 29 3532 1510 0 350 1672 0 2006 654 -60 60 804 23 3709 1510 0 350 1849 0 2007 686 60 864 26 3894 1510 0 350 2034 0 2006 721 -60 120 924 29 4089 1510 0 350 2229 0 2009 757 924 22 4293 1510 0 350 2433 0 2010 795 -60 120 984 24 4SO9 1S5O 0 350 2648 0 2011 834 60 1044 25 4733 1510 0 350 2873 0 2012 876 -60 120 1104 26 4970 (510 0 350 3110 0 2013 920 60 1164 27 5219 1510 0 350 3359 0 2014 966 -60 120 1224 27 5480 1510 0 350 3620 0 2015 1014 60 1284 27 5754 1510 0 350 3894 0 2016 1065 -60 120 1344 26 6041 1510 0 350 4181 0 PVENER6Y (NHU) I 5 3687 0 12463 0 0 10 1734 0 4151 0 15 924 0 1572 0 -9 ANNEX 14 * ~~~~~~~~~~~Page17 of 21 , _ _ fl O f_ 40infl 4w .. a g So 4 n 0 2te.O 00004 0 2 n m-C 00,0%n_" g~~~-i 0 a O. 0 - 0 0. e fl o..0 ke 00 o 0 0 m OO 0mi - 1- oooooooo@~~~~~_^_-oor"o^nXX2NZ"0>- 0 a an C! !-~ U 2 - - - -. - d 00 ° 0° ° 00° 0 0 00 0 00 0 0 0 0 ° 00 ° °°°°°°°° LA On ! B. ,~~~~~~~~~~~~~~~~ 0 o _ o0 . ~~~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ..-~ .u ~ ~ ~ ~ ~~~~~~~~~~~~~~0 a~~~~~~~~~~~~~~_ 0 0 1~~fl 0 °°°°°°*-o 04 '° - IFs n 0 000 00 00 00 00 00 00 '.J ~~~ ~ ~ ~ ~ ~ ~ ~ ~ CD ~ ~ ~ ~ ~ ~ 0 '30 0 I 0 - I 5 0 1O0 ow-j a a - >*tMO.0 0000 a0 -JO-in t e uJ~~~ ~ 00 - a 0 a 0 _ - ,a., O 0 00 0000000 ,eBo 000000 0000000 000000 a in _j_ _ __ _ ~ _ 2 TANZANIAPOWER DEVELOPMENT PROGRAM CAPACITYADDITIONS AND ENERGY BALANCE OPTION:ALL NAT.GAS-GAS TURBINE <------CAPACITYADDITIONS ------) LOAD EXISTINGCAPACITY <------NEW CAPACITY ------) TOTAL CAPACITY ENERGY(------ENER6Y BALANCE------> YEARDEMAND HYDRODIESEL HYDRONAT.GAS NAT.6AS COALCAPACITY RESERVE DEMANDEX.HYDRO DIESEL MTERA OIL NAT.GASCOAL tIH) (mW) t"W) (NW) (MN) (NW) (MW) (NW) 11) (GWH) 16HH) (SW) (68H) ISWH) (1WH) 16NH) 1984 1985 225 244 77 321 43 1164 1164 0 1986 242 -3 318 31 1373 1363 10 1987 259 0 318 23 1462 1427 35 0 0 1988 271 0 30 348 28 1536 1510 4 0 22 1999 285 -3 30 375 32 1612 1510 8 0 94 1990 300 -14 60 421 40 1699 1510 14 0 175 0 1991 315 -1 420 33 1784 1510 28 0 246 0 1992 330 -1 419 27 1873 1510 9 0 354 0 1993 347 -19 60 460 33 1967 1510 3 0 454 0 1994 364 -9 45t 24 2065 1510 5 0 550 0 1995 382 -27 60 484 27 2168 1510 0 0 658 0 1996 401 484 21 2277 1510 0 0 767 0 1997 421 60 544 29 2391 1510 0 0 881 0 1998 442 544 23 2510 1510 0 0 1000 0 1999 465 60 604 30 2636 1510 0 0 1126 0 2000 488 604 24 2768 1510 0 0 1258 0 2001 512 60 664 30 2906 1510 0 0 1396 0 2002 538 -60 60 664 23 3051 1510 0 0 1541 0 2003 565 -60 120 724 28 3204 1510 0 0 1694 0 2004 593 724 22 3364 1510 0 0 1854 0 2005 623 60 784 26 3532 1510 0 0 2022 0 2006 654 -60 60 784 20 3709 1510 0 0 2199 0 2007 686 60 844 23 3894 1510 0 0 2384 0 2008 721 -60 120 904 25 4089 1510 0 0 2579 0 2009 757 904 19 4293 1510 0 0 2783 0 2010 795 -60 120 964 21 4508 1510 0 0 2999 0 2011 834 60 1024 23 4733 1510 0 0 3223 0 2012 876 -60 120 1084 24 4970 1510 0 0 3460 0 2013 920 60 1144 24 5219 1510 0 0 3709 0 2014 966 -60 120 1204 25 5480 1510 0 0 3970 0 2015 1014 60 1264 25 5754 1510 0 0 4244 0 2016 1065 -60 120 1324 24 6041 1510 0 0 4531 0 PVENERGY (ISW) T 5 0 0 16150 0 o 4 10 0 0 5885 0 * 15 0 0 2496 0 t TANZANIAPOWER DEVELOPMENT PRORAN ECONOMICCOSTS (TSHMILLION) OPTION:ALL NAT.6AS-6AS TURBINE EVALUATIONCASE BASIC SAS PRICE(US$/MCF) 3.00 <------CAPITAL COSTS------(------O&K COSTS------) 4------FUEL COSTS------TOTAL YEAR HYDRO OIL (HEAVY) NATURALGAS COAL MTERA DIESEL OIL NAT.5AS COAL DIESEL OIL NAT.6AS COAL COSTS STATIONASS.TRAN STATION ASS.TRAN STATION ASS. TRAN 1984 0 0 0 0 0 0 0 0 1985 0 0 0 82 0 0 0 0 17 0 0 0 0 0 0 0 99 1996 0 0 0 230 210 0 0 0 17 0 0 0 14 0 0 0 471 1987 0 0 0 378 216 0 0 0 17 0 0 0 50 0 0 0 661 1988 0 0 0 394 210 0 0 0 17 0 9 0 6 0 17 0 652 1989 0 0 0 164 0 0 0 0 17 0 15 0 12 0 73 0 281 1990 0 0 0 230 0 0 0 0 17 0 30 0 22 0 137 0 435 1991 0 0 0 296 210 0 0 0 17 0 30 0 44 0 192 0 788 1992 0 0 0 296 216 0 0 0 17 0 30 0 14 0 276 0 950 1993 0 0 0 362 210 0 0 0 17 0 46 0 5 0 354 0 SS3 1994 0 0 0 296 0 0 0 0 17 0 46 0 8 0 429 0 795 1995 0 0 0 362 210 0 0 0 0 0 62 0 0 0 514 0 1146 1996 0 0 296 216 0 0 0 0 0 61 0 0 0 598 0 1171 1997 0 0 362 210 0 0 0 0 0 76 0 0 0 687 0 1335 1998 0 0 296 0 0 0 0 0 0 76 0 0 0 780 0 1152 1999 0 0 526 210 0 0 0 0 0 91 0 0 0 878 0 1705 2000 0 0 756 216 0 0 0 0 0 91 0 0 0 981 0 2045 2001 0 0 789 210 0 0 0 0 0 106 0 0 0 1089 0 2194 2002 0 0 493 0 0 0 0 0 0 107 0 0 0 1202 0 1802 co 2003 0 0 592 210 0 0 0 0 0 122 0 0 0 1321 0 2245 2004 0 0 592 216 0 0 0 0 0 122 0 0 0 1446 0 2376 2005 0 0 822 210 0 0 0 0 0 137 0 0 0 1577 0 2746 2006 0 0 789 210 0 0 0 0 0 137 0 0 0 1715 0 2851 2007 0 0 657 216 0 0 0 0 0 152 0 0 0 1860 0 2986 2008 0 0 897 210 0 0 0 0 0 167 0 0 0 2012 0 3276 2009 0 0 987 210 0 0 0 0 0 167 0 0 0 2171 0 3436 2010 0 0 1019 216 0 0 0 0 0 183 0 0 0 2339 0 3756 2011 0 0 953 420 0 0 0 0 0 199 0 0 0 2514 0 4085 2012 0 0 1019 216 0 0 0 0 0 213 0 0 0 2699 0 4147 2013 0 0 953 420 0 0 0 0 0 228 0 0 0 2893 0 4494 2014 0 0 855 216 0 0 0 0 0 243 0 0 0 3096 0 4411 2015 0 0 329 210 0 0 0 0 0 259 0 0 0 3310 0 4107 2016 0 0 131 0 0 0 0 0 0 274 0 0 0 3534 0 3940 PRESENTVALUE OF TOTAL COSTS I 2 5 23122 10 9736 15 4945 PRESENTVALUE OF ENER6Y FROM ADDITIONALCAPACITY (B1HI @ T 5 16150 co 10 5885 15 2496 AV.INCREMENTALCOSTENERGY i 2 5 1.43 (TSH/KWH) 10 1.65 15 1.98 TANZANIAPOWER DEVELOPlENT PROGRAM CAPACITYAND ENERGY BALANCES OPTION MTERA+STIE6LERSGORSE1995 +COAL LOAD EXISTINGCAPACITY <…--CAPACITY ADDITIONS------> TOTAL CAPACITY ENERGY<------ENERGY BALANCE …------YEARDEMAND HYDRODIESEL MTERAST.G.PHI ST.6.PH2 COALCAPACITY RESERVE DEMANDEX.HYDRO DIESEL MTERAST.G.PHI ST.6.PH2 COAL (no) (MN) (HN) (MN) (HN) (MN) (MN) (NW) IZ) (6HH) (S6H) (6WH) (WlH) (1WH) (WHH) (SWH) 1984 1985 225 244 77 321 43 1164 1164 0 1986 242 -3 318 31 1373 1363 10 1987 259 0 318 23 1462 1427 35 0 1988 271 0 Go 398 47 1536 1510 4 22 1989 285 -3 395 39 1612 1510 a 94 !990 300 -14 381 27 1699 1510 14 175 0 1991 315 -1 380 21 1784 1510 28 246 0 1992 330 -1 60 439 33 1873 1510 9 304 50 2993 347 -19 420 21 1967 1510 3 350 0 104 1994 364 -9 60 471 29 2065 1510 5 350 0 200 1995 382 -27 300 744 95 2168 1510 0 350 158 150 1996 401 744 85 2277 1510 0 350 397 20 1997 421 744 77 2391 1510 0 350 511 20 1998 442 744 68 2510 1510 0 350 630 20 1999 465 744 60 2636 1510 0 350 756 20 2000 4B8 744 53 2768 1510 0 350 888 20 2001 512 744 45 2906 1510 0 350 1026 20 2002 538 744 38 3051 IS1O 0 350 1171 20 2003 565 744 32 3204 1510 0 350 1322 22 2004 593 744 25 3364 1510 0 350 1484 20 2005 623 150 894 44 3532 1510 0 350 1652 0 20 2006 654 894 37 3709 1510 0 350 1829 0 20 2007 686 894 30 3894 1510 0 350 1829 185 20 2008 721 150 1044 45 4089 1510 0 350 1829 380 20 2009 757 1044 38 4293 1510 0 350 1829 584 20 2010 795 1044 31 4508 1510 0 350 1829 799 20 2011 834 150 1194 43 4733 1510 0 350 1829 1024 20 2012 876 1194 36 4970 1510 0 350 1829 1261 20 2013 920 150 1344 46 5219 1510 0 350 1829 1371 159 2014 966 1344 39 5480 1510 0 350 1829 1371 420 2015 1014 60 1404 38 5754 1510 0 350 1829 1371 694 2016 1065 60 1464 37 6041 1510 0 350 1829 1371 981 041- PVENERGY 16H T 5 3687 9272 2296 894 10 1734 3226 588 337 15 924 1250 162 159 . TANZANIAPOWER DEVELOPMENT PROGRAM ECONMICCOSTS (TSHMILLION) OPTION:MTERAtSTIE6LERS GORSE-I995+COAL EVALUATION CASE BASIC TOTAL …------CAPITALCOSTS------< ON COSTS------> <------FUELCOSTS ------cosTs YEAR MTERASTIESLERS SORGE STIE6LERS 6ORGE COAL MTERADIESEL STIE6LERS SORGE COAL DIESEL COAL STATIONASS.TRAN STATION ASS.TRAN STATION ASS.TRAN PHASEI PHASE2 PHASEI PHASE2 1984 248 0 0 0 0 0 0 248 1995 400 0 0 0 0 0 0 12 0 0 0 0 0 0 0 412 1986 457 0 0 V 0 0 0 12 0 0 0 16 0 0 0 486 1987 457 1236 0 0 0 0 0 4 12 0 0 0 58 0 0 0 1768 Il88 343 1607 0 0 0 0 0 9 12 0 0 0 7 0 0 0 1977 1989 1607 0 0 0 249 0 9 12 0 0 0 14 0 0 0 18S0 1990 1730 0 0 0 48 37 9 12 0 0 0 25 0 0 0 2310 1991 1730 0 0 0 913 38 9 0 0 0 0 50 0 0 0 2739 ISS2 1607 365 0 0 747 73 S 0 0 0 27 16 0 0 12 2855 1993 1607 376 0 0 664 38 9 0 0 0 27 6 0 0 24 274S 1994 1236 365 0 0 249 37 9 0 0 0 54 10 0 0 46 2005 1995 0 0 0 0 0 0 9 0 20 0 54 0 0 0 35 118 1996 0 0 0 0 0 0 9 0 20 0 54 0 0 0 5 87 I997 0 0 0 0 0 0 9 0 20 0 54 0 0 0 5 87 1998 0 0 0 0 0 0 9 0 20 0 54 0 0 0 5 87 1999 0 0 0 0 0 0 9 0 20 0 54 0 0 0 5 87 2000 0 0 0 0 0 0 9 0 20 0 54 0 0 0 5 87 2001 0 0 0 0 0 0 9 0 20 0 54 0 0 0 5 87 2002 0 0 196 0 0 0 9 0 20 0 54 0 0 0 5 283 OD 2003 0 0 784 0 0 0 9 0 20 0 54 0 0 0 5 872 2004 0 0 784 0 0 0 9 0 20 0 54 0 0 0 5 871 2005 0 0 I96 0 0 0 9 0 20 5 54 0 0 0 5 288 2006 0 0 0 0 0 0 9 0 20 5 54 0 0 0 5 92 2007 0 0 462 0 0 0 9 0 20 5 54 0 0 0 5 555 2008 0 0 0 0 0 0 9 0 20 10 54 0 0 0 5 97 2009 0 0 0 0 0 0 9 0 20 10 54 0 0 0 5 98 2010 0 0 462 0 0 0 S 0 20 10 54 0 0 0 5 560 2011 0 0 0 0 0 0 9 0 20 IS 54 0 0 0 5 103 2012 0 0 462 0 249 0 9 0 20 15 54 0 0 0 5 013 2013 0 0 0 0 747 37 9 0 20 20 54 0 0 0 37 923 2014 0 0 0 0 1161 74 9 0 20 20 54 0 0 0 97 1436 2015 0 0 0 0 913 74 9 0 20 20 81 0 0 0 160 1277 2016 0 0 0 0 249 37 9 0 20 20 108 0 0 0 227 669 PRESENTVALUE OF TOTAL COSTS I 1 5 16368 10 10760 15 7672 PRESENTVALUE OF ENERGY FROM ADDITIONALCAPACITY 1(NH) 7 T 5 16150 10 5885 15 2496 AV.INCREMENTALCOSTENERGY I 1 5 1.01 (TSH/KNH) 10 1.83 15 3.07 - 84 - ANNEX 15 ECONOMIC RATE OF RETURN ON MTERA PROJECT Incremental ------Mtera ------Incremental Output Capital Operating Benefits Net Year from Mtera 1/ Costs Costs at TSh 0.81/kWh 3/ Benefit (GWh) ------(TSh million) 4/------ 1984 248 -248 1985 400 -400 1986 457 -457 1987 457 4 -461 1988 22 343 9 18 -334 1989 94 9 76 + 67 1990 175 9 142 +133 1991 246 9 199 +190 1992 304 9 246 +237 1993 350 9 284 +275 to 2037 350 9 284 +275 Economic Rate of Return: 10.1% 1/ Production from Mtera hydro station in an average hydrological year taken to be 350 GWh (300 GW firm energy and 50 GWh secondary energy). 2/ Transmission and distribution losses taken to be 20% of energy sales from 1988 onwards. 3/ Case 2 average tariff yield is TSh 0.975/kWh sold in constant 1983 price terms, equivalent to TSh 0.81/kWh generated. 4/ 1983 price terms. - 85 - ANNEX 16 Page 1 of 2 TANZANIA TANESCO FOURTHPOWER PROJECT Selected Documents and Data Available in the Project File General Reports and Documents Related to the Sector 1. "Stiegler'sGorge Scheme Preliminaryoutline and Tentative Estimate of Cost," November 1967, Coyne and Bellier. 2. "Planning the Developmentof the Kagera River Basin," June 1972, Polytechna-Hydroprojekt- Carlo Lotti & Co. 3. "Energy Policy in Tanzania," June 1980, InternationalInstitute for Environmentand Development. 4. "Stiegler'sGorge Scheme PreliminaryOutline and Tentative Estimate of Cost," November, 1967, Coyne and Bellier. 5. "Kingenenasand Shuguri Falls Power Projects, A PreliminaryReview and Study IdentificationReport," November 1980, A/S Hafslund - Norplan A/S. 6. "Tanzania Power Sector Study," February 1981, Acres International Limited. 7. "TanzaniaPower Sector Study Executive Summary,"March 1981, Acres InternationalLimited. 8. "Statementsof the Minister of Water and Energy during Presentation in the National Assembly of Expenditures,"July 1981 and 1982, MWE. 9. "TANESCO System Operations,"October 1981, TANESCO. 10. "OpportunitiesFor Natural Gas Utilization,"October 1982, InternationalGas DevelopmentCorporation. - 86 - ANNEX 16 Page 2 of 2 General Reports and Studies Related to the Project 1. "Report on Tanzania Electricity Supply Company Ltd." January 1977, Electricity Supply Board, Ireland. 2. "Great Ruaha Power Project Studies of Soil Erosion, Vegetationand Fluvial Transport of Mtera Reservoir Region," June 1977, SWECO. 3. "Great Ruaha Power Project Expected EnvironmentalChanges Below the Mtera Reservoir,"June 1978, SWECO. 4. "Ubungo Power Plant Rehabilitation,"April 1981, SWECO. 5. "Great Ruaha Power Project Mtera Dam Water Management,"May 1981, SWECO. 6. "Great Ruaha Power Project - Mtera Power Plant PreinvestmentStudy," June 1981, SWECO. Selected Working Papers Computer printouts and discounted cash flow studies. Project cost estimates and sensitivitystudies; and Financial and accountingstatements. _.2.3 IEREDB... 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