TANESCO 'NOW FACES IMMINENT COLLAPSE'

Energy and Minerals minister Sospeter Muhongo Dar es Salaam. National utility Tanesco is in dire straits, with mounting losses that may ultimately see the power behemoth fold like a cheap suit, The Citizen on Saturday has learnt.The company’s operating deficit currently stands at a colossal Sh400 billion according to the latest International Monetary Fund (IMF) data. These fiscal arrears could snowball into a budget shortfall of at least a half a trillion shillings by 2013/14 says the IMF, putting into jeopardy national energy plans. “Tanesco’s financial difficulties need to be addressed speedily. Large arrears and continued losses pose significant risks to growth and the budget,” the IMF says in a new report. This trend does not bode well for the future of this country, analysts note. The Tanzanian economy will be hardest hit by Tanesco’s financial nightmare, and could go into a tailspin from which recovery is unlikely, they say. The IMF offers this stark warning: “Further deterioration of Tanesco’s finances would ultimately translate into a drain on the budget and could result in power outages, thereby potentially undermining growth prospects.” Economist Honest Ngowi agrees that the power utility is neck-deep in the red, but thinks the government will not let this primeval national outfit collapse. If anything, he told this reporter, Tanesco is on the bubble: It could go either way. Dr Ngowi does warn, however, that the path to recovery will be painful. To keep the firm from foundering, the donor community wants Tanzanian administrators to step in. Members of the diplomatic corps said Tanesco needs a top-to-bottom makeover. Its management structure and fiscal systems need to be overhauled, they said, otherwise the firm will have difficulty raising much-needed financing. The government is already moving to backstop Tanesco’s slide into fiscal oblivion according to Energy and Minerals minister Sospeter Muhongo. On Thursday, he acknowledged that his office is in talks with both the World Bank and the IMF, but refused to divulge what their chats are about. There are indications however, that among other things, the Energy tsar may be desperately fishing for a Tanesco bailout package. The global lenders are quite open about it. “The World Bank is engaged in discussions with the government of Tanzania on the overall efficiency of the energy sector,” said a World Bank official who asked to not be named. “We are working together on a sustainable plan for Tanesco’s operations,” our World Bank source added. The embattled power firm has a long history of failing to balance its books. Its current fiscal woes, however, go back two years to the crippling blackouts of 2011, when severe nation-wide droughts undercut hydropower production. The government was subsequently forced to put into action an emergency plan that saw Tanesco begin to buy electricity from private power companies at exorbitant rates. With that, cheap hydro power was out, diesel electricity became all the rage and Tanesco began a fiscal backslide that has brought it to the brink of collapse. Presently, the firm says it spends around Sh8.32 billion (about $5.2 million) every day to generate power using diesel and heavy furnace oil. This, coupled with mismanagement and gross inefficiencies in the firm’s upper echelons, has put the government in a tough spot. Observers want action, and they want it now. Prof Muhongo says Tanesco does not just have money issues: Its problems run much deeper. “It’s not just about bailing Tanesco out, because we did that before and it did not work” said the Energy boss in an interview with this reporter. The firm’s entire corporate structure needs to be gutted out and turned on its ear, he noted. “We’ll deal with it differently this time – we want a modern outfit that should see Tanzania realise its energy ambitions.” The national laws that created Tanesco in 1964 must first be reworked according to Prof Muhongo. The firm is reeling under the pressure of being the sole energy supplier, he said. Several options for streamlining the utility’s operations are being looked at, but ultimately the government may be forced to split it into two or three different business units, says Prof Muhongo. Dr Ngowi believes Tanesco’s deficit is unsustainable. He is worried if left unchecked, things might spiral out of control. In its latest tariff review application, Tanesco has supposedly admitted if it does not get the green light for a price bump, it will go under. The only way to turn things around is to end Tanesco’s monopoly in Tanzania, according to Dr Ngowi. Kigoma legislator Zitto Kabwe agrees.. “Power generation should be done by the private sector,” he said. “The government should just focus on transmission – they need to float Tanesco in the local stock market, and to let in more competitors,” closed the Kigoma North MP.                                                           News By MCL Blog.