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TANZANIA ELECTRIC SUPPLY
COMPANY LTD
Presentation on the performance
of the Company to Development
Partners
By
Eng. Felchesmi Mramba
Managing Director- TANESCO
1
Contents
Background
 Current Power Situation
 Internal Reforms and Status
 Recent Improvements
 Financial Performance
 Conclusion

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Background


Tanzania
Electric
Supply
Company Limited is a parastatal
organization under the Ministry
of Energy and Minerals (MEM)
established in 1964.
Vision
 To
be an efficient and
commercially focused utility
supporting the development of
Tanzania and to be a power
house of East Africa.
The Company’s core business Mission
generate/purchase, transmit
is Generation, Transmission  To
and supply electricity in the
and Distribution.
most effective, competitive and
sustainable manner possible.

The
Company
also
sale
electricity to the mainland and Company Values
bulk power supply to the Island  Ethical
of Zanzibar.
 Excellence

3
Receptiveness
Current Power situation
Generation




Installed capacity in the grid is 1501.24 MW. Hydro:
561.84 MW (37.43%); Thermal: 939 MW (62.57%).
Capacity of thermal plants (Gas: 501MW; Oil: 438.4
MW)
Off-grid stations total capacity is 92.4 MW
Highest grid system demand is 898.72 recorded in
November 2013.
Transmission System :
Transmission network comprises of 2,732 km of 220kV
lines; 1,555.79 km of 132 kV lines; and 578.7 km of
66 kV lines, totalling 4,866.85km by the end of
November 2013.
Distribution System :
Comprises of 17,021 km of 33 kV lines, 5,375km of
11kV lines, 34,513km of LV and 11,124 distribution
transformers.
4
Internal Reforms and Status

Main Focus Areas
 Operational Efficiency
 Customer Service Improvement
 Business Growth
 Our people
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1. Operational Efficiency

Build Effective Procurement function by:
 Decentralizing
procurement function
 Restructuring the PMU
 Build PMU Capacity

Effective Management of Stock items by:
 Enhancing
Stock Management
 Enhancing Stock Monitoring
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Operational Efficiency …

Strengthening ICT systems to support the
business

Implement Corporate Management System
Automate most of the Operations

Improve on collection of electricity revenues





Replace all post-paid meters with prepaid meters in
three years time
Use Banks for collection of payments from customers
Establish electronic payment systems for credit systems
Stretch collection targets with attractive incentives to
best performers
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Operational Efficiency …








Improve revenue protection
Increase severity of penalties to electricity thieves
Enhance education to customers on electricity theft
Enhance partnerships with customers to provide
information on electricity theft
Institute Stern disciplinary action on staff any
colluding with customers to steal electricity
Use modern tools, technology and improved
technical design
Acquire modern tools to standardize workmanship
Use Low cost but good quality designs and materials
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2. Customer Service …

Improve quality of power supply to customers
Improve maintenance of the system
 Complete the ongoing Distribution Projects to
improve reliability and improve voltage


Improve electrical safety
Monitor compliance on safety measures in
distribution lines e.g. use of insulators, cutting of
trees and use of PPE
 Institute friendly process and timely compensation
to affected customers

 Enhance
Monitoring of safety compliance
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Customer Service…






Enhance customers relations management
Establish one stop shop under reviewed customer
processes
Enhance monitoring and evaluation of Customers
Service Charter implementation
Enhance Customer Service Training
Improve Customer Communication
Use more efficient communication channels
including sms and social media to communicate
with customers
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Customer Service …





Enhance stakeholder relationship and
engagement including functional PR
Develop communication policy and strategy
Capacity building
Provide adequate tools and equipment
Provide strategic guidance for stakeholders
Relations Management at various organizational
levels i.e. Corporate, zonal, regional and plant
levels
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3. Business Growth …

Build a Lean Head office structure
focused on supporting regional
operations
 Decentralize
Operations and empower zonal
and regional offices

Increase access to electricity in Urban
areas


Source commercial financing for network expansion
and rehabilitation
Implement urban electrification program
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Business Growth …




Expand Customer base
Outsourcing distribution network expansion and
rehabilitation
Stretch connection targets for all region
Allow Customer Group payment to speed
customer connection and reduce connection
costs
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Our People

Involvement of regional/plant management
in setting performance objectives
 Participatory
driven performance contracts
 One Minute Goals
 PDP (Performance Development Program)

Inculcate business management
orientation and sense of responsibility and
accountability


Enhance Management and Leadership Capacity
Establish accountability through regular financial
reporting and operations monitoring and evaluation
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Internal Reforms - Status

PMU
 Specialized
Units within PMU operational
 All posts advertised
 Interview of shortlisted candidates in progress

ICT
 Establishment
of CMS is in progress
 Use of Banks customers payments started in May
2014 and being rolled out to all regions.
Completion: July 2014
 Use of SMS to inform customers in progress
 Online application for new connection is in
progress
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Internal Reforms - Status

Revenue Protection
 Installation
of meter on substations and
feeders completed by 100%
 Installation of meters on transformers and
feeders completed in Dar es Salaam, Tanga,
Coast and Iringa
 Installation of AMR meters to all T2 & T3
customers is 100% completed
 Inspection Vehicles procured for all Class A
regions
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Internal Reforms - Status

Access to electricity
 Connection
to outstanding applications of
more than 30 Working days completed.
 Areas to be electrified under Urban
Electrification Programme has been
identified negotiation for funding of the
same is in progress.

Use of Modern Tools and Technology

Procurement of necessary tools and equipment is in
progress.
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Internal Reforms - Status

Involvement of regional/plant management
in setting performance objectives
 Performance
Contracts for 2014 signed with
subordinates
 All regions and plant managers have submitted
their business plan that will be used to set their
next year Performance Contracts.
 One Minute Goal Targets agreed with
Subordinated
 PDP Group Targets agreed with all regions and
Power Plants
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Recent Improvements
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Recent Improvements …
Energy Loss-2010-2015
Distribution Loss %
Transmission Loss %
Total Loss %
2010
17.8%
5.6%
23.4%
ACTUAL
2011
2012
15.3% 15.8%
6.1%
6.1%
21.4% 21.9%
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2013
12.8%
6.2%
19.0%
PROJECTION
2014
2015
12.4% 12.0%
5.7%
5.1%
18.1% 17.1%
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Recent Improvements …
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Recent Improvements …
Reasons for loss reduction
 Replacement of post paid meters with
pre paid meters
 Energy metering at substations, feeders
boundary and transformer
 Replacement of defective meters
 Enforcement of meter inspections
 Enhanced maintenance
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Recent Improvements …
Figures in TZS Millions
Revenue Collection 2009-2013
Year
Total Revenue Collection
2009
2010
2011
2012
413,501 466,477 545,658 820,436
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2013
945,599
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Recent Improvements …
Figures in TZS Millions
Monthly Revenue Collection-January 2013 to May 2014
Month
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
Monthly Revenue Collection
74,387 74,303 74,790 79,200 81,039 78,463 79,998 78,172 76,659 82,448 81,356 84,784
Month
Monthly Revenue Collection
Jan-14 Feb-14 Mar-14 Apr-14 May-14
89,617 97,418 99,794 100,239 102,187
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Recent Improvements …
Mobile payment systems:
 TANESCO
has continued to use
Banking Institutions and Mobile Phones
Operators for convenience of payment
 This mode of payment is simple, safe
and user friendly.
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Recent Improvements …
Debt Recovery Strategy
 TANESCO
has started a three years
program for replacement of post-paid
meters (which is 36% of all customers
meters at the moment) with pre-paid
meters.
 This will allow TANESCO to earn revenues
upfront as well as ease recovery of 50% of
the arrears for every purchase.
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Recent Improvements …
Consumer /Staff ratio
2007
2008
2009 2010
2011
2012
2013
2014
Total Number of consumers by end
of year
667,490 723,873 783,311 849,236 932,385 1,020,854 1,163,968 1,421,768
4,695 5,527 5,550 5,664 5,885
5,915
5,983
6,068
Total Number of company Staff
142
131
141
150
158
173
195
234
Consumer /Staff ratio
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Recent Improvements …
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Recent Improvements …
Group Performance Targets
 TANESCO
has
implemented
a
Performance Development Program (PDP)
with collective performance targets for
regions/plants whereby after meeting
targets reward is given and when target
is not met a penalty is instituted.
 Great performance improvements have
been achieved using this strategy
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Recent Improvements …
Bonus and Performance …
 TANESCO
has also established
individual performance contracts
from top management to principal
level and One Minute Goal (OMG)
for the rest of the cadre which is
also connected to a reward/penalty
after evaluation of the achieved
performance.
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Recent Improvements …
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Financial Performance
Arrears status (quarterly reports since Jan. 2013)
QUARTERLY SUMMARY
Figures in TZS Million
QUARTER OPENING O/S BALANCE
RECEIVED INVOICES DURING THE QRTER
YEAR 2013
YEAR 2014
1ST
2ND
3RD
4TH
1ST
2ND
QUARTER
QUARTER
QUARTER
QUARTER
QUARTER
QUARTER
435,925.44
321,435.14
295,364.34
333,595.27
382,968.00
456,049.44
64,169.36
239,298.76
255,066.99
368,947.69
313,853.64
105,941.74
PAYMENTS MADE:
EPP
IPP
TOTAL PAYMENTS
158,135.46
20,524.20
178,659.66
195,871.56
69,498.00
265,369.56
148,304.33
68,531.73
216,836.06
248,714.91
70,860.05
319,574.96
197,777.31
42,994.89
240,772.20
100,751.79
65,000.00
165,751.79
QUARTER CLOSING O/S BALANCE
CLOSING O/S BEFORE PAYMENT
321,435.14
500,094.80
295,364.34
560,733.90
333,595.27
550,431.33
382,968.00
702,542.96
456,049.44
696,821.64
396,239.39
561,991.18
124,000.00
55,709.35
SOURCES OF FUNDS
ON LENT (GVT) FUNDS
DPs DISBURSEMENT
OWN FUNDS
SYNDICATION LOAN
PAYMENT FROM COLLECTION
TOTAL OWN FUND
67,260.34
158,000.00
111,399.32
111,399.32
107,369.56
107,369.56
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80,928.69
92,836.06
92,836.06
131,548.58
132,317.04
263,865.61
46,597.67
113,245.83
159,843.50
165,751.79
165,751.79
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Financial Performance …

The rise of outstanding arrears to creditors in the first
quarter of 2014 is the result of higher usage of liquid fuel
in the fourth quarter of 2013 due to lowest water levels in
Mtera and Kidatu Dams.

Note: Mtera Dam was completely shut in October 2013
while Kidatu was shut in December 2013.

This was the most severe drought impact for a period of
four years since drought started

As a resulted it derailed the trend of arreas decrease
observed during 3rd quarter of 2013.
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Financial Performance …

Starting from January 2014, the water inflows to Mtera
dam increased due to better rains in 2014 and production
from Mtera and Kidatu plants increased and hence use of
liquid fuel was minimized.

This contributed to reduced cost of generation
TANESCO’s revenue showed improvement from January
2014 due to tariff increase and reduced generation costs
Payment of outstanding arrears to EPPs and IPPs from
TANESCO revenues had consistent improvement
TANESCO has also managed to buy enough distribution
materials and connect the customers who were pending



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Financial Performance …
Arrears clearance plan;
TANZANIA ELECTRIC SUPPLY COMPANY LIMITED
ARREARS CLEARANCE PLAN
CURRENT
ARREARS AS AT
06.06.2014
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
EPPs:
AGGREKO INTERNATIONAL
SYMBION POWER
IPTL FUEL(CAMEL OIL)
IPTL FUEL(ORYX OIL)
AGGREKO FUEL(GBP)
SUB TOTAL
14,407.45
89,920.56
13,294.93
4,274.05
55,814.50
177,711.49
6,270.00
9,000.00
3,000.00
3,000.00
6,000.00
27,270.00
4,620.00
42,000.00
4,000.00
1,274.05
28,000.00
79,894.05
3,517.45
12,000.00
4,000.00
8,000.00
27,517.45
12,000.00
4,000.00
8,000.00
24,000.00
12,000.00
5,814.50
17,814.50
2,920.56
2,920.56
IPPs & GAS:
SONGAS
IPTL-INTERIM ENERGY BILL
PAN AFRICAN ENERGY-GAS
SUB TOTAL
119,619.59
14,622.20
76,978.52
211,220.31
9,000.00
6,000.00
9,000.00
24,000.00
52,000.00
8,000.00
52,000.00
112,000.00
12,000.00
622.19
12,000.00
24,622.19
12,000.00
3,978.52
15,978.52
12,000.00
12,000.00
12,000.00
12,000.00
12,000.00
12,000.00
GRAND TOTAL
388,931.81
51,270.00
191,894.05
52,139.64
39,978.52
29,814.50
14,920.56
12,000.00
SOURCES OF FUNDS
DPs DISBURSEMENT
REVENUE COLLECTION
Assumptions:


Jun-14
51,270.00
Jul-14
166,000.00
25,894.05
Aug-14
52,139.64
Sep-14
39,978.52
Oct-14
29,814.50
Nov-14
14,920.56
-
Dec-14
12,000.00
Large part of arrears in July 2014 will be cleared by disbursement from the WB (USD
100m) and the rest of arrears will be cleared by own revenue collection.
TANESCO has committed to pay the above suppliers from the own revenue collection as per table above.
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Financial Performance …
TANZANIA ELECTRIC SUPPLY COMPANY LIMITED
OUTSTANDING PAYMENT - CLEARANCE PLAN
ACCUMULATED
OUTSTANDING
EPPs:
AGGREKO INTERNATIONAL
SYMBION POWER
IPTL FUEL(CAMEL OIL)
IPTL FUEL(ORYX OIL)
60 MW NYAKATO FUEL(GBP)
SUB TOTAL
13,404.86
83,100.00
8,058.66
8,058.66
50,400.00
163,022.18
IPPs & GAS:
SONGAS
IPTL
PAN AFRICAN ENERGY-GAS
SUB TOTAL
91,094.72
56,700.00
55,437.70
203,232.42
GRAND TOTAL
366,254.60
Aug-14
1,404.86
4,000.00
4,000.00
4,000.00
5,404.86
5,404.86
Aug-14
DPs DISBURSEMENT
MONTHLY REVENUE COLLECTION
Assumptions:


Sep-14
111,677.22
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Apr-15
8,000.00
4,000.00
30,000.00
4,000.00
1,000.00
16,000.00
55,000.00
4,000.00
8,100.00
4,000.00
8,000.00
24,100.00
12,000.00
1,000.00
8,000.00
21,000.00
12,000.00
8,000.00
20,000.00
12,000.00
8,000.00
20,000.00
9,000.00
2,400.00
11,400.00
8,000.00
8,000.00
40,000.00
16,000.00
30,000.00
86,000.00
8,000.00
12,000.00
20,000.00
1,094.72
8,000.00
12,000.00
21,094.72
15,000.00
8,000.00
1,437.70
24,437.70
15,000.00
8,000.00
23,000.00
15,000.00
700.00
15,700.00
5,000.00
5,000.00
16,000.00
141,000.00
44,100.00
42,094.72
44,437.70
43,000.00
27,100.00
5,000.00
Sep-14
115,027.54
Oct-14
132,800.00
118,478.37
Nov-14
122,032.72
Dec-14
125,693.70
Jan-15
127,579.11
Feb-15
127,580.12
Mar-15
127,581.14
-
Apr-15
127,582.15
Large part of the accumulated outstanding will be cleared in October 2014 by
disbursement from the AfDB (USD 80m) and the rest of outstanding will be cleared by
own revenue collection.
Clearance of accumulated outstandings will commence immediately after completion of clearing the arrears.
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Financial Performance …
Revenues and expenditures projections for the next three years;
Operational Income and Expenditure Budget
TOTAL
BUDGET
2014
TOTAL
FORECAST
2015
TOTAL
FORECAST
2016
TOTAL
FORECAST
2017
ELECTRICITY REVENUE
1,653,998,918,878
1,759,650,517,452
1,900,422,558,848
2,052,456,363,556
OTHER REVENUE
TOTAL REVENUE
EXPENDITURE
93,899,770,775
1,747,898,689,653
97,388,897,720
1,857,039,415,172
102,059,770,479
2,002,482,329,327
107,786,434,691
2,160,242,798,248
COST OF PRODUCTION
1,273,947,203,261
1,228,211,670,594
1,294,707,879,543
1,260,655,599,378
44,877,485,531
313,661,957,343
48,063,787,003
354,082,480,729
51,235,996,946
377,451,924,457
54,617,572,744
402,363,751,472
115,412,043,517
95,423,233,415
226,681,476,845
119,374,465,003
279,086,528,382
132,028,158,293
442,605,874,654
175,631,590,560
5,986,039,612
6,411,048,424
6,866,232,863
6,591,583,548
14,002,770,489
100,895,963,418
140,192,137,226
260,382,700,546
77,203,970,382
85,889,300,000
120,219,300,000
190,456,300,000
-63,201,199,893
15,006,663,418
19,972,837,226
69,926,400,546
REPAIR AND MAINTENANCE
OTHER EXPENSES
EARNING BEFORE INTEREST, TAX, DEPRECIATION
AND AMORTIZATION, (EBITDA)
DEPRECIATION
PROVISION FOR BAD DEBTS AND WRITE OFF
OPERATING SURPLUS/(DEFICIT) AFTER THE ABOVE
ITEMS
INTEREST
OVERDRAFT
LOANS
OPERATING SURPLUS/(DEFICIT)
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Financial Performance …
Assumptions:
 Generation plan assumes an average hydrology
 Cost of Generation will go down in year 2015 due to
replacement of EPPs and IPPs which generate by liquid
fuels with gas fired plants.
 The Financial Support from the Development Donors will
continue in 2014 and the Government will disburse to
TANESCO the promised USD 100m and 80 from the
Development Partners in the months of July and October
respectively.
 The Demand will continue to grow at a steady rate of less
than 8% for 2014.
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Financial Performance …
Assumptions:



In the year 2016 there will be a slight increase in cost of
sale resulting from the carried costs of newly
commissioned IPPs and PPPs.
No tariff increase forecast from 2014 – 2017 but revenue
growth will depend on new customer connections and
increased consumption.
The provision for bad debt will start decreasing in year
2017 following replacement of postpaid meters by pre
paid meters throughout the country.
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Financial Performance …
Impact of the following on TANESCO’s financial
situation:
o
Tariff increase; Revenue collection increased from TZS
74.79 billion in March 2013 to TZS 99.79 billion in March
2014 – which is an increase of 33.4%
o
Rain; Cost of production dropped from TZS 115.32
billion (in January 2014) to TZS 86.66 billion (in
February 2014) – which is a decrease of 25%.
o
DPs disbursement. Reflected under “Arrears status” in
financial performance.
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Other Success Stories
Establishment of two Subsidiaries:
The following two subsidiaries have been established
under TANESCO:
o
o
TGDC – Tanzania Geothermal Development Company. This
is a Company created with the purpose of developing
(studying, exploring and drilling) Geothermal Potentials in the
Country.
TCPC – Tanzania Concrete Poles Company: This a Company
created to deal with manufacturing of concrete pole for
transmission and distribution uses in the country. The purpose
being to adress the issue of deforestration as well as
supplying poles which are enviromentally friendly and in a
sustainable way.
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Conclusion





TANESCO’s Financial situation has shown strong
signs of recovering and as per the projections the
outstanding arrears should be fully liquidated in 2015
Consequently TANESCO has started retiring of EPPs.
Two Symbion plants in Dodoma and Arusha have been
decommissioned in June 2014.
Two more which are Aggreko Ubungo and Aggreko
Tegeta will be decommissioned in November 2014.
TANESCO will soon start to negotiate with Symbion
Ubungo to change from Emergency to long term IPP
contract arrangements in order to further bring down
generation costs.
TANESCO and IPTL will soon start negotiation on the
Ahsante
Thanks
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