World Bank Supports Power Sector and Natural Gas in Tanzania

In a Press Release in Washington on March 26, 2013, The World Bank Board of Executive Directors approved two International Development Association (IDA) credits amounting to US$121.46 million to Tanzania for power sector reforms, forging public-private partnerships, and strengthening national capacity for the optimal use of the country’s natural gas reserves.

“We are committed to reducing the cost of power supply by expanding the use of domestic natural gas in electricity generation and promoting private sector participation in both the power and gas sectors” said Hon. Professor Sospeter Muhongo, Minister of Energy and Minerals, Tanzania.

“We are taking concrete steps to strengthen power sector governance and to improve planning and implementation capacities for bringing more electricity to homes and businesses across Tanzania.”

The Tanzanian power sector is facing major challenges due to below average rainfall that have reduced hydropower generation and due to inadequate past investment in power generation capacity.

As a result, the state-owned electricity utility, TANESCO has increased the use of expensive emergency generation plants that have placed the sector in financial difficulties.

The energy sector’s financial woes are expected to peak in 2014, bringing the cumulative deficit over the period 2011-2014 anywhere between US$760 million to US$1 billion.  Less than 19 percent of Tanzania’s 46 million citizens have access to electricity.

“With these two new operations, the World Bank will help to place the power sector on a more sustainable path, and will help create foundations to maximize benefits of natural gas reserves for all Tanzanians” said Philippe Dongier, World Bank Country Director for Tanzania.

The two projects consist in:

A Development Policy operation of US$100 million (the first of series of three) that will support the Government of Tanzania to: a) address the financial gap in the power sector, especially in TANESCO, b) help expand power generation using natural gas, including through public-private partnership, c) reform sector institutions, and d) strengthen policy and institutional foundations for maximizing the benefits of natural gas reserves.

A complementary technical assistance project of US$21.46 million that will help build critical capacity for the power and gas sectors.  This project is expected to be co-financed by the Canadian International Development Agency (CIDA).

The projects involve collaboration across the World Bank Group, with Jacques Morisset, Lead Economist based in Dar es Salaam serving as team leader for the Development Policy operation, and Robert Schlotterer, Senior Infrastructure Finance Specialist and Alexander Huurdeman, Senior Gas Specialist, serving as co-team leaders for the capacity building project.