Tanzania says needs $46 billion in power investment by 2040

DAR ES SALAAM (Reuters) - Tanzania said on Monday it needs $46.2 billion in investment over the next 20 years to revamp ageing energy infrastructure and meet soaring demand for electricity. Investors have long complained that a lack of reliable power is an obstacle to doing business in east Africa's second biggest economy.

A power system master plan released on Monday by the country's energy ministry said 70 per cent of capital spending would be financed by debt and the rest by the government's own resources.

"The financing requirement to implement the Power System Master Plan (PSMP 2016 – 2040) is about $46.2 billion for capital cost," the updated plan said. 

"The cost includes investment on generation, transmission and sub-stations. Generation accounts for almost 80 percent of the total investment cost."

Tanzania aims to boost power generation capacity to 10,000 megawatts over the next decade from around 1,500MW now by using some of its vast natural gas and coal reserves to end chronic energy shortages and boost industrial growth.

Tanzania said in January it was seeking a loan of $200 million from the World Bank for its debt-ridden state power supplier Tanzania Electric Supply Company (TANESCO) after the country's president refused to allow the utility to raise prices to cover costs.

President John Magufuli wants cheap electricity to drive industrialisation, but the World Bank is likely to insist the loss-making utility increases prices so it can cover the cost of producing power and begin much-needed reforms.

TANESCO has debts of $363 million, up from $250 million at the end of 2015.

Tanzania's energy regulator approved on Dec. 31 a tariff hike of 8.53 percent, less than half of what the utility said it needed to cover the losses.

But the next day, Magufuli sacked the head of TANESCO and blocked the rise, saying the price increase would stymie his plans to ramp up industrial output.

Decades of mismanagement and political meddling means the utility sells electricity below cost. It also struggles to cope with transmission leaks and power theft.

The power system master plan said around 40 per cent of Tanzania's estimated population of 50 million currently has access to electricity. The government wants to boost the electrification rate to 90 per cent by 2035.