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MINISTRY OF ENERGY AND MINERALS (MEM)

2014/15 BUDGET AND ESI REFORMOVERVIEW

24 JUNE, 2014

COVER OF PRESENTATION

Part One: Plan and Budget for 2014/15 overview.

Part Two: Electricity Supply Industry (ESI) Reform Strategy and Roadmap.

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Vision

To be a vibrant and performance driven Ministry that ensures Tanzania’s energy and mineral resources contribute significantly to the socio-economic development of the country.

MissionTo promote, facilitate, regulate and monitor the development and sustainable utilisation of energy and mineral resources for the benefit of Tanzanians.

Core ValuesAccountabilityEffectivenessTransparencyResults orientedLoyalty ResponsibilityIntegrity

MEM OBJECTIVES ACCORDING TO SP

Objective A: Sustainable development and management of energy resources for national development enhanced. Objective B: Sustainable development and management of mineral resources for national benefit improved. Objective C: Resources management and support services improved.Objective D: HIV and AIDS infection reduced and support services to employees improved. Objective E: Implementation of the National Anti-Corruption Strategy effected, enhanced and sustained.

2014/15 Budget Preparation MEM Plan and Budget preparation for

2014/15 started early in November, 2013.The budget was submitted to the Ministry of

Finance for scrutinization in February, 2014. The parliamentary Committee approved it in

May, 2014.MEM speech was presented to the

Parliament on 29 May, 2014 and the discussion was on 30th May 2014

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MEM PRIORITIES FOR 2014/15Energy SectorContinue with construction of gas pipeline and the processing

plants.Continue with implementation of priority power projects under

BRN initiative, including IMPLEMENTATION of ESI Reform Strategy and Road Map.

Strengthening existing power generation plants, transmission lineS and distribution network.

Expediting implementation of urban and rural electrification projects.

Improving legal and regulatory framework for energy sector.Promoting investments in renewable energy resources.

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Priorities ………

Mineral Sector

Increasing Government revenue collection from mineral sector.

Enhancing capacity at Zonal Mining Offices.Implementation of the Sustainable Management of

the Mineral Resources Project (SMMRP).Supporting development of Small Scale mining;Improving legal and regulatory framework in the

mineral sector.Promotion of mineral value addition activities to

enhance revenue collection.

MEM Budget Ceiling 2014/15

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Category Ceiling %

Recurrent 125,378,452,000 11.6

Development 957,177,170,000 88.4

Total 1,082,555,622,000

Local and Foreign Dev. Budget

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Category Amount % of total

budget

Local 652,805,000,000 68.2

BRN Projects (91%) (595,900,000,000)

Foreign 304,372,170,000 31.8

BRN Projects (91%) (277,700,000,000)

Total (Local + Foreign) 957,177,170,000

Development Projects Allocation in 2014/15.

Main projectsDue to the budget constraint, funds allocated

to many projects are insufficient.The focus in 2014/15 has been BRN projects.Tshs. 873.6 billion (91.3%) of total

Development Budget has been allocated to the BRN projects.

Only 8.7% has been allocated to other projects.

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Main Projects Allocation (LOCAL)Projects Allocation – TZS ( Billion)

Construction of Natural Gas 151

Kinyerezi I – 150 MW 90

Rural Electrification 269.2

Energizing rural Tanzania – Power supply to Ngara, Biharamulo and Mpanda (Orio)

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Institutional Cooperation to TANESCO 30

Transfers to TANESCO 20

Total 582.2

Only 6 Projects has been allocated 89% of the total local Development Budget

Lesson Learnt from above Allocation

Due to budget constraint some important projects have not allocated any fund.

Ministry has not been able to allocate the required budget to key projects.

Ministry should solicit some funds from different sources to cover the gaps.

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Projects and Amount Required

PROJECT allocation in 2014/15 (Local –

Tsh.)

Extra Required in 2014/15

220 kV Makambako – Songea Transmission

300,000,000. (USD 183,000)

13 mil. USD

Kinyerezi I – 150 MW 90,000,000,000 (USD 54.9 mil.)

53.3 mil. USD

Total (USD) 55.083 66.3

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Revenue collection – 2014/15

Sector Amount to be collected ( Billion)

Mineral Sector 209. 96

Energy Sector 31.27

Administration 0.15

Electricity Charges - REA 28.00

Total 269.38

Part Two: ESI REFORM & ROADMAP

Process

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TASK DATE

The Consultant M/s PWC engaged by MEM to advise GoT on the reform agenda by providing a final Draft Reform Strategy and Roadmap on 2nd May, 2014.

1st February, 2014

The Hon. Minister for Energy met DPs to among other things share progress on ESI reform.

4th February, 2014

Part Two: ESI REFORM & ROADMAP

Process

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TASK DATEThe Consultant M/s PWC met AfDB to gather views on the current situation of the energy market in Tanzania.

11th February, 2014

The Consultant M/s PWC met DPs to gather views and opinions on ESI Reform Strategy and Roadmap

13rd February, 2014

The Consultant M/s PWC met EWURA to gather views and opinions on ESI Reform Strategy and Roadmap.

13rd February, 2014

Part Two: ESI REFORM & ROADMAP

Process

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TASK DATEThe Consultant M/s PWC met TANESCO’s Management to gather views and opinions on ESI Reform Strategy and Roadmap.

14th February, 2014

The Consultant M/s PWC met MCC to gather views on among other things status of Compact- II.

18th Feb, 2014

The Consultant M/s PWC separately met REA and President Office – Planning Commission to gather views and opinions on ESI Reform Strategy and Roadmap

18th Feb, 2014

Part Two: ESI REFORM & ROADMAP

Process

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TASK DATEThe Consultant Ms PWC made a presentation to DPs

15th April, 2014

Meeting held involving TANESCO Board of Directors, TANESCO Management, EWURA Management and REA Management to share the ESI Reform Strategy

1st May, 2014

MEM met TANESCO Board of Directors and TANESCO Management to share the ESI Reform Strategy and Roadmap

23rd May, 2014

MEM met TANESCO Labour Union Leaders (TUICO) to share the ESI Reform Strategy and Roadmap.

23rd May, 2014

Part Two: ESI REFORM & ROADMAP

Process

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TASK DATEMEM consultation with EDPG, TANESCO, MoF and EWURA on ESI Reform Strategy and Roadmap

6th June, 2014

Discussion with Cabinet Secretariat 15th June, 2014

Discussion with inter Ministerial Technical Committee (IMTC)

18th June, 2014

Approval by Cabinet 20th June, 2014

REFORM ROADMAP

Immediate Term (July 2014 – June 2015)

Short Term (July 2015 – June 2018)

Medium Term (July 2018 – June 2021)

Long Term (July 2021 – June 2025)

The Roadmap – Main Immediate ActionsThe Roadmap – Main Immediate ActionsJuly 2014 – June 2015July 2014 – June 2015

Major Activities Timeframe Cost (USD)

Million

Establish a Task Force with mandate to monitor the implementation of the Roadmap August 2014 100

Establish a Transformation and Change Management Team (TCMT) at TANESCO to manage the reform process

August 2014200

Initiate valuation of TANESCO’s generation, transmission and distribution assets

December, 2014 300

Assess Human Capital Needs and prepare Capacity Building Programme

March 2015 200

Carry out management information system audit

June, 2015 300

The Roadmap – Main Immediate ActionsThe Roadmap – Main Immediate ActionsJuly 2014 – June 2015July 2014 – June 2015

Major Activities Timeframe Cost (USD)

Million

Reviewing of the Electricity Act, 2008, in particular, Section 41(6)

June, 2015 0.50

Improve TANESCO financial performance December, 2015

100

Designate Grid Control Center as Independent System Operator (ISO);

December, 20150.50

Review tariff structure and develop of Grid Codes to guide transmission and distribution operations

December, 2015 1.00

The Way ForwardThe implementation of ESI Reform

Strategy and Roadmap will start in July, 2014.

We are open and inviting any stakeholders (including DP’s) to support our immediately activities.

Our implementing will cover immediate, Medium and Long term measures/actions

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CONCLUSIONMEM is committed to implement ESI Reform

Strategy and Roadmap with any stakeholder who is ready.

MEM is confident that DP’s will support initiative to achieve the desired outcome.

The budget gap for financing ESI Reform immediate activities is USD 1,201 million equivalent to TZS 1.96 trillion,

Concerted efforts from all stakeholders are required to make the reform success.

Thank You