Institutional cooperation between Statnett and TANESCO in Tanzania

89 Document 3:12 2013–2014 Report Prioritisation by the authorities is paramount according to the embassy. The embassy in Nepal stated that some capacity-building projects have not been successful due to a lack of institutional anchoring. The embassy noted that institutional anchoring is critical. Several evaluations of institutional cooperation cite a lack of ownership and capacity. Among other things, the mid-term evaluation of the institutional cooperation between NVE and Ethiopia’s Ministry of Water and Energy shows that relations are lacking between NVE and the Ministry, and that the Ministry of Water and Energy lacks personnel and has a high turnover of staf. 122 According to the mid-term evaluation of the cooperation between Statnett and the Uganda Electricity Transmission Company UETCL, management should provide all employees with a clear mandate to priori- tise project activities, and that it is vulnerable to changes of staf. The evaluation notes that staf stability is critical for ensuring long-term utilisation of expertise in the organisation. 123 The mid-term review of the institutional cooperation with the energy ministry in Liberia emphasised that ministry employees lack the prerequisites to absorb new knowledge, and that the Ministry’s budget does not provide employees with the means to exercise what they have learned in practical work. This makes it diicult to achieve goals. The evaluation also reported positive experiences in the work areas where long-term advisers from NVE and dedicated employees of the organisation participated. 124 TANESCO’s financial and organisational challenges TANESCO’s inancial deicits are increasing. For the iscal year that ended in June 2013, the budget overrun was 370 per cent, 125 and by the end of 2013 the company had a debt of approx. NOK 3 billion. 126 TANESCO’s inancial deicit was equivalent in 20122013 to about 1.4 per cent of Tanzania’s GDP. 127 The Energy and Water Utilities Regulatory Authority EWURA approved increasing electricity prices by 40 per cent from 1 January 2014. However, it is unclear how much impact the price increase would have on TANESCO’s inancial situation because the price paid by a relatively large share of the customers is very low in principle. 128 In an interview, EWURA noted that TANESCO can also reduce operating expenses by using cheaper produc- tion technology and by investing in more reliable energy sources than water. All expenses are combined in TANESCO’s overview of expenditures. This makes it dii- cult to identify cost drivers. The Ministry of Foreign afairs stated that the price increase in 2014 comes in addi- tion to a 40 per cent increase in 2012. After the tarif adjustment, TANESCO has had smaller deicits, but continues to accumulate debt. TANESCO has taken out loans and received large transfers to break even inancially. 122 Norad 2012 Mid-Term Review of TANESCO-Statnett, pp. iv and 28. 123 Norad 2012 UETCL-Statnett twinning arrangement: End-review of 2009–2011 phase 2 and appraisal of 2012–2016 phase 3 proposal. Final report Norplan, 3 April 2012. 124 Norad 2013: Mid-term review of Norwegian financial support to the energy sector in Liberia. 125 The World Bank, Dar es Salaam 2013 Rapid Budget Analysis 2013. Synoptic Note, draft 15 November 2013, p. 25. 126 Joint Energy Sector Group 2012: Joint Energy Sector Review, p. 17. 127 International Monetary Fund 2013 United Republic of Tanzania: Sixth Review Under the Policy Support Instrument, Second Review Under the Standby Credit Facility Arrangement, and Request for Modification of Performance Criteria—Staff Report; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Tanzania, p. 8. 128 Electricity Tariffs to go up by 40 per cent on January 1, The Citizen, 24 December 2013 and TANESCO Tariff Review Application from September 2013 TANESCO’s application to EWURA for tariff increase. 90 Document 3:12 2013–2014 Report Box 4 TANESCO’s expenses The increased share of electricity produced with oil and gas has led to higher production costs for TANESCO. Production is expensive and the agreements TANESCO has entered into with private vendors to maintain production levels are also expensive. Another cause of the problems is that the government adopted an emergency power supply plan in 2011 after hydropower generation was affected by drought. It is estimated that a similar drought in 2006 caused inancial losses of up to 4 per cent of GDP. The emergency supply plan includes agreements to purchase electricity from private oil and gas power producers at high prices. The hydroelectric power TANESCO produces costs NOK 0.25–0.30kWh. Production and purchase of gas costs NOK 0.35–0.40 kWh, and agreements to purchase oil power cost TANESCO NOK 1.80–2.50kWh. TANESCO must pay the private producers per unit of purchased power and ixed monthly capacity charges, regardless of how much power is actually purchased. In 2012, these fees amounted to approxi- mately NOK 100 million a month. The electricity prices that Tanzanian consumers pay are signiicantly lower than what TANESCO pays for producing or purchasing the power. This means that TANESCO, in practice, sells heavily subsidised electricity to consumers. Sources: Africa Infrastructure Country Diagnostic 2012 and Joint Energy Sector Review 20102011, p. 27. In an interview, the embassy in Tanzania noted that TANESCO has serious inancial and organisational issues. Statnett stated in an interview that the purchase of fuel for power plants and emergency repairs therefore take precedence over other activities. Participants in the institutional cooperation stated in an interview that although activi- ties are decided on, TANESCO often does not have the means to implement them. In interviews, employees of TANESCO pointed out that the lack of funding from TANESCO contributes to many problems. According to a participant in the working group, it is very diicult to meet deadlines because the equipment, hardware, training and special skills are not available. TANESCO also often postpones acquiring equip- ment necessary to carry out project activities. Employees of TANESCO also stated that those who have received training in Norway have not shared their skills with their colleagues. There is little time for transferring knowledge on busy workdays, and there is therefore little to ensure that the knowledge is utilised throughout TANESCO. This weakness is compounded by the fact that employees who have received training, ind new jobs because they have become more attractive in the labour market. Mozambique’s power company, Electricidade de Mozambique EDM, also faces signiicant inancial challenges. 129 In its activity plan for 2011, the embassy in Mozambique noted that EDM is considered one of the best power companies on the African continent in terms of increasing access to electricity. In 2011 it took on more than 163,000 new customers. Nevertheless, the company posted huge losses as a result of tarifs that do not relect development costs, but are politically determined. Earnings and debt servicing goals have not been reached. Given the importance of the institution, the embassy in Mozambique still considers it appropriate to retain EDM as an important partner. 129 Norad 2013 Impact assessment of rural electrification. 91 Document 3:12 2013–2014 Report 4.5 The energy and climate initiative Energy+ The energy and climate initiative Energy+ was launched in October 2011 by Norway’s Prime Minister and the UN Secretary-General. The initiative is an international part- nership. The Ministry of Foreign Afairs stated that the initiative had 46 international partners at 10 July 2013. According to the Ministry, the international support shows that Energy+ has been a successful initiative. Energy+ aims to increase access to energy services through increased development of renewable energy and improved energy eiciency. According to Proposition 1 S 2013–2014, the initiative will engage the private sector and trigger commercial investments in the energy sector. Energy+ has a phased approach to performance-based funding. According to Proposition 1 S 2012–2013, the initial stage is aimed at developing methods for implementing performance-based aid. Performance-based aid means that the pay- ments depend on performance in terms of increased access to energy services, increased renewable energy production and more climate-friendly development in the energy sector. A performance basis requires the Ministry, in the initial stage, to assist countries through traditional means such as capacity building and technical assistance. According to Proposition 1 S 2012–2013 this shows the relationship between Norway’s bilateral clean energy eforts and the international renewable energy initiative Energy+. In 2011, Norways Prime Minister Jens Stoltenberg launched the multilateral initiative Energy+ together with UN Secretary General Ban Ki Mon. Photo: Trond Viken, Ministry of Foreign Affairs. The Ministry of Foreign Afairs has signed energy cooperation agreements with Bhutan, Ethiopia, Kenya and Liberia. The Ministry will also sign an overarching Energy+ agreement with Nepal in 2014. 130 In Ethiopia and Bhutan, the Ministry has signed ive-year cooperation agreements of NOK 500 and 100 million, respectively, and in Kenya and Liberia, the Ministry has signed ive-year letters of intent. 130 Minutes of the energy adviser meeting on 18–19 December 2013, p. 6.