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Songas now shuts power plant as government refuses to renew contract
What you need to know:
- Songas - a leading Tanzanian gas-to-power company - has been a government partner for 20 good years
Dar es Salaam. Tanzanian independent power producer Songas has now switched off its plant after the government rejected to renew contract with the company for power supply.
The Power Purchase Agreement (PPA) between the state-owned Tanzania Electric Supply Company (Tanesco) and Songas officially expired on Thursday October 31, 2024, with the power utility stating that the government will not continue with the deal.
Songas - a leading Tanzanian gas-to-power company - has been a government partner for 20 good years, with figures from its website indicating that it generated 190 megawatts (MW) of electricity, using gas from the Songo Songo gas reserves, and sell all the electricity it produces to Tanesco.
The company which the government of Tanzania owns 46 percent stake, through its Tanesco, Tanzania Petroleum Development Corporation (TPDC) and Tanzania Development Finance Company Limited (TDFL), also processes and transports natural gas to other power generators and industrial customers.
Africa’s independent power producer Globeleq own the rest of the shareholding.
“The Songas power plant has ceased production as of October 31 and is safe and secure,” Songas managing director, Mr Anael Samuel, told The Citizen on Saturday.
“Songas will continue discussing the next steps with the government of Tanzania, Tanesco and other key stakeholders including the current staff employed by Songas,” he added, without more details.
Unless stated otherwise, the expiry of the PPA means that Songas could start processing the decommissioning of its Ubungo power plant and distributing any salvage value among its shareholders.
This is so because the deal is under a build-own-operate arrangement, meaning that Songas will retain ownership of the assets following the expiry of its agreement with Tanesco.
On Friday, Tanesco confirmed that the contract had indeed expired and that there was no intention to renew.
“The government’s decision not to continue with this contract is to protect the country’s broader interests. Therefore, the government, through the Ministry of Energy and Tanesco, will continue to oversee the electricity sub-sector to ensure a high-quality, sustainable and reliable electricity supply,” Tanesco said in a statement.
It assured that the current electricity generation was exceeds the available demand after the recent commission of the electricity generated by the Julius Nyerere Hydropower Project (JNHPP) to the national grid.
“Despite the expiry of this contract, the Tanesco would like to reassure its customers that the electricity supply situation in the country is stable, thanks to various power generation sources. Currently, the generation capacity from natural gas and hydroelectric plants exceeds demand,” it added.
According to the power utility firm, the situation has been enhanced by the positive progress of the JNHPP, with a total of 940 megawatts added to the national grid.
Tanzania’s electricity generation has increased from 1,694.55 megawatts in 2021/22 to 2,373 megawatts in 2023/24, with a target of reaching 4,915 megawatts by 2025/26, according to the Minister of State in the President’s Officer for Planning and Investment, Prof Kitila Mkumbo, who on Friday presented next year’s government plan to the Parliament.
He said the current electricity demand stands at 1,766.96 megawatts, leaving a surplus of 606.04 megawatts.
