Makambako - Songea 132 kV Transmission Line, Tanzania

TANESCO SWECO International “Feasibility study for Makambako - Songea 132 kV Transmission Line in Joint Venture with and Electrification of Songea and Districts in Ruvuma, Tanzania” Norconsult Project Report

5460871000

Tanzania Electric Supply Company Limited

“Makambako - Songea 132 kV Transmission Line and Electrification of Songea and Districts in Ruvuma and Iringa,

Tanzania” Project Report

21 June 2006

Makambako

Songea

Namtumbo

Mbamba Bay

LudewaMadaba


5460871000 Page I of (I)

LIST OF CONTENTS 1 Executive Summary .............................................................................................1

1.1 Introduction 1 1.2 Development Objectives 1 1.3 Market Survey 2 1.4 Technical Analysis 2 1.5 Financial and economical analysis 2 1.6 Environmental Impact Assessment (EIA) 3 1.7 Socio-Economic Impact Assessment 3 1.8 Recommendation 3

2 Project purpose....................................................................................................5 2.1 Background 5 2.2 Scope of Study 6

3 The Project Area ..................................................................................................7 3.1 Geographical Location and Population 7 3.2 Project Area Map 8 3.3 Villages 9 3.4 Present Energy Situation 10 3.5 Planned generation facilities in the project area 10

4 Market Survey....................................................................................................12 4.1 Power Demand 12

5 Network Design and Cost Estimates..................................................................17 5.1 Proposed Network Design 17 5.2 Cost Estimates 21

6 Financial Assessment ........................................................................................23 6.1 Financial Analysis 23 6.2 Tariff Study 26 6.3 Sensitivity Analysis 27

7 Economic Assessment.......................................................................................29 7.1 Economic Price of Electricity 29 7.2 Economic Analysis 30 7.3 Sensitivity Analysis 32

8 Environmental Impact Assessment....................................................................33 8.1 Objectives 33 8.2 Methodology 33 8.3 Line routes description 34 8.4 Potential Environmental Impacts 35 8.5 Mitigation Measure 38 8.6 Environmental Management Plan 41 8.7 Conclusions and Recommendations 42

9 Socio-Economic Impact Assessment.................................................................43 9.1 Objectives of Survey 43 9.2 Methodology 43 9.3 Socio-Economic Situation in the Project Area prior Electrification 44 9.4 Potential Benefits of Electrification of the Project Area 50 9.5 Monitoring Indicators 52 9.6 Crosscutting Issues 53

10 Logical Framework Approach (LFA) Workshop .................................................56 10.1 Objectives of the Planning Participatory Workshop 56


5460871000 Page II of (II)

10.2 Scope and Methodology 56 10.3 Participants 57 10.4 The core problem 58

11 Primary Objectives.............................................................................................59 11.1 Securing commercially viable and sustainable electrification 59 11.2 Efficient project implementation 59 11.3 Marketing of TANESCO services 60 11.4 Anti-Corruption Strategy 61 11.5 Network implementation 61 11.6 Compensation to Land Owners 62

12 Implementation Strategy ....................................................................................64 12.1 Project Strategy 64 12.2 Management and Organisation 64 12.3 Proposed Project Implementation Unit (PIU) 64 12.4 Organizational Chart for Operation and Maintenance 65 12.5 Project monitoring and evaluation 65

13 External Risks Factors and Assumption ............................................................66 14 Project Recommendations.................................................................................67


5460871000 Page III of (III)

Annexes: Annex 1 Cost Estimate Annex 2 Income Statement Transmission Annex 3 Income Statement Distribution Annex 4 Cash Flow Statement-Transmission Annex 5 Cash Flow Statement - Distribution Annex 6 Project Activities and Sub activities for each objective Annex 7 Logical Framework Matrix Annex 8 Problem Tree for Songea Area Annex 9 Objective Tree for Songea Area Annex 10 Organizational Chart for TANESCO Project Implementation Unit Annex 11 Organizational Chart for TANESCO Operation and Maintenance Annex 12 TANESCO Anti-Corruption Action Plan ABBREVIATION DSM Demand Side Management EIA Environmental Impact Assessment GWh Giga Watt hour = 1000 000 kWh k kilo = thousand km kilometer kV kilo Volt kVA kilo Volt Ampere kW kilo Watt LV Low Voltage NGO Non Governmental Organisation OPGW Optical Fibre Ground Wire U>TR Voltage regulating transformer (step-up transformer) SEK Swedish Crowns (the currency) STD Sexually Transmitted Diseases Sida Swedish International Development Cooperation Agency TRA Tanzania Revenue Authority USD United States Dollar VOIP Voice over Internet Provider


Page 1 of (68)

1 Executive Summary

1.1 Introduction

The demand for electricity in Tanzania is growing at a relatively fast rate. The Government of the United Republic of Tanzania has decided to reform and privatise its power sector. Electricity supply by the national grid in Tanzania is provided by a vertically integrated utility, namely TANESCO. This company is a publicly owned utility and operates the national electricity power system. The generation is presently mainly based on hydropower and thermal power based on gas fuel.

Widespread access to electric power is one of the more important infrastructures in order to achieve socio-economic development in any area. For this reason, the Government of Tanzania is currently putting emphasis on electrifying not only urban areas but also many rural areas in Tanzania. Since the Government of the United Republic of Tanzania is not in a position to finance all the required development projects, the Ministry of Energy and Minerals as well as TANESCO are engaged in source funding for energy projects. One of these projects is the Makambako-Songea project.

A feasibility study has been made for the Makambako-Songea project, where different alternatives of grid extension were identified as well as an alternative with local hydropower generation. This project document covers alternative 1; the power supply of Makambako-Songea by grid extension, including the districts of Njombe and Ludewa in Iringa Region and Songea Rural, Mbinga, Songea Urban and Namtumbo in Ruvuma Region. The document consists of the proposed network design and the essential results from a power market survey, a socio-economic study and an environmental impact assessment of the project area. Furthermore the document comprises a financial and economic analysis of the project.

1.2 Development Objectives

The major objective of the project is to extend TANESCO’s electricity network in order to provide electricity to commercial business activities, fresh water pumping, secondary schools, medical services, streetlights, residential houses, etc. within the project area. The majority of all residents within the project area will benefit on the results of the project, and the standard of living will improve in many ways. Small commercial and industrial businesses are expected to be established, which may attract potential investors to further invest in this area. The use of kerosene, firewood and charcoal will be reduced which will have a positive impact on the environment. The amount of diesel fuel transported from Dar es Salaam to Songea and Ludewa will be considerable reduced, resulting in a decrease in air pollution from trucks and an improvement of the road safety. Security will also improve as a result of the electrification process, especially through the installation of streetlights. Other social benefits include performance improvements in the education area, especially at Secondary Schools and improved health services in hospitals and clinics.


Page 2 of (68)

1.3 Market Survey

The rural population of the Makambako-Songea Community are primarily dependent on agriculture for their livelihood.

Based on the assessment of the market surveys conducted in the Makambako-Songea Villages, the estimated total maximum load demand for the initial six years period amounts to 15 MW. The total number of potential customers identified in the project area amounts to 21 200.

1.4 Technical Analysis

Based on the market survey, suitable network alternatives for the power supply have been outlined. The network principle is to dimension for the estimated load year 2012. The proposed main transmission network consists of grid extension via a 132 kV transmission line from Makambako substation to Songea substation.

Makambako 220/132/33kV substation, under construction, will be extended with a 132 kV system. The 132 kV overhead line will be designed using steel towers and optical cable will be installed in the earth wire. In Songea a new substation is proposed for 132/33/11 kV systems.

From the new proposed Songea substation 33 kV lines are suggested to Namtumbo and Mbinga with a further proposed extension to Mbamba Bay using a low cost single phase alternative (SWER). The SWER system is using only one conductor as phase conductor with earth as return for the current. This will give a single phase system for connections of low load centres to a minimum cost.

The calculated investment cost amounts to USD 50 million, among which USD 21.9 million is allocated to transmission, USD 21.6 million to distribution and USD 6.5 million for contingency.

1.5 Financial and economical analysis

A financial and economical model developed specifically for the assessment of rural development projects have been used for the financial and economical analyses. The models handle the identified electrification area, starting at the connection point to TANESCO’s transmission system and using the supply cost determined by TANESCO at this point. The project is divided into a transmission part and distribution part for the financial analysis. The model provides both income statements and cash-flow statements over a 25-year period for the project. The result from the financial analyse shows a negative present value of the cash flow for the distribution part of the project and even when a 100% grant for financing of investments is used the project shows a negative net present value. In other words, the total revenues based on today’s tariffs do not cover the operating costs consisting of supply cost (average electricity production cost) and operation and maintenance costs for the extended network. The transmission part on the other hand, shows a positive net present value, which means that the initial investment for transmission is expected to be paid back from the projects positive cash flow over the 25 years of period. The cost benefit analysis in the economical analyse is mainly based on the socio-economic survey indicating the potential customers ability to pay for electricity. This analyse shows positive result.


Page 3 of (68)

1.6 Environmental Impact Assessment (EIA)

The main purpose of this study is to determine if the project is feasible from the environmental viewpoint. The study has reviewed and documented baseline situation and analysed possible potential impacts of developing the project. Recommended mitigation measures have been included for potential adverse impacts and enhancement measures for the positive ones. In addition the study recommended monitoring program to be followed during subsequent phases of the project so as to ensure the project remains environmentally sound.

The project will have positive environmental impacts in terms direct and indirect employment opportunities, reduction of green house gas emission and stimulation of economic growth through improved trade and economic base diversification. The project will also have some negative impacts such as soil erosion after vegetation clearance due to land and soil formation of the area, air pollution due to dust and fumes during construction and increased noise and vibration and risk of disease transmission (particularly HIV/AIDS), which however can be mitigated. Resettlement for this project maybe required where available right-of-way is narrow. However, resettlement for transmission lines or distribution lines shall be avoided and shall only be used as the last option available.

The results of the study have shown that the project activities will not have significant negative impacts to the environment. It can therefore be concluded that within the limitations of the prediction assessment methods applied during the study, the project will be environmentally sound provided that the recommended mitigation measures are considered.

If the financier and TANESCO decide to implement the project, a detailed EIA study is required, fulfilling all requirements stipulated by the financiers and National Environmental Management Council (NEMC).

1.7 Socio-Economic Impact Assessment

The socio-economic study determines the current socio-economic situation and conceivable effects of electrification of the project area, including monitoring indicators and a number of crosscutting issues, such as HIV, gender and conflicts, of the project are described.

There will be many different effects of electrification of Makambako-Songea area on poverty reduction. Provision of electricity to these areas will improve the situation for the people, directly by enhanced income and employment and more indirectly through impact on social- and cultural aspects of life, including areas as education, health, women’s status etc. In Makambako-Songea area, agriculture is the main economic activity.

1.8 Recommendation

In the financial analysis, a 100% grant financing of the distribution part of the initial investments is assumed. Even under these circumstances it will have a negative cash flow. In other words, the total revenues based on today’s tariffs do not cover the operating costs consisting of supply cost (average electricity production cost) and operation and maintenance costs for the extended distribution network. The tariff study has also focused on this specific topic. Although the financial results of the distribution part are poor, the tariff study clearly indicates that the required tariff


Page 4 of (68)

levels in order to attain viable results are not necessarily out of range. For the transmission part soft credit is assumed, since this part shows a viable financial result. This conclusion is also strengthened in the economic analysis, which clearly indicates the affordability of a tariff level needed to cover all operational costs. From a social-economical perspective the results are definitely interesting, especially taking into account the overall development potential.

The strategy of the Government of the United Republic of Tanzania of electrifying rural areas, of which electrifying the Makambako-Songea is one possible area, is supported by the results of this feasibility study, thus under the prerequisite that it is acceptable for TANESCO to operate new areas with an initial negative cash flow or a government decision to increase tariff levels. Based on these conditions, TANESCO apply for financial assistance of USD 21.9 million for distribution and 21.6 for transmission, for rural electrification of the Makambako-Songea, which covers all material investments and external administration but excludes own administration and project management costs.


Page 5 of (68)

2 Project purpose

The major objective of the project is to extend TANESCO’s electricity network in order to be able to provide electricity to commercial business activities, fresh water pumping, secondary schools, medical services, streetlights, residential houses, agro-processing activities etc. in the project area. The majority of all residents within the project area will benefit on the results of the project, and the standard of living will improve in many ways. Small commercial and industrial businesses are expected to be established, which may attract potential investors to further invest in this area. The use of kerosene, firewood and charcoal will be reduced which will have a positive impact on the environment. Security will also improve as a result of the electrification process, especially through the installation of streetlights. Other social benefits include performance improvements in the education area, especially at Secondary Schools and improved health services in hospitals and clinics.

One major environmental benefit is the possibility to replace the existing diesel power station in Songea and Ludewa thus reducing the pollution from diesel oil burning and transport of diesel from Dar es Salaam to Songea and Ludewa.

2.1 Background

In Tanzania, at present, outside the major cities and towns, only the majority of regional headquarters, some district township and a limited number of villages are supplied with electricity. Only 1% of rural households have access to grid electricity. The lack of basic modern energy services in most rural areas is perceived as being a bottleneck in social and economic development.

The Government of the United Republic of Tanzania and Sida (Sweden) are currently reviewing various options to finance rural electrification projects in Tanzania. This feasibility study assess the possibility to electrify central parts of the Ruvuma and Iringa Region by transmitting power from the under construction 220/132/33kV substation at Makambako to Songea. The prevailing economic changes in Tanzania will affect most rural areas targeted for electrification thus many projects are forced to show positive financial indicators in order to guarantee a pay back on capital investments. However, the government still emphasizes that electrification stimulates rural development. Since TANESCO does not currently have the required funding to finance this project there is a need to receive external financial assistance in order to fulfil the requirements on asset return, rural development and sustainable energy supply.

A feasibility study has been made for the Makambako-Songea project, where different alternatives of grid extension were identified as well as an alternative with local hydropower generation. This project document covers alternative 1; the power supply of Makambako-Songea by grid extension, including the districts of Njombe and Ludewa in Iringa Region and Songea Rural, Mbinga, Songea Urban and Namtumbo in Ruvuma Region. The document consists of the proposed network design and the essential results from a power market survey, a socio-economic study and an environmental impact assessment of the project area. Furthermore the document comprises a financial and economic analysis of the project.


Page 6 of (68)

2.2 Scope of Study

A Feasibility Study has been carried out for the project. In this study four Alternatives were identified and analysed, the most feasible alternative (No 1 in the Feasibility Study) were recommended. This Project Document covers the proposed Alternative 1 in the Feasibility Study.

Initial Scope of Study

Some of the activities that have been carried out in order to prepare this project document include the following topics. • Physical site visits to the Makambako, Songea area and villages along the proposed line

routes in order to determine network layout.

• Socio-economic surveys in villages located along the proposed network lines were carried out in order to determine the ability and willingness to pay.

• Market survey of today’s energy use and identifications of potential customers.

• Environmental impact assessment to analyse the potential impacts of the project development and recommend mitigation measure to be followed during the project implementation.

• A workshop with the stakeholders where the objectives of an electrification of the project area was defined in detail. The stakeholders consisted of relevant representatives of the Songea, Namtumbo and Mbinga district, TANESCO and the Consultant team.

Modified Scope of Study

Different network alternatives

The scope of services for the study was originally to revise the pre-feasibility study made by TANESCO. During the kick-off meeting it was expressed by TANESCO representatives to study a route more close to Njombe than in the previous study. Further, it became natural to also identify a number of alternatives for the grid extension as well as a stand-alone generation alternative with local generation within the Songea area. All alternatives were analysed in overall terms and summarised in an Interim Report that were presented to Sida and TANESCO. It was decided to continue the analysis for Alternative 1, with an additional extension of villages in Madaba-Ludewa areas, that becomes the main alternative for this study. This Project Document is based on the main alternative. In the main alternative it was proposed to include a new substation in Madaba about half-way between Makambako-Songea that improves the transfer of power in the 132 kV line. It also allows or rural electrification of villages in the vicinity of Madaba, the so-called Wino project, but also villages along the proposed 33 kV line Madaba to Ludewa including the district town Ludewa. To allow for different financing alternatives in the future the entire project has been divided into two main lots, one for the 132 kV transmission part and one for the distribution part. For the economical and financial analysis this two separate lots have been taking into consideration in this report.


Page 7 of (68)

3 The Project Area

3.1 Geographical Location and Population

The proposed project area extends over parts of two regions in the southern Tanzania: Ruvuma Region and Iringa Region

Ruvuma Region with its headquarters at Songea is one of the twenty-one administrative regions in mainland Tanzania. It is named after the Ruvuma River, which forms most of its southern boundary with Mozambique. It is also bordered to the North by the Morogoro Region, to the Northeast by the Lindi Region, to the East by the Mtwara Region and to the Northwest by the Iringa Region. Ruvuma is administratively divided into 5 districts: Songea Rural, Songea Urban, Tunduru, Namtumbo and Mbinga. Songea town is also a commercial centre in the region, south of Tanzania. Ruvuma appears among the three least densely populated regions in the country. Over 90 % of the population in the region lives in the rural villages, most of the villages being located along roads of varying standard.

Iringa Region has its headquarters at Iringa. It borders to Ruvuma and Lake Nyasa in the South, Mbeya in the West, Singida and Dodoma in the North and Morogoro in the East. The region is divided into seven districts; Kilolo, Iringa Urban, Iringa Rural, Ludewa, Mufindi, Makete and Njombe.

The project area includes the following districts in the two regions. The district population and number of household are presented and are according to 2002 census.

Region District Population Number of

Households Ruvuma 1 117 166 Songea Rural 147 924 31 514 Mbinga 404 799 84 669 Songea Urban 131 336 30 102 Namtumbo 185 131 32 998 Iringa 1 495 333 Njombe 420 348 98 825 Ludewa 128 520 27 729


Page 8 of (68)

3.2 Project Area Map

The proposed project area extends over parts of two regions in the southern Tanzania: Ruvuma Region and Iringa Region. The 132 kV transmission line connects Makambako – Songea while the 33 kV lines connects Madaba-Ludewa, Songea – Namtumbo, Songea - Mbinga with a further 19 kV extension to Mbamba Bay

Makambako

Songea

Namtumbo

Mbamba Bay

Ludewa Madaba


Page 9 of (68)

3.3 Villages

The project area has been divided into smaller sub areas shown in the following table, including all the villages and number of potential customers.

Table 1 Villages included in the Project Area and Number of Potential Customers

Songea-Namtumbo Mbinga-Mbamba Bay Madaba-Ludewa Lumecha 81 Nyoni Ward 34 Lilondo 571 Mtele 58 Mpapa 30 Magereza 119 Msindo 70 Buruma 32 Maweso 83 Mawa 40 Mbamba Bay 75 Wino 203 Hanga 208 Total 171 Igeawisenga 49 Mputa 54 Lilombwi 61

Naikesi 53 Songea North Liwengi 308 Namabengo Ward 262 Tanga 58 Mikongo 66 Luegu Ward 233 Lumecha 58 Kifanya 56 Ngwinde 29 Mlilayoyo 71 Ihanga 103

Lighano Monastery 1 Mageuzi 71 Pigan Yonga E 230

Lighano Ch. Sem. 1 Likalangilo 61 Madaba 571 Njalamatata 127 Mtyangimbole 103 Mkongotema 206 Nakawale 102 Total 422 Ngadinda 215 Nahimba 18 Gumbiro 103

Mkongo Gulioni 141 Makambako Piga Yonga W 48 Kilangalanga 58 Igongolo 235 Pigan Yonga 265 Namanguli 65 Tagamenda 61 Mahanje 64 Suluti 248 Itipingi 58 Ndalela 185 Namtumbo 247 Kichiwa 285 Liganga 101 Rwinga 158 Maduma 58 Shauri Moya 47 Minazini 105 Ibumila 210 Mkongabati 49 Total 2358 Matikanjola 103 Madindo 19 Total 1010 Muhoro 17

Songea-Mbinga Ludewa 559

Lilambo Ward 32 Njombe Milo 104 Maposeni Ward 658 Idunda 103 Lugarawa 150 Matomondo 80 Yakobi 103 Mkiu 78 Liganga 28 Iboya 61 Mlangalil 397 Kitai 31 Lwangu 103 Total 5027 Amani Makoro 92 Total 370 Masuguru Gem. 84

Mkako 39 Songea Town Kigonsera 118 Total 7593 Lipumba 44 Mtama 51 Mbinga 3017 Total 4273


Page 10 of (68)

3.4 Present Energy Situation

Apart from Njombe and Makambako, at the northern end of the proposed 132 kV line, only Songea and Ludewa town are electrified. Suppressed demand is a common feature in all these places, although with the now recently added capacity in Songea the situation there has improved. Songea town is provided electricity by diesel generators (7.6 MW installed capacity), operated by TANESCO through a local distribution network. Mbinga and Namtumbo districts have no grid electricity supply. The current level of electricity generation of 3.5 MW1 in Songea town would not be sufficient to supply Mbinga and Namtumbo district headquarters. Songea town itself faces intermittent power supply shortages due to load increase, lack of spare parts for maintaining the old generator sets, and occasional shortages of fuel. In addition, running diesel generators is an expensive undertaking requiring subsidies to keep consumer tariffs at the level required by the Government.

Energy is mainly needed for water boiling, entertainment and lighting. In most rural areas, firewood is a dominant fuel for cooking but also charcoal and kerosene are supplementary fuels for cooking. Kerosene is used for lighting; batteries for torches and candles are also used. In Namtumbo, Mbinga and other settlements, firewood and charcoal are the common sources of energy for cooking. Small diesel generator sets are used by businesses, e.g. in guest houses, restaurants, bars, grain mills, and by missions (for some missions also some micro hydro). For entertainment purposes, dry cells are used to power radios. In a few locations, PV solar panels are used.

3.5 Planned generation facilities in the project area A number of different generation plants are planned to be implemented in the project area. Most of the plants are very large compared to the demand in this project. Following, are shortly given comments to the intended power plants:

Nkomang’ombe Mchuchuma

In Ludewa district, a company has advanced plans to open a new coalmine and an iron smelter. This will attract immigration to the area and investments in new business. The plan is to install about 200 - 400 MW in a coal fired plant. The transmission of power shall mainly be transferred to the main grid with use of 220 - 400 kV lines and is therefore not considered in this project.

Ruhudji

Plans are made to construct a new hydropower plant in Ruhudji River, with an estimated capacity of about 340 MW. All power transmission from the plant should be transferred to the main grid with the use of 220 - 400 kV lines and is therefore not considered in this project

1 In August 2005 six generators were running giving 3.5 MW and four generators were grounded waiting for major overhauls or spares.


Page 11 of (68)

Masagiri

It is planned to construct a new hydropower plant at Masagiri with an estimated capacity of about 120 MW. The transmission of all power from the plant should be transferred to the main grid with use of 220 - 400 kV lines and is therefore not considered in this project

Nakatuta

Plans are made to construct a new hydropower plant at Nakatuta, about 80 km south of Songea, with an estimated capacity of about 9,6 MW. The transmission of all power from the plant could be transferred to Songea and has been included in the Feasibility study as Alternative 4.


Page 12 of (68)

4 Market Survey

A power market survey has been performed for the electrification of the project area. Generally, potential electricity loads in the villages are of similar types, ranging from households to health centres, dispensaries, grain milling machines, small shops, bars, restaurants, guest houses, administrative office, schools missions, etc.

Agriculture is the mainstay of the area, supplemented by lumbering, hunting and small businesses. The type of agriculture is still very traditional (shifting cultivation). Cash crops are mainly tobacco, coffee and groundnuts; food crops are maize, cassava, paddy and beans. Coffee is processed and packed in Mbinga. Outside of that and small-scale mining of gem stones, there is reportedly little industrial activity destined for sale outside the region itself. There is no available information on concrete plans for new (agro-industrial) activity.

Makambako and Njombe town will be connected to the main grid via 220/132/33kV Makambako substation that currently is under construction. This will allow for further extension of the 33 kV system to connect some villages in the vicinity of Makambako and Njombe respectively. At the initial network plans these villages were supposed to be connected through a Single Wire Earth Return feeding single phase form the 132 kV line. That would allow connections of single phase customers (house holds) but not industrial customers. During the final analysis, a three phase connection has been preferred by an extension of 33 KV three phase lines from Makambako and Njombe respectively. The power load requirement for theses villages in Makambako and Njombe areas to be connected have been established through the experience from connections of villages in the ongoing 33kV Makambako-Njombe project.

4.1 Power Demand

4.1.1 Identified Loads

All types of potential consumers were determined through physical counting and categorised as domestic consumers (small, medium and large), commercial consumers (shops, restaurants etc.), light industries and others.

The estimation of the number of potential domestic consumers in the study area was based on the number of permanent houses, which satisfy TANESCO standards for electrification. Further, the quality and size of the houses were taken into account to enable grouping into small, medium and large categories. For light industrial group, light industries found in the areas are milling machines, which are currently operated by diesel engine sets and water pumps. Commercial consumer group included shops, restaurants, bars, guesthouses etc. but generally they are small in size.

The individual peak power demands of the consumers are then estimated as a product of the unit load and diversity factors. The estimated peak demand for dimensioning year (year 5) in the project area amounts to about 15 200 kW.


Page 13 of (68)

Table 2 Peak Power Demand for Individual Load Centre

Peak Power Demand (year 5) Area

Peak Power Demand (kW)

Songea-Mbinga 2 265 Mbinga-Mbamba Bay 84 Songea-Namtumbo 2 131 Makambako 1 121 Njombe 269 Madaba -Ludewa 3 906 Songea-North 280 Songea Town 5 163 TOTAL 15 219

4.1.2 Load Centre Power Demand

Generally, loads in all villages are of similar categories ranging from households to health centres, dispensaries and grain milling machines. Either there are small shops, bars and tearooms and a few guesthouses. The maximum demand presented above is distributed on the following categories: Table 3 Power Demand for each Consumer Category and Area

Load Centre Maximum Power Demand in kW distributed on Consumer Categories

Category Domestic Domestic Domestic General Usage

Tariff General Usage

Tariff Low

Voltage High

Voltage Public Lighting

Area (small) (medium) (large) Single Phase Three Phase

Songea-Mbinga 26 45 64 564 1 520 19 27 Mbinga-Mbamba Bay 1 2 3 24 34 19 1 Songea-Namtumbo 12 22 31 362 1 690 13 Makambako 5 9 12 157 933 5 Njombe 2 3 5 50 206 2 Madaba -Ludewa 26 54 77 762 2 973 13 Songea-North 2 4 5 64 202 2

Songea Town 268 255 363 2 580 1 595 39 63

4.1.3 Specific Loads

Songea is the regional capital of Ruvuma. Public administration, diesel power supply (TANESCO) and a tobacco processing factory are the single largest sources of employment, in addition to various restaurants. There is also a vocational training centre and a number of primary, secondary schools, colleges and hospitals. The area has potential commercial customers such as the mission with several mills, a butchery and a cool storage, and the adjacent village of Peramiho Sokoni with two maize mills, shops and guest houses. A mini hydro power plant with a capacity of approximately 500 kW is owned by Peramiho Mission and supplies the mission buildings in the Peramiho area. Peramiho Mission has applied to get connected to the TANESCO grid as the generating capacity is not sufficient to permanently supply all consumers in the mission area.


Page 14 of (68)

Mbinga is a small, busy town with hotels, guesthouses, restaurants, shops, banks, several mills, workshops, etc. The Mbinga Coffee Curing Company operates their own electricity supply fed by two diesel generator sets of 160 and 420 kVA respectively. This commercial customer requires initially about 120 kW, but should probably reach a demand of about 350 kW when affordable electricity becomes available and new investments are made. Mbinga Town is estimated to have an initial demand of 500 kW that probably would be doubled within a short period. Luhuwiko is located adjacent to Mbinga District Township and can be electrified through the installation of a distribution transformer along the line.

Mbamba Bay is a further 68 km from Mbinga Town. Presently, Mbamba Bay is a sleepy village at the shore of Lake Nyasa with apparently little own potential for development. However, the World Bank has financed a new building for the Tanzania Revenue Authority and USAID has financed the reconstruction of approximately 30 km of the road close to Mbamba Bay. Thus, a development potential for the village may exist and its importance may increase since it is a point of connection, through ferry or boat, with Malawi on the other side of the lake, and as a possible terminal point on a future east-west Mtwara Development Corridor project.

Namtumbo district township is at present at quiet place accommodating mainly some shops, a couple of missions, a few grain mills, schools and a dispensary. Activities in the town should increase with the relocation of administrative units from Songea following the recent creation of Namtumbo district. Namabengo is certainly the village with most potential customers such as shops, a mission, four maize mills, a large community centre and a secondary school. The new Namtumbo District Office some other village’s located along the 33kV feeder from Songea plant to Namtumbo District Township could be directly connected to this line.

Ludewa District which had a population of 128,520 people in 2002 is among the six districts of Iringa region and is situated south-west of the region. The district borders Lake Nyasa on the west. Other districts of Iringa region include Njombe, Mufindi, Makete, Iringa Urban, Kilolo and Iringa Rural. Ludewa town situated on the almost flt area after one goes from Njombe-Luponde-Ludewa road. Njombe and Luponde are situated on the southern highlands. The town is a small, busy town with Government administration buildings, hotels, guesthouses, restaurants, shops, banks, several mills, workshops, etc. The town is about 40km from the famous Mchuchuma Coal deposits in the ]southern Tanzania. The district is also surrounded by the Ruhuhu and Kitiwaka rivers which empty their water to Lake Nyasa. The town has several individual diesel generator sets. At the Government Hospital there is a small wind turbine which used to produce about 5KW of electricity. The turbine currently is defective. Ludewa town is estimated to have an initial demand of 500 kW that probably would be doubled within a short period. From the proposed 33kV line from proposed Madaba 132/33Kv, 5 MVA substation, the line is proposed to be extended to Wino ward, Madaba town, Mahanje, Ndolella coffe Farm, Liganga, Lugalawa Hospital, Mlangali, Milo, Mkongobasi, Mhoro, Amani and finally the Ludewa town. At Liganga village, there is iron ore deposit on which a local investor is finalizing an agreement with the Government on developing the same. Initial load estimates for the proposed Liganga Iron Steel is 50MW on which there will also be extra electricity of about 36MW to be co-generated due to steel manufacture processes.


Page 15 of (68)

4.1.4 Load and Energy Forecast

A 25-year load forecast has been made through the use of a Network Dimensioning Model. The network-dimensioning model has been developed to perform load forecasting for new rural development areas. The load forecast is used for both load (kW) and energy (kWh) forecasting.

The model determines maximum demand based on the results from the market survey. This maximum demand is used as the main input in order to calculate the annual demand. The forecasting model uses three input variables; Connection Rate, Number of consumers and Specific Demand. For the project, connection rate vary from 5% per year for small domestic consumers to 100% for major loads. The number of consumers in the specified areas is forecasted to grow with a yearly rate of 3% with the exception of the larger consumers where the growth rate is believed to be more modest (1%). The specific demand, being the average use of electricity among individual consumers is assumed to have an annual growth rate varying between 1 and 5%. In addition to these parameters, the model also uses demand profiles in order to perform a reasonably accurate load forecast. These profiles are also managed in the network-dimensioning model. Assumptions regarding future electricity demand and connection rate are presented in Table 4 below:

Table 4 Annual Growth Rate

Tariff Consumer Category Connection

Rate Number of Consumers

Specific Demand

Domestic (small) 5% 2% 3%Domestic (medium) 10% 3% 3%Domestic (large) 10% 3% 2%General usage tariff (T1), Single Phase 10% 1% 2%General usage tariff (T1), Three Phase 20% 2% 2%Low Voltage (T2) 100% 1% 1%High Voltage (T3) 100% 1% 1%Public Lighting 50% 3% 2%

The approach to the forecasts for Songea and Ludewa towns differ from that of the villages since the towns already have access to electricity through the isolated, local grid. For the already existing demand a 100% connection rate is assumed for all consumer category. The number of consumers and the specific demand is assumed to grow at the same rate as for other villages in the area.

The network-dimensioning model also calculates maximum energy demand, based on input demand factors in the model. The maximum energy demand is subsequently an essential input to the financial and economical model.


Page 16 of (68)

Figure 2 Future Electricity Demand

Future Electricity Demand Songea Electrification

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033

MW

h

Low Voltage (T2) General usage tarif f (T1) 1ph General usage tarif f (T1) 3ph Domestic

Table 5 Summary of total number of customers and their average demand

Customer Category

Number of Customers Number of Potential

Customers Number of Initial

Customers

Number of Customer

Year 6

Number of Customers

Year 10 Average Demand

per Unit Domestic (small) 9 139 4 025 5 420 6 805 84 Domestic (medium) 1 774 821 1 314 1 766 581 Domestic (large) 592 274 438 590 5 001 General usage tariff (T1), Single Phase 7 460 2 963 4 719 6 028 3 549 General usage tariff (T1), Three Phase 1 390 412 1 089 1 464 30 943 Low Voltage (T2) 6 6 6 7 52 560 High Voltage (T3) Public Lighting 862 656 983 1 124 548

Total number of consumers 21 224 9 157 13 970 17 782


Page 17 of (68)

5 Network Design and Cost Estimates

5.1 Proposed Network Design

Based on the market survey and the network dimensioning calculations a network for the power supply has been outlined. The network is dimensioned for the estimated load year 2012. The proposed network consists of grid extension via a 132 kV transmission line from Makambako substation to Songea substation.

Makambako 220/132/33kV substation, under construction, will be extended with a 132 kV system. The 132 kV overhead line will be designed using steel towers and optical cable will be installed in the earth wire. In Songea a new substation is proposed for 132/33/11 kV systems.

From the new proposed Songea substation 33 kV lines are suggested to Namtumbo and Mbinga with a further proposed extension to Mbamba Bay using a low cost single phase alternative (SWER). The SWER system is using only one conductor as phase conductor with earth as return for the current. This will give a single phase system for connections of low load centres to a minimum cost.

The substations and LV-network are dimensioned for the estimated load year 2012 while the 33 kV lines are dimensioned for an additional 50% transformer capacity per substation. That gives a larger 33/0.4 kV transformer capacity and LV network extension than needed during the forecast period.

Njombe and Makambako are currently being supplied with electric power from TANESCO diesel generators and Uwemba mini hydro 11 kV network, which is interconnected with the network power, generated and owned by TANWAT. In 2006, Njombe will be connected to the main grid and supplied from the proposed 220/132/33 kV Makambako substation via a 60 km 33 kV line.

Proposed grid extension consists of:

• Extension of Makambako substation (under construction) • A new 250 km 132 kV overhead line from Makambako to Songea, including optical fibre • a new 132/33 kV substation at Madaba • a new 132/33/11 kV substation at Songea • 33 kV distribution lines and low voltage connection of villages along the Makambako -

Songea route (Makambako, Njombe and Songea areas) • 33 kV distribution lines and low voltage connection of villages along the Madaba - Ludewa

route including a connection at Pigan Younga to the Wino distribution area • 33 kV distribution lines and low voltage connection of villages along the Songea-

Namtumbo route • 33 kV distribution lines and low voltage connection of villages along the Songea-Mbinga

route and 19 kV SWER lines along the Mbinga-Mbamba Bay route The proposal to include a new substation in Madaba and a 33 kV line extension to Ludewa allows connection of villages in the vicinity of Madaba, villages in the Wino area, villages along the line Madaba-Ludewa and the town Ludewa. This will allow TANESCO to offer secure grid supply at a 33kV/0.4kV level. Electric connections of villages in the Wino area, with a 11 kV distribution


Page 18 of (68)

system has earlier been studied as a self-contained project with electric supply form mini hydro plants. An organisation to develop this 11 KV electric network, mini hydro generation, administration etc. on a stand alone basis has been established and is given in detail in the Report ‘Songea Rural Electrification Project’ of Sten Bergman. It is recommended that experience gained from the already existing plans should be used in developing the future detailed network within the Wino area.


Page 19 of (68)

Figure 3 : Network map (including the Wino project), consisting of 132 kV line Makambako-Songea , 33 kV distribution systems in Makambako, Njombe and Songea including distribution lines and low voltage connection of villages along the Madaba - Ludewa route, the Madaba-Ihanga route and Madaba-Gumbiro route, Namtumbo-Songea-Mbinga and 19 kV SWER Mbinga-Mbamba Bay

Songea 132/33/11 kV Substation

Tanga

Mlilayoyo MageuziLikalangilo

Mtyangimbole

Lwangu

Iboya

Itipingi Tagamenda

Maduma

Kichiwa

Idunda

Yakobi

Igongolo

Makambako 220/132/33 kV Substation

Ibumila Matikanjola

Legend: 132 kV line 33 kV line Substation Lumecha

Njombe 33/11kV Substation

33 kV Songea – Mbinga-Mbamba Bay, see separate Map

33 kV Songea –Namtumbo, see separate Map

Madaba 132/33 kV Substation

Kifanya

Ihanga

Mikongo Liwengi

Lilombwi

Ludewa

Shauri Moyo Madlindo

Pigan Yonga

Liganga

Mohoro

Milo

Lugalawa

Mkongotema

Ngadinda

Gumbiro

Lilondo

Wino

Mahanje

Igawisenga

Ndolela

Mklu Maweso

Pigan Yonga

Mlangali

Mkongabati

Magereza


Page 20 of (68)

Figure 4 Network map of consisting of 33 kV line Songea – Mbinga and 19 kV SWER line Mbinga – Mbamba Bay with connection of villages along the line route

Figure 5 Network map consisting of 33 kV line Songea – Namtumbo with connection of villages along the line route

Songea 132/33/11 kV Substation

Lumecha

Naikesi

Mputa

Hanga

Mawa

Msindo

NgwindeUtwango

Namabengo

Litola

KumbLuegu

Nahoro

Suluti DC Office

RwingaMinazi

Lighano

Lighano Ch.

NamanguliKilangalanga

Namtumbo

Litete Mkongo GulioniNahimba

NakawaleNahimba Sec. Sch.

Nakawale Njalamatata

MletelMtele

Songea 132/33/11 kVSubstation

SSOONNGGEEAA

Songea Diesel Power

Peramiho Seminar Peramio Farm

Maposeni Sec.

LilamboLikuyu F i

MatomonLiganKitai

Amani Junc.

PeramiPerami

Masaguru

Mkako. Likonde S

KigonseraLipumba.

Mtama.St. Josephs Voc. Tr. Mbinga Mbinga.Makita Sec.

Sch.

Nyoni.

Mpapa. Mitawa.

BurumaMbamba bay.

Legend: 33 kV line

19 kV SWER line

Substation

Power Station

Water pump


Page 21 of (68)

5.2 Cost Estimates

The initial implementation cost for the proposed network outlined has been estimated to USD 50 (SEK 400 million) of which USD 21.9 million are transmission costs, USD 21.6 million are distribution and USD 6.5million is contingency.

Table 6 Cost Estimates for Initial Investment

Investment Costs Transmission Distribution Overhead Line

132 kV Makambako - Songea USD 15 600 000 Makambako USD 1 226

453

Sub Total Overhead Line USD 15 600 000 Njombe USD 885

973

Madaba USD 7 854

440

Substation Songea (north) USD 760

587

Makambako USD 911 819 Songea - Namtumbo USD 4 619

722

Madaba USD 1 217 449 Songea - Mbinga USD 4 067

234

Songea USD 2 769 231 Mbinga - Mbamba Bay USD 734

882

Subtotal Substation USD 4 898 498 Songea Waterpupmp Station USD

24 960

Subtotal Transmission USD 20 498 498 Subtotal Distribution USD 20 174 251

Tanesco Administration, Consultancy Services 7% of Sub Total USD 1 434 895

Tanesco Administration, Consultancy Services 7% of Sub Total USD

1 412 198

Total Transmission 21 933 393 Total Distribution 21 586 449 Contingency (15%) 6 527 976 Grand Total Investment USD USD 50 047 819 Grand Total Investment SEK (1USD = 8 SEK) SEK 400 382 549

Table 7 Cost Estimates for Initial Investment Detailed estimated costs is shown in Annex 1.

The figures include the concept of implementing optical ground wires (OPGW), thus providing the option to introduce land-based communication access to the power customers.

TANESCO has performed a rough cost benefit analysis for using OPGW. The conclusion from this analysis is that the OPGW is of great socio-economic value such as:

• video medicine, • education VOIP, • law enforcement, banking, • district administration,


Page 22 of (68)

• custom TRA and • internet for the inhabitants. The additional cost for OPGW in comparison with traditional ground wires is approximately 1200 USD per km. The total additional cost for OPGW is about USD 1 010 000. TANESCO can allow broadband companies to operate the optical fibre system and receive revenues from utilisation of the system.


Page 23 of (68)

6 Financial Assessment

In order to assess the financial viability of the project from the viewpoint of TANESCO, a financial evaluation of the project has been carried out in the form of a cost benefit analysis. This analysis involved essentially identification of all relevant costs and benefits of the project. Comparison of quantified costs and benefits by means of calculating the discounted cash flow were made, which includes the present value (PV), the net present value (NPV) and the internal rate of return (IRR). With consideration to TANESCO’s current tariff level a study has been performed to determine the required tariff for financial viability of the project. Finally, a sensitivity analysis is carried out to test the effects of changes in key assumptions on the financial indicators.

6.1 Financial Analysis

A financial model has been developed in order to analyse the financial performance of the electrification of the project area. The assumptions used in the analysis derive from data provided by TANESCO such as market survey, socio-economic study and data regarding power generation. As the project may be implemented without recourse financing in which the lenders and investors may treat the project assets as a collateral, the financial analysis was carried out to determine cash flows that is considering the most important factors for the project developers, the lenders and investors. The financial analysis hence shows the pattern of cash flow, which the project provides over its economic lifetime. It also determines the ability to pay the debt service, operating and maintenance cost streams and brings out any cash flow deficits, which may arise. Ideally the net cash flow should be an inflow, otherwise other short-term loans have to be used to cover these deficits during the project operation. In evaluating the cash flow, all expenditures such as debt service, operation and maintenance, depreciation, income from sale of electricity are lumped into end of year payments. According to Sida, different financing alternatives shall be considered for the transmission part and distribution part of the project. For distribution 100% grant shall be considered and soft loan for transmission and the result shall be presented separately.

General assumptions

All calculations are made in real terms with starting year 2008 and over a period of 25 years. A discount rate of 12 % is used. Debtor days and creditor days are assumed to be 60 days based on information from TANESCO. The following foreign exchange rates are used: 1 USD = 1150 Tshs 1 USD = 7.8 SEK Market demand The pro forma market demand was calculated using the network dimension model and was presented in chapter 4.


Page 24 of (68)

Revenues Distribution: TANESCO’s tariffs and service charges for year 2005 are used when calculating the revenues. The collection rate is estimated to 95% since Pre-payment meters (LUKU) will be used and based on historic figures in similar areas presented by TANESCO. Transmission: TANESCO's cost for grid is used when calculating the revenues. A 100% collection rate is used. One main benefit of the project is the cost reduction that arises from replacing the existing diesel generation in Songea and Ludewa by electricity from the grid. Since the diesel generation can be replaced, the corresponding revenue stated as cost saving is included in the analysis for the transmission part. Investments The investment for grid extension and consumer connections are presented in chapter 5.2.The initial investments are dimensioned based on the estimated load demand year 5 after the network is in operation. After year 5 there will be extension investments mainly in low voltage distribution network, customer connections and distribution transformers. The initial investments is For Transmission USD: 21.9 million For Distribution USD: 21.6 million Total USD: 43.5 million The total estimated additional investments for future extension during the studied period are approximately USD 20.8 million for the project as a whole. Due to degrading etc. of equipment it is necessary to account for depreciation. Straight line depreciation has been used in the analysis using 25 years depreciation period for all investments.

Operation costs Operation and Maintenance costs (O&M): The annual O&M costs are estimated to 1.5% of the total investment for both distribution and transmission. Supply costs and energy losses Distribution: Supply cost: The average energy supply cost from grid is 0.070 USD/kWh. Distribution losses: The distribution technical losses in the grid are estimated to 10%. Non-technical distribution losses are estimated to 10%. That results in bulk energy supply 20% higher than total energy demand. Transmission: Supply cost: In the feasibility study report for reinforcement and upgrade of Dar es Salaam, Kilimanjaro and Arusha Transmission and Distribution System, performed by Lahmeyer, the percentage of distribution cost in total energy supply cost was estimated to 25%. The average energy supply cost from transmission is accordingly 0.052 USD/kWh. Transmission losses: No losses are considered in the analysis. Financing The project may bee financed using borrowed capital, grants or by TANESCOS own equity. In the base case analysis the financing of the project consist of, 100% grants for distribution and soft credit for transmission, for initial investments. Regarding the credit for transmission no


Page 25 of (68)

assumptions concerning interest rate and return period has been made. All additional investments for future network extension are financed by TANESCO with no assumed yield requirements.

Financial Results

Table 8 Financial Indicators

Summary of Financial Analysis Transmission Distribution Initial Investment kUSD 21 933 21 586 Present Value for Cash Flow (PV), at a 12% discount rate kUSD 26 544 -3 503 Net Present Value (NPV), at a 12 % discount rate kUSD 5 180 -24 241 Benefit/Cost Ratio (B/C) 1,37 0,93 Internal Rate of Return (IRR) % 15%N/A Income statements and cash flow statements are presented in Annexes 2-5. The financial sustainability of the project is verified by the positive cumulated total cash flow of the project. The result of the analysis shows that the transmission part is viable while the distribution part shows a negative cash flow even though 100% grants are assumed. This is mainly due to that the revenues from the tariff do not cover essential elements such as the operating costs for distribution. Table 9 shows the total revenues and costs over the period and the operating margin before depreciation.

Revenues and Costs Makambako-Songea Electrification Transmission

-15 000

-10 000

-5 000

0

5 000

10 000

15 000

20 000

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

kUSD

Revenues Operating costs Operating margin before depr.

Table 9 Total revenues, cost and operating margin before depreciation, Transmission to the Project Area


Page 26 of (68)

Revenues and Costs Makambako - Songea Electrification Distribution

-20 000-15 000-10 000

-5 0000

5 00010 00015 00020 000

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

kUSD

Revenues Operating costs Operating margin before

Table 10 Total revenues, cost and operating margin before depreciation, distribution to the Project Area

6.2 Tariff Study

To evaluate the financial impact of the existing tariff levels, the switching values have been calculated. This is done by an iteration of the average electricity tariff. Tariff 1: The annual average tariff needed in order to receive a positive NPV (=0). Tariff 2: Looking at the project on a stand-alone basis, where the cash at the end of the year may not be negative. Since the tariffs only have an effect on the financial results of the distribution part, the tariffs study will focus on arriving at a positive cash flow for distribution.

Tariff 1: The average tariff needs to increase in real value by approximately 4.1% annually in order to reach a NPV equal to zero for distribution. This will result in a negative cash flow during the first five years, which needs to be covered by TANESCO. Tariff 2 When the project is on a stand-alone basis, the average tariff needs to increase in real value by 11.0% the first year of operation in order for the project to build up a cash balance which can cover both operating costs as well as future additional investment costs and reinvestments in the system. The result of the tariff study is presented in Figure 6 and Figure 7.


Page 27 of (68)

Average income from sales (tariff) in Songea-Makambako Electrification project

0,00

0,05

0,10

0,15

0,20

0,25

2007 2010 2013 2016 2019 2022 2025 2028 2031

USD

/kW

h

Base case Tariff 1 Tariff 2

Distribution - Tariff Study

Figure 6 Tariff Study of the average tariff for distribution to the project area

Operating Margin for the Songea-Makambako Electrification project

-5000

0

5000

10000

15000

20000

25000

2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031

USD

thou

sand

Base case Tariff 1 Tariff 2

Distribution - Tariff Study

Figure 7 Tariff Study of the operating margin for distribution to the project area

6.3 Sensitivity Analysis

Sensitivity analysis identifies the variables that most influence the project’s net benefits and quantifies the extent of their influence. The deviation between the projected project costs, revenues and the real outcome can be identified as the risk of the realisation and operation of the project. There may be several reasons for this, e.g.

• The decrease of the revenues from consumers because of the inadequate affordability or the potential unwillingness of some groups to connect to the system.

• The number of inhabitants in the Ruvuma district decreases and/or the consumption of electricity decrease.


Page 28 of (68)

• Consumers will be connected to the network grid slower than expected. • The specific cost of some of the operational components is higher than planned. • Energy prices increase at an unexpected rate, which cannot be charges to the consumers. • The initial investment costs being higher than estimated.

A sensitivity analysis has been carried out for both the transmission part and the distribution part respectively. The influence of variations in electricity demand and energy supply cost variables on the project’s IRR or NPV have been investigated. Three different scenarios, besides the base case are analysed: Scenario 1: A 10% increase in energy supply costs Scenario 2: A 20% decrease in electricity demand Scenario 3: A10 % increase in energy supply cost and a 20% decrease in electricity demand.

Table 11 Results from Sensitivity Analysis

Transmission Distribution Summary of Sensitivity Analysis Base Scenario 1 Scenario 2 Scenario 3 Base Scenario 1 Scenario 2 Scenario 3

Present Value for Cash Flow (PV), at a 12% discount rate kUSD 26 544 23 778 23 815 21 603 -3 503 -8 113 -3 293 -6 980

Net Present Value (NPV), at a 12 % discount rate kUSD 5 180 2 469 2 504 336 -24 241 -28 759 -24 036 -27 650

Benefit/Cost Ratio (B/C) 1,37 1,25 1,34 1,23 0,93 0,85 0,92 0,84

Internal Rate of Return (IRR) % 15,4% 13,7% 13,7% 12,2% N/A N/A N/A N/A The result of the sensitivity analysis indicates that the three scenarios have a limited effect on the project’s NPV and IRR. Even though a 10% increase in energy supply costs and a 20% loss in electricity demand are assumed, the financial analysis of the transmission part still shows a positive NPV.


Page 29 of (68)

7 Economic Assessment

In order to assess the economic viability of the project from the national economy’s point of view an economic evaluation of the project is carried out in the form of a cost benefit analysis. This analysis involves essentially identification of all relevant costs and benefits of the project and comparison of quantified costs and benefits by means of calculating the discounted cash flow, which includes the present value (PV), the net present value (NPV) and the economic internal rate of return (EIRR). Finally a sensitivity analysis is carried out to test the effects of changes in key assumptions on the economical indicators. Economic analysis, in contrast to the financial analysis, assesses the overall impact of the project on improving the economic welfare of the citizens of Tanzania.

7.1 Economic Price of Electricity

The relation between the financial situation, measured as affordability, of the population in the project area and the average electricity tariff was analysed. Currently the average electricity tariff is approximately 0.075 USD/kWh for all consumer categories (reference is made to the results from the financial analysis, base case). Based on estimated consumers ability to pay for energy the existing electricity tariff may increase significantly without exceeding the consumers current expenditure on energy. The energy cost saving per kWh electricity is calculated and used as a measure of the customers’ ability to pay for the electricity from the grid and is used in the economic analysis as the economic value of electricity supply when calculating the benefit of the project. Based on Tanzania Rural Electrification Study, carried out by DECON and SWECO, the cost reduction in the households sector due to rural electrification was estimated as follows in Table 11 below. The study indicates an average monthly reduction of expenditures on current energy sources of 21 500 Tsh per average household and month when electrified. The average households monthly use of electricity is estimated to 52 kWh. This means a cost reduction of 417 Tsh per kWh or 0.36 USD/kWh.


Page 30 of (68)

Table 12 Cost Reductions in the Household Sector due to Rural Electrification Item Units Kesonsene Candles Car

Batteries Small

Batteries PV Solar Diesel

Generation

Non-electrified households Monthly expenditures Tshs 10324 2127 5290 3733 5284 88438Energy used in household % 100% 8% 40% 70% 8% 12%Average consumption Tshs 10324 168 2116 2613 423 10613Energy cost per month Tshs Electrified households Monthly Expenditures Tshs 2980 1288 2675 1080 1146 28867Energy used in household % 78% 5% 4% 25% 0% 7%Average consumption Tshs 2324 64 107 270 0 2021Energy cost per month Tshs Cost reduction per household Tshs 7999 104 2009 2343 423 8592Total reduction in energy costs Tshs 21470

Residential customers Annual Cons.

Monthly Cons.

Households Connection rate

Client base

Client Structure

Weighted consumption

kWh kWh % % % % kWh Low Income 84 7 80% 5% 4% 67% 5Medium Income 581 48 15% 10% 2% 25% 12High Income 5001 417 5% 10% 1% 8% 35 Average electricity consumption kWh/month 52

Tshs/kWh 417 Energy cost saving per kWh electricity USD/kWh 0,36 The calculated cost saving of electricity, of 0.36 USD/kWh, concerns the currently non-electrified customers in the project area. Since there is an existing diesel generation in Songea and Ludewa, these customers will not benefit of these cost savings. At present the average tariff is approximately 0.075 USD/kWh. The Socio-Economic Impact Assessment however shows other positive impacts of provision of reliable electricity, which will also benefit the already existing customers. The value of electricity for the customers in Songea and Ludewa has been assumed to be 0.14 USD/kWh. Consequently the average value of electricity for all customers in the project area arrives at 0.28 USD/kWh.

7.2 Economic Analysis

The economic analysis is carried out to evaluate the viability of the project from Tanzania’s national economy’s point of view. Therefore the project is considered as a whole, without separating the transmission and distribution part. The Benefit Cost ratio method is used to evaluate the economic feasibility. The value of benefit is defined as the discounted value of all future net profits without considering taxes. The costs are


Page 31 of (68)

defined as the discounted sum of all expenditures entailed by planning, designing, constructing and operating the project throughout its economic lifetime. The project’s benefits arise from sales of the generated energy. In order to derive the benefit cost ratio, it is necessary to fix a suitable economic value of the electricity supplied to the area. The project is likely to give other benefits such as indirect benefits from tourism etc, these are however considered as intangibles and the benefits are considered to be insignificant. The project is considered feasible if the B/C ratio at a given discount rate is greater than unity.

General Assumption

The general assumptions for the economic analysis correspond in majority with the assumptions made for the financial analysis. Revenues The economic value of electricity supply is used when calculating the revenues of the project. Investments The total investment cost for the project as a whole is estimated to USD 43.5 million. Operation costs Supply cost: The average energy supply cost from grid is 0.070 USD/kWh. The distribution losses in the grid are estimated to 10%. Non-technical distribution losses are estimated to 10%. That results in bulk energy supply 20% higher than total energy demand. Based on the presented assumptions project cash flows, the present value (PV), the net present value (NPV) and the economic internal rate of return (EIRR) are calculated and analysed using a computer model.

Economic Results

Table 13 Summary of Economic Analysis

Summary of Economic Analysis

Economic Price of Electrcicity USD/kWh 0,28 Initial Investment kUSD 43 520 Present Value for Cash Flow (PV), at a 12% discount rate kUSD 93 284 Net Present Value (NPV), at a 12 % discount rate kUSD 49 468 Benefit/Cost Ratio (B/C) 2,83 Economic Internal Rate of Return (EIRR) % 22,7%

The result of the economic analysis shows that the project is economically viable which indicates that the project will have a positive effect on the national economy


Page 32 of (68)

“Non-affordability”, normally appears if the costs are too high with respect to income of households. “Non-willingness to pay”, may appear although the costs are affordable, since consumers find them unacceptable on the basis of their assessment of costs, service received and benefits. The willingness to pay is defined as the price the consumers are prepared to pay for a service. In theory, the willingness to pay can be higher than the price and in such cases a goodwill or consumer surplus appears.

7.3 Sensitivity Analysis

To evaluate the stability of the project’s economic viability, sensitivity analysis similar to the financial analysis has been carried out and consists of testing the effects of variations in electricity demand and energy supply cost variables on the project’s IRR or NPV. Three different scenarios, besides the base case are analysed; Scenario 1: A 10% increase in energy supply costs Scenario 2: A 20% decrease in electricity demand Scenario 3: A10 % increase in energy supply cost and a 20% decrease in electricity demand.

Table 14 Result of Sensitivity Analysis

Summary of Sensitivity Analysis

Base Scenario 1 Scenario 2 Scenario 3

Present Value for Cash Flow (PV), at a 12% discount rate kUSD

93 284 88 675 73 639 69 951

Net Present Value (NPV), at a 12 % discount rate kUSD

49 468 44 950 30 213 26 599

Benefit/Cost Ratio (B/C) 2,83 2,59 2,76 2,54

Economic Internal Rate of Return (EIRR) % 22,7% 21,9% 18,9% 18,2% The sensitivity analysis reveals that changes in electricity demand variables have a greater influence on the project’s economic result. Although the outcomes are positive even for scenario 3.


Page 33 of (68)

8 Environmental Impact Assessment

The main purpose of this study was to determine if the project is feasible from the environmental viewpoint. Findings are based on environmental along the route corridor of proposed high voltage transmission line from Makambako to Songea, distribution lines and low voltage lines in Madaba, Ludewa, Songea, Namtumbo and Mbamba Bay area.

The study has reviewed and documented baseline situation and analysed possible potential impacts of developing the project. Recommended mitigation measures have been included for potential adverse impacts and enhancement measures for the positive ones. In addition the study recommended monitoring programme to be followed during subsequent phases of the project so as to ensure the project remains environmentally sound.

8.1 Objectives

The main objective of the current study was to update the environmental study conducted by TANESCO in order to identify the potential impacts of the project and to recommend future mitigation measures to be followed. The ultimate aim was to establish if the proposed project will be environmentally sound.

8.2 Methodology

The following methods were used in undertaking this study.

Literature review

Literature review off reports, documents and other relevant information about the project was conducted. The review also included literature available at the village, ward and district offices such as population data of every village visited and other information found important.

Site visit

Site visit were made to get a general understanding of the target area and assess the environmental impacts of the project.

Consultations

Consultations were made with district officials, local leaders and other key informants who will be affected by the electrification project.

Legislative, regulatory and institutional framework for the EIA and SIA

In Tanzania today, it is mandatory to carry out Environmental Impact Study (EIA) for all developments projects. The National Environment Council (NEMC) has been empowered to


Page 34 of (68)

supervise the implementation of EIA studies in the country. The National Environmental policy (NEP, 1997) and several other national and sectoral policies stipulate that EIA should be mandatory. In addition, the newly enacted Environmental Act of 2005 supports the same. Therefore, a detailed EIA study is required if the financiers and TANESCO decide to implement the project. This detailed study shall be made in accordance with the financier’s and Tanzanians National Environmental Management Council (NEMC) guidelines.

8.3 Line routes description

132 kV line Makambako - Songea

Section Makambako S/S (km 0.0) - Kichiwa (A-02, about km 20)

From the proposed location of the Makambako substation the line is lead straight southwards for about 11 km to angle point A-01 from where the line turns southeast to Kichiwa about 20 km to angle point A-02. The selection of leading the line as stated, is to avoid the up build area along the road south of Makambako and to avoid:

(i) the wetlands south of Kiziwa, (ii) the tea plantations south of Wangama and (iii) further south and southeast the Lihospa swamp and Tanganyika wattle estate.

The section is recognised by undulating scattered cultivated land including sections of scrub and grassland. Access is good from gravel roads and tracks from the main road.

Section Kichiwa (A-02, about km 20) - Kifanya (A-09, about km 89

From Kichiwa the line route continues southwards on the east side of a gravel road passing the village of Maduma before reaching angle point A-03, about 32 km, from where the line bends slightly southeast to get clear of the eastern outskirts of the Tanganyika wattle estate at angle point A-04, about 43.5 km.

At angle point A-04 the line cross the “all weather” road from Kibena before continuing south passing the village of Matikanjola also having access from the same all weather road before reaching angle point A-05, about 58km, approximately 2 km west of Idunda.

Continuing from Idunda the line bends south east passing the villages of Kilolelo and Mpimbitu at angle point A-07, about 86 km, and crossing the main road from Njombe before reaching Kifanya.

The section up to angle point A-03 is recognised by open partly flat grassland and scattered cultivated land with minor sections of scrub and scattered trees. This also applies for the remaining sections towards Kifanya but the terrain becomes increasingly more undulating with a decreasing number of access tracks on the line sections between the angle points.

Section Kifanya (A-09, about 89 km) - Mkongotema (A-28, about 151 km)


Page 35 of (68)

As previously mentioned a new road to Songea has been constructed since the available 1:50,000 scale maps were issued. From Kifanya this new road follows an on the maps stated “main track” in a more southeast direction compared to the old main road. However, on several sections the new road also deviates from this “main track”.

Towards Kifanya and further along this section the terrain changes character and becomes substantially more hilly and irregular in formation which also is reflected in the road alignment having more or less continuous turns on its way through the landscape. These irregularities in the landscape emphasising reasonable access and maintenance conditions result in the number of angle towers to increase substantially compared with the remaining sections of the line. It is also foreseen that additional angle and/or uplift dead end towers will be required in this section.

Due to the irregular formations the line is lead close to the road emphasising access conditions and the difficulty of maintaining a continuous service track in the right of way (RoW) of the line. Several access tracks from the main road will accordingly be required. As the new road is constructed with relatively deep concreted roadside drainage channels and a high number of road cuts and further taking into consideration all bends and the hilly conditions careful planning of the access points to the RoW is required on this section.

Section Mkongotema (A-28, about 151 km) - Songea (A-39, about 243.5 km)

Reaching Mkongotema the “new” main road again follows the alignment of the “old” main road but several shortcuts have been made compared with the original track. As previously stated these shortcuts have been plotted on the line route maps and marked as “new road”.

Passing Mkongotema and angle point A-28 the terrain again changes character from irregular hilly formations to a rolling undulating forested landscape towards Mtukamo, angle point A-33, about 184 km, and further on through plain forested areas passing the cultivated areas around the villages of Gumbiro and Lumecha . From Lumecha approaching Songea the land becomes increasingly more populated with sections of cultivation, grassland and scattered trees.

Access is good from gravel roads and tracks from villages along the main road and improves the closer one gets to Songea.

The 132 kV line route is shown in Figure 3.

33 kV lines Makambako, Njombe, Madaba, Ludewa, Songea, Namtumbo and Mbinga area

The 33 kV line routes to Makambako, Njombe, Madaba, Ludewa, Songea, Namtumbo and Mbinga area mainly following the main roads available but connects to the villages indicated on the maps given in Figures 1,2 and 3.

8.4 Potential Environmental Impacts

The principle sources of impacts in electric project arise during the construction and the operation of the 132 kV transmission line, 33 kV distribution lines and low voltage connections. Electrification projects may cause irreversible environmental changes over a wide geographic


Page 36 of (68)

area if not properly assessed and evaluated. The negative and positive effects on the environmental in the project area are described below.

Negative impacts

Soil erosion and land degradation

During construction, various project activities like clearing, dredging and movement of heavy machinery and towers/poles will increase the rate of surface runoff especially during long rain periods. The length of the line (project area) means that numerous points along the project corridor will be disturbed and there will be localised disruption of the surface soils. This is expected due to existing soil and landscape characteristic of some areas of the project such as Njombe, Mbinga and Namtumbo. The removal of vegetation cover will make the soil prone to erosion. Therefore adequate mitigation and conservation measures will be required during the project implementation to reduce the potential for erosion and hence soil degradation especially in steep areas with high rainfall. Pollution

a) Air pollution During construction, there will be increased vehicular traffic, which will release poisonous fumes and gases that may pollute local atmosphere. Likewise, activities like excavations, tower erections/pole erections and stringing will generate dust especially during dry season. Other possible source of pollution is decomposition and/or burning of the cleared vegetation. The level of air pollution originating from the above-mentioned sources is low, locally distributed and is not expected to have serious impacts on the environment. With regards to human health, dust and motor fumes may trigger upper respiratory diseases to machine operators and other workers in close proximity. Civil works in close proximity to the residential areas may also negatively impact on the residents and precautionary measures will need to be taken and implemented.

b) Soil pollution Accidental oil spills particularly in and around machinery and plant yard; base camps and areas of concentrated activities may infiltrate into soils and cause soil pollution. This is only possible during construction phase of the project and the impact is expected to be minor and localised if any.

c) Surface and ground water pollution There is the potential for surface and groundwater pollution during construction and operation phases as a result of oil, fuel and other toxic substances spillage. Harmful construction materials and substances may spill over and pass into the surface runoff and/or seep into the groundwater. In addition, surface water quality may be undermined due to increased erosion and run-off from roads. Precaution measures and handling procedures will need to be in place to care for any eventuality.

Vibrations and noise

The level of noise and vibration are expected to rise during the construction phase due to heavy vehicles, machinery and equipment involved in the construction activities as well as people who


Page 37 of (68)

will be working on the project. However, this impact is a short term and will be felt mostly in residential areas. In some cases the noise may disturb forest fauna such as birds and other small wild animals. However, no significant impact is anticipated, as the line does not cross any game reserve or game controlled area.

The contractor needs to arrange working house properly to ensure that noisy activities are performed during day time in residential areas so as to reduce the noise nuisance factor at night and wherever possible reduce machine noise levels at all times.

Flora

It is required to clear vegetation along the proposed right–of-way (RoW), clearance for access roads and other civil works and possibly clearance to give way for construction of camps. The level of clearance will differ in magnitude according to the different project stages.

a) During survey and construction stage This stage will be characterised by clearance of bushes, shrubs and felling of trees. These activities will culminate into loss of vegetation either permanently or temporarily.

For the 132 kV line the RoW is approximately 30-40-m wide. Therefore, approximately 900 hectors of different types of vegetation will be affected and some 240 hectors will be cleared of vegetation (assuming the maximum RoW of 40m wide and total clearance is 8m for the total length of 250 km). No specific species to be affected have been identified, however the area covers miombo woodland and forest plant communities. The significance of this impact is of low severity since the impact is of local nature. The detailed EIA will stipulate specific vegetation species to be affected.

b) During operation and maintenance After construction activities are completed some vegetation will be allowed to regenerate along the 132 kV transmission line but to a limited height of 5 metres. However, trees directly under the line will have to be either removed or chopped off to reduce their height to maintain the required clearance between vegetation and the transmission line conductors. The microhabitats on the ground will remain almost undisturbed for the micro flora.

Fauna

Transmission line construction and operation is expected to have insignificant impact on land wild animals, as there is no sensitive wild habitat in the project area. Furthermore, the area for the proposed project is already highly cultivated and wild animals are very rare. In spite of the fact that trees and vegetation clearance may affect nesting and hiding sites for some type of birds, the impact is expected to be minor.

During operation of the line, it is expected that some birds will fall victims of the transmission line as result of electrocution or collisions with transmission line conductors. This impact mostly affect only some type of birds such as raptors and vultures who instinctively seek out the highest vantage point as suitable perches from where they scan the surrounding area for prey or carrion. Depending on the design of the towers a large raptor can potentially touch two live components or


Page 38 of (68)

a live and earthed component simultaneously, almost inevitably resulting in instant electrocution and a concomitant disruption in the electrical supply. However, the impact is anticipated to be small, as no cases of electrocution of birds have been recorded in existing transmission line.

Positive impacts

Reduction of Greenhouse gas emissions

Commissioning of the project will have a major advantage to the environment when electric power is distributed to the project areas with provision of electric power to villages that at the moment do not have electricity. A large number of people are expected to relinquish from using firewood, diesel/petrol generator sets and kerosene thus reducing the total output of green house gas pollution.

In Songea a large diesel generation plant can be idle and instead reserve as back-up to the grid supply. This will extensively reduce the amount of diesel transported from Dar es Salaam to Songea, improve the traffic safety along the main highway, reduce the pollution from diesel generation and improve the work environment at the power plant.

8.5 Mitigation Measure

The proposed project is not likely to cause any serious negative impact as long as appropriate mitigation measures are requested for TANESCO and the contractor during the implementation of the project. The detailed mitigation measures should be outlined in the detailed EIA and also included as requirements in the Contract with the Contractor.

Besides the requirements of mitigation measures identified in the EIA report the Contractor’s should have his own guidelines that should form an adequate basis for his required mitigation measures. Adherence to all relevant guidelines would avert all problems of pollution and disturbance.

Corona effects

Corona and its related effects such as audible crackling noise and radio noise occur whenever the air surrounding overhead transmission line conductors undergoes partial electrical breakdown, thus producing small quantities of ozone and nitrogen oxides.

No theoretical basis or empirical data indicates that transmission lines adversely affects ambient air quality or that corona effects are harmful to living organisms. The quantities of ozone and nitrogen oxide are far too small to be harmful.

Land degradation and soil erosion

During the construction phase, construction of new access roads should be minimised and use of the existing roads be utilised as much as possible. Where new access roads are to be constructed, they should run along the contours where possible. In addition, using simple measures through construction of gabions on the sides of the road may reduce potential soil erosion especially in steep areas such as in Madaba. Clearance of vegetation should be


Page 39 of (68)

minimised and restricted to the RoW (30 m) as far as possible. The RoW area should be clearly marked to avoid any unplanned encroachment.

The RoW width is proposed to a minimum of 30 metres. As previously mentioned complete clearing of the ROW where the line pass through forested areas should be limited to a 10 m strip in the centre line to allow for stringing of the conductors. Outside this trip but within the ROW all vegetation above 3 m height need to be cleared including possible dangerous trees outside the ROW. Further, utilization of the terrain when selecting the final line route and spotting the towers are factors which is skilfully performed could reduce the clearance requirements further.

Some sections of the line indicate poor stability due to erosion. During erection, manually footpaths are required from the main roads which could initialise landslides. The selection and location of these access paths should accordingly be planned carefully.

The same approach applies to the foundation works and it is assumed that extensive soil investigation are carried out in order to specify proper drainage and erosion protection systems for the affected tower sites. This also includes gabion walls for stabilization of foundations/towers in steep slopes and on riverbeds.

Similarly, rehabilitation of excavated sites, quarries and denuded strips during stringing should be made before completion of the construction. This rehabilitation effort should be complemented with landscaping and should involve planting of vegetation and grass types to mimic the original vegetation as far as possible.

Pollution

Atmospheric pollution can be mitigated through routine maintenance of machinery and use of energy efficient machinery. Pollution by the dust especially during dry season, water should be used to sprinkle on the ground to minimise dust at construction sites and on access roads particularly in residential areas. Appropriate instruction to workers in handling of oil, fuel and other harmful substances should help to prevent spills and careless handling. Emergency response plan should be in place to deal with any eventuality.

Anticipated pollution or impact on water resource will be avoided through avoidance of spills of any kind (oil, fuel, etc.,), minimisation of soil erosion and rehabilitation of denuded areas. In addition, appropriate handling and disposal of solid waste and other effluent materials should be done to reduce the impact on water. In addition construction camps, vehicle repair workshops and other possible sources of pollutants should not be located near water sources

Aesthetics and visual impact

The transmission line structures will be a permanent feature in the area once erected. Areas suspected to be of visually sensitive nature should be avoided and be identified during the transmission line alignment.


Page 40 of (68)

Noise and vibrations

During construction, relatively high levels of noise and ground vibration are inevitable. Workers and visitors to the site should then be provided with protective earmuffs and earplugs to attenuate the sound levels whenever applicable. Modern machinery and vehicles of low noise should be used wherever possible. When construction will involve high noise or blasting activities in residential area, they should be done during daytime hours to reduce noise levels during night times.

Flora

Cutting of trees and removing of some vegetation in the right of way is necessary for safety of the line and individuals, to allow construction of pylons, erection of towers, stringing and to get rid of obstacles on the access road. However, the forest loss would be small because clearing will be limited to the commended RoW dimensions (30 – 40 metres).

All actions that may cause wildfire to the forest should be avoided to prevent fire hazard to the vegetation in the project area.

Fauna

The transmission line route is not located anywhere within or near a National Park, game reserve or any area of conservation importance. Although Namtumbo is rich in wildlife due to the famous Selous National park, the project area is outside the park. The transmission line does not pass through the area known to be sensitive to the wild fauna.

Accidents

Accidents may occur during construction and operation phases. Hence there is a need to design and implement safety measures and emergency plans to reduce risk of accidents and improve attendance to emergencies when they occur. The following safety measure should be observed during the construction and operation phases:

Provide information to local community of the impending dangers and ensure that the

general public especially children do not come too close to the project activities.

Erect and supervise warning signs to warn the workers and the public on potential dangers at all construction sites. This includes road signs and electrocution dangers.

Minimise risks of bush fire outbreaks caused by construction workers due to discarding live

matches, cigarettes or setting of deliberate fires.

Educate workers to take precaution for their own safety and safety of others and how to respond to emergency cases including use of first aid kit.

Provide safety and protective gears


Page 41 of (68)

Information on the dangers of high tension transmission line should be translated into the language known to all residents.

Social disruption

The line routes must be selected to avoid affecting residential areas and residential houses, thus minimising the social disruption. However, if not possible due to limitation in RoW some relocation and compensation of lost properties must be made. Any compensation should reflect the market value of the property in question and should also take care of the inconveniences. Negotiation to reach consensus and timely payment of the compensation should be considered and implemented.

The detailed mitigation measures in regard to relocation and compensation will be provided after thorough studies and final route and access roads selection. It is therefore required that a detailed EIA study be done to take those aspects into concern.

Where the line crosses cultivated fields, limited cultivation in the RoW should be allowed under supervision for seasonal crops such as beans and maize. This will reduce dissatisfaction of the project by the people who have always used the land for agriculture.

The requirements for construction of the project should encourage the Contractor to engage as much as possible local labours, instead of immigrant workers, for unskilled and semi-skilled jobs available. This will reduce or eliminate many problems that may arise if local people are not committed and involved in the construction process. Further, it will contribute to the income of the local families and improve the goodwill for TANESCO and the financiers.

8.6 Environmental Management Plan

An environmental management Plan (EMP) should be made in the detailed EIA that should include a set of mitigation measures to be taken during implementation of the project. That would reduce/eliminate adverse environmental and socio-economic and cultural impact to acceptable levels. The environmental management required for this project will be effected by fulfilment of the mitigation measures (described above) and by the conduct of appropriate, regular and timely local consultation (as set out below).

Environmental Monitoring

During construction, environmental monitoring is proposed to be conducted by the Supervising Engineer who will secure compliance with the environmental mitigation and management measures equally with other conditions of contract. After construction, no further major monitoring should be required, other than periodic inspection by TANESCO and the concerned District Councils.

Environmental Audit

Since the detailed final EIA will be submitted to National Environmental Management Council for review and approval provision should be made to allow for representatives from NEMC to visit the site area during construction of the project for inspection.


Page 42 of (68)

The visiting environmental experts should check compliance with the requirements and recommendations of the detailed EIA report. Their inspection report should be made available to Ministry of Energy and Minerals, TANESCO, the financiers, concerned Consultant, concerned District Councils.

8.7 Conclusions and Recommendations

The main result of this EIA update study confirms the previous findings that the project activities will not have significant negative impacts to the environment within the project area.

It can therefore be concluded that within the limitations of the prediction assessment methods applied during the study, the project will be environmentally sound provided the recommended mitigation measures are considered during construction.

Provided the Project will be decided to be implemented a detailed EIA study should be made and submitted to National Environmental Management Council for review and approval.


Page 43 of (68)

9 Socio-Economic Impact Assessment

A socio-economic study of the project area has been carried out. All the villages along the transmission and distribution line are supposed to be provided with electricity, however some do not qualify for electrification and are therefore not included. The study is based on interviews with households in the surveyed area and in total 600 households were interviewed. The study determines the current socio-economic situation and conceivable effects of electrification of the project area, including monitoring indicators shown in Table 24. Furthermore, a number of crosscutting issues, such as HIV, gender and conflicts, of the project are described.

9.1 Objectives of Survey

The objectives of the survey is to find out the economic and social situation in the identified communities and to know if they will be able to pay for electricity connection to their houses and be able to pay for monthly electricity bills. The base-line study displays the general socio-economic situation in the project area prior to electrification and includes parameters that facilitate monitor long-term aspects relevant for development.

9.2 Methodology

A number of methodologies were used in collecting the information to ensure that information obtained is reflecting the reality. These methodologies are qualitative and quantitative including:

• Household surveys

• Document reviews

• Key informant interviews

• Observations

• Mapping

Household Survey

The numbers of villages selected for the survey were of such amount that they had to be sampled. This was done due to the fact that most of the villages have same characteristics, same kind of economy and are farming the same kind of crops. Thus sampling was done to select few representative villages for the survey. In total 600 households were surveyed: 106 in Songea district, 101 in Namtumbo district, 92 in Mbinga district, 99 in Njombe district and 298 in Ludewa district. Formatted questionnaires were used to conduct the survey.

Literature, Observation and Interviews

Review of available literature was conducted at the village, ward and district offices for information that supplements the data collected. This included population data of every village


Page 44 of (68)

visited and other information found important. To supplement the reported findings of household surveys, structured observations were conducted to achieve insight of the housing conditions and of the beneficiaries and to monitor housing structures in respective villages and wards. As almost no statistics or written information was available at village and ward offices interviews were conducted with key informants at village and ward offices. The purpose was to crosscheck and interpret available population statistics and the household surveys.

9.3 Socio-Economic Situation in the Project Area prior Electrification

Population characteristics and ethnic groups

Table 15 Number of male and female population and ethnic groups

Category Songea Mbinga Namtumbo Njombe Ludewa Male 72 330 198 405 91 070 196 130 60 715 Female 75 594 206 394 94 061 224 218 67 805 Total 147 924 404 799 185 131 420 348 128 520

Ngoni Ngoni Ndeule Bena Pangwa Matengo Matengo Yao Hehe Manda

Yao Yao Matengo Kinga Kisis Ndendeule Ndendeule Ngonoi

Bena

Ethnic groups

Hehe

Settlement and housing characteristics

The population in the surveyed area is mainly rural located with small settlements in towns and suburbs. A majority of the households studied in the project area live in grass huts, made of mud and wattle, although use of burned bricks has become popular. A few people in the project area have managed to build semi permanent and permanent residential and commercial premises. Men own the majority of houses surveyed.

Table 16 Type of house and building material

Category Songea Mbinga Namtumbo Njombe Ludewa

Walls Number of households

Cement and burnt bricks 89 84 92 65 267

Mud bricks 17 18 9 30 23 Wood and mud 1 1 0 2 8 Roof Grass thatch 18 28 24 29 41 Iron sheet 90 82 77 73 267 Tiles 1 0 1 0 0

Like any other parts of Tanzania, land ownership is based on the traditional system of inheritance. Ownership of land is by men and women have no right of ownership unless the father decide to


Page 45 of (68)

give inheritance to the female child. Alternatively, the women must be powerful economically and able to purchase land. If the husband dies and the wife inherits the land, the husband relatives can evict the woman and take over the relative’s property. However, the land law act 1999 is being changed to accommodate the rights of women to inherit land legally.

Poverty Status

Despite the fact that it was not possible to obtain data on the level of poverty, most villagers have ability to meet their basic needs for surviving. It has been reported, that the regions normally do not face food shortages to the extent necessitating food importation from other regions The indigenous in this area are good farmers and unless the farming season is met with natural calamities like drought or floods, they usually harvest enough to suffice their annual needs.

The general poverty and lack of sustainable income generation has restrained economic development within the project area. Due to lack of modern communications many farmer are handicapped in finding markets and getting reasonable prices. Selling maize and beans may not generate any net income during certain years. Due to lack of electricity the added-value to coffee production by e.g. pulping and by semi-processing of other crops is not possible, resulting in low sales prices and income.

Household Income and Expenditures

Household source of income and expenditures are also a good indicator in measuring the possibility of people being able to pay for electricity connection and monthly bills. The majority of the household depend on agriculture for survival, and therefore, derive their source of livelihood from subsistence farming. Livestock keeping is the second major activity that supports livelihood of the surveyed populations. Other sources of household income in the study area include small businesses and salary employment.

Table 17 Income per household and month


Income per household (Tsh/month) Percentage of households

1 000-10 000 18% 31% 18% 10% 23%

10 000-90 000 71% 39% 63% 83% 59% 100 000-200 000 2% 6% 1% 5% 3% 200 000-500 000 10% 23% 17% 2% 14% 500 000-1 000 000 0% 1% 0% 1% 1%

According to the survey results, a large portion of household income is spent on food, school fees and energy.


Page 46 of (68)

Table 18 Expenditures per household and month

Category

House Rent

Water Supply

Food School Fees (per year)

Energy Health

Expenditures per household (Tsh/month) Percentage of households < 1 000 92% 49% 4% 27% 5% 7%

1 000-5 000 5% 48% 13% 32% 30% 65% 5 000-20 000 2% 2% 34% 24% 54% 22% 20 000-50 000 0% 0% 23% 9% 9% 5% 50 000-100 000 0% 0% 19% 7% 1% 1% > 100 000 0% 0% 7% 2% 1% 0%

Productive and Service Sectors

The project area is mainly an agrarian region with majority of its population residing in rural areas and actively engaged in land-based production. The regional major economic activities are agricultural farming, livestock keeping, lumbering, fishing, beekeeping, mining and trade. Agriculture is the mainstay and leading productive sector accounting for a larger part of the regional GDP and per capita income. Farming, especially crop production is undertaken by individual small-scale farmers. The main food crops in the region are maize, cassava, paddy, sweet potatoes, legumes, millets and sorghum, while coffee, tobacco, cashew nuts are major cash crops. Other crops are sunflower, soya beans, simsim, finger millet and groundnuts.

The project area is endowed with very high natural resource potential, including natural forests, game reserves, fish minerals deposits, honey and bees wax. Fishing plays an important role in the economy in particular in Mbinga District. It is a supplier of fish protein and a major source of employment. Fishing activities are mainly carried out in lake Nyasa. Minor fishing in the waters of different rivers also do contribute with an amount of fish. Tourism, beekeeping and lumbering are among others important subsectors in the regions not yet fully exploited. Other activities include shops businesses, hotels, restaurants, food selling kiosks and guesthouses.

The mineral deposits potential of the region includes gold, various gemstones, coal and building materials. In the southern most end of the area, diamond has also been reported to be found.

Infrastructure

The road network in the project area is generally good. There is one main all weather road, linking Makambako, Njombe and Songea Districts. Similarly there is an all weather accessible road between Songea and Mbinga. This road will simplify the transportation of equipment and construction material and in some cases will provide access to the maintenance of service line. There are several feeder roads connecting villages. The project area can also be reached by TAZARA railway to Makambako and by air through Njombe airstrip and Songea airport. Mbamba Bay is also accessible by ferry from Kyela Mbeya through Lake Malawi. Mbamba-Bay is connected by permanent road from Mbinga.

Telecommunication services have improved in the last years, during which STD system was installed and Telex, Fax and EMS facilities have been put in place as well.


Page 47 of (68)

Employment Status

In terms of employment opportunities, a large part of economic active population in the regions engages in farming and livestock keeping. These activities contributes to 95% of the district economy. The remaining portion is employed in public and private sectors such as trade, carpentry, mansonary, shoe making, bicycle repair, black smithery etc. Women in particular are doing petty businesses at the markets, operating food kiosks and working in other service sectors like hotels guesthouses and others.

Table 19 Occupation of household heads


Male Female Male Female Male Female Male Female Male Female

Occupation Number of household heads Farming 87 87 84 80 100 82 73 69 237 181

Seasoal work 31 34 4 0 7 2 1 2 51 17 Livestock keeping 7 4 75 68 47 31 44 38 170 120 Salaried employment 14 4 7 4 9 6 10 2 51 23 Small scale industries 1 1 0 1 4 1 5 2 95 48 Business 21 40 18 17 31 22 29 11 21 8

Women contribute significantly in the production process, even though they have limited or even no control over the means of production or incomes. Women as main producers in the rural communities have achieved special consideration by district authorities and international organisations, to help them improve their lives. These organisations give loans to women to start up different projects. Unfortunately these projects have so far failed, due to male interference, the investments/businesses are poor organised and lack of sufficient experience of running businesses.

Education

Few of the schools in the project area have access to electricity. Most of them receive energy from generators only for a few hours due to high running costs. In some areas children have formulated a studying scheme at night where parents contribute money for kerosene for hand lamp. According to the district education officer, this scheme has improved the pupil’s study performance to a high degree.

Table 20 Percentage of education in the project area

Education Percentage of interviewees Primary education 76% Secondary education 14% Diploma education 1% No formal education 9%


Page 48 of (68)

Health services

The health status in the area is mostly the same as experienced and compared to even more developed regions in the country. It is evident that the area has considerably sufficient health facilities in all districts but like in other regions they lack medicine, equipment and qualified medical staffs.

The most common diseases in the study area include malaria, pneumonia, diarrhea, anemia, eye infection, intestinal worms and pregnancy complications.

Table 21 Sources of health services used in the districts


Source of health service Used by number of households

Dispensaries 76 59 n/a 57 145

Health centers 26 30 n/a 18 89 Hospitals 72 4 n/a 16 148

Water accessibility

The main water sources for the rural population in the area are lakes, rivers, streams, traditional wells, ponds, water springs, hand pump wells, gravity schemes, hydro schemes and rain water harvested. Only a few households receive water supply from a village piped scheme or a spring.

Table 22 Domestic water sources used in the districts


Water source Used by number of households

Shallow well without pump 11 37 n/a 24 27

Improved traditional well with pump 24 27 n/a 14 8 River 4 9 n/a 49 63

Piped water scheme 19 20 n/a 13 170

Spring 31 7 n/a 6 16

Deep well with pump 43 0 n/a 0 14

Shallow well with pump 2 0 n/a 0 27

Type of energy sources

A number of diesel generator sets are operating within the project area, used for schools, vocational training institutes and others for water pumping. Milling and processing of crops for local need are done using diesel-powered engines, resulting in high energy costs and gives small margins for profit making. Cooking is typically done with firewood and charcoal. Lighting is typically achieved from kerosene lamps. Even where there is electricity from sources like solar energy or from a generator it is only for lighting and for a particular period of time during the day. There are few villages that receive hydroelectricity from minor hydropower supplied by mission


Page 49 of (68)

centres. However, some villages do not receive electricity throughout the whole year due to the drought period.

Attitude and willingness towards electrification

There is a great demand for electricity in the surveyed villages. Out of the surveyed households the majority indicated a need of electricity and a willingness to pay for it. The ability and willingness to pay for electricity is determined by the economic ability and readiness to get electricity by the community members. In most cases willingness is always there, but could be hindered by the ability to pay for electricity connection and consumption. It is only possible to measure the ability by looking at general economic production trends and the indicated amount the individuals showed they are willing to pay. Also the interviewed persons were convinced that electricity will have a positive effect to their lives. Some of the possible benefits mentioned by the households are:

• Electricity will bring development

• Reduce energy costs

• Reduce environmental pollution

• Create employment

• Improve security

• Improve children performance at school Improve health services

• Improved efficiency of processing machines

• Improved information, communication and entertainment

• Improved processing of agricultural products

In addition to the above listed benefits, many people in the study area own various types of equipment that can be used if electricity is supplied.

Table 23 Equipment that require electricity

Category Number of Households Radio 364 Fan 125 Television 245 Refrigerator 157 Cooker 259 Iron 308 Milling machine 25 None 5


Page 50 of (68)

The main economic activity is agriculture of crops that are harvested only once in a year. Thus for some community member, it will be impossible to pay for monthly electricity bills, unless they produce more crops or have other income earning activities. About 70% of the surveyed households are willing to pay between 10 000 and 50 000 TSH for electricity per month. This correspond to the amount the households are paying for kerosene etc.

9.4 Potential Benefits of Electrification of the Project Area

The effects of rural electrification on poverty reduction are multidimensional, and both tangible and intangible. The former are mostly economic and relates to enhanced levels of income, employment and capabilities of the poor population, while the latter is related to the social and cultural aspects of life, concerning education, health, reducing gender gaps and insecurity. Electricity provides a safe and clean source of heat, light, power and which play an important role in the fulfilment of key economics, social and cultural rights, such as the right to housing, the right to education and the right to health. Further, it allows for refrigeration and quality of preserving food.

Employment and increased income

During construction of the project, it is expected to generate various job opportunities for both skilled and unskilled laborers. This category of job opportunities is expected to draw employees both locally and from outside of the project area. Aside from direct employment, indirect form of employment will be created in form of provision of goods and services to the project staff. The additional income will make it possible for parents to send their children to schools and to higher levels of education. One long-term effect of electricity supply is the possibility to boost up the economic growth of the southern region due to availability of adequate and reliable power. Districts such as Mbinga and Namtumbo may get grid electricity thus stimulating industrial activities and other production activities. As a result income-generating sources will be widened.

Education

The provision of electricity to poor households gives them access to better lighting, which makes it possible to gainfully utilize the latter part of the day, resulting in a positive effect on education and employment. Electricity allows an increase of children’s study time and, consequently, a positive implication for their education. It may then be possible for adults and children to take up many household activities such as sewing and embroidery (for revenue generation or otherwise) during evening and night hours. The provision of electricity contributes therefore to improved capabilities and greater opportunities for children to attend school.

Many schools in the project area lack the use of lighting. Studying with lighting from candles and hurricane lamps, compels pupils to stain their eyes. Students from these areas study for only a few hours unlike their counterparts in other parts of the country, which uses electricity light for reading. The project if implemented will supply electricity in such schools, which will result in better quality of education

Furthermore, schools will be able to use modern technology i.e. computers for teaching as well as use of Internet. Teachers will have more time for class work and teaching materials preparation thus improving student’s performance.


Page 51 of (68)

Provision of electricity will accordingly contribute to a higher level of literacy in the project area.

Agriculture

Any rural electrification project that provides incremental or more reliable electricity to the agricultural sector may benefit the poor in many ways. Firstly, through pumping water, which is available in the ward, people can be assured of two crops per annum. It may increase the gross cropped area, support cropping intensity, reduce the cost of energy by making available, cheaper, more efficient, and convenient options. Secondly, the use of electric pulpery gives a higher-grade coffee, which naturally generate higher price. Availability of adequate electricity will further enable people to start fruit canning and food processing industry. Finally, it could increase farm employment.

Information, Communication and Entertainment

Provision of electricity allows a wider choice of energy services to the population to meet their specific needs – households can use electricity for entertainment, information, communication (TV and radio), education, and economic gains (home businesses). Of these, information is important in today’s world, and can lead to increasing empowerment of a population. Currently communication within and outside the area is very difficult and expensive. Availability of electric lighting during evening hours allows social gathering. Rural telephones can be effective to maintain contact with family members working in remote areas. Telephones also facilitate business opportunities.

Health

According to the District Medical Officer, hospitals are limited in its capacity and performance due to lack of sustainable and reliable energy supply. This situation has led to failure to use some equipment, which hamper the possibility to operate and prevent the use of blood stopper equipment that needs reliable electricity.

To switch from biomass to more efficient cooking fuels will reduce indoor air pollution. Access to electricity may reduce dependence on fuelwood, which in turn, may prevent forest degradation, with positive effects on the environment. Water from springs/lakes/rivers or wells may be contaminated with disease-causing bacteria. While water distributed from a municipal water system can be better controlled and give a higher quality to people.

Businesses and Industries

The districts within the project area are endowed with natural trees. Carpentry and lumbering are therefore important businesses. Availability of affordable and reliable electricity would raise productivity levels for these activities as well as keeping the prices down.

Public lighting will make it possible to trade for longer hours thus increasing income opportunities. Longer operating hours will attract more customers, and availability of goods and services in the electrical markets will increase. Small shops can stay open longer and new establishments will most likely be develop.


Page 52 of (68)

Energy is a basic input for the industrial sector and new industries can be established if adequate availability of energy or good quality of supply. These may also affect capacity utilization in existing industries. Availability of additional or superior forms of energy in and energy deficient area may foster industrial growth in the region through reduced costs or increased output and employment.

A developed infrastructure, with reliable electricity supply will allow for people to start various business including welding, grinding, milling, battery charging etc.

Infrastructure

The provision of electricity to the project area opens up the possibility of providing other kinds of social infrastructure. This includes street lighting, piped water, better-equipped hospitals and schools, and access to television. By connecting social institutions such as schools, hospitals etc., households that are not able to have a connection of their own will still benefit from increased access to electricity through these institutions. Also the security is expected to improve in the project area owing to streetlights and electric fences.

9.5 Monitoring Indicators

Table 24 Monitoring Indicators for Socio-Economic Study Start value Indicator Unit Assumption

Ruvuma Iringa + 5 years

+ 10 years

Source of startdata

Overall objectives

Number of electrical users No. Increase 7593 Power Market Survey

Volume of electrical usage 2005 MWh/year Increase 17000 Power Market Survey

Income per capita and month TSh/month Increase 13000 18 000

Tanzanian Household Budget Survey (HBS)

Portion of primary school education % Increase 67% 64% 2002 Census

Percentage of households below the food poverty line % Decrease 27% 10%


Percentage of households below the basic needs poverty line % Decrease 41% 29%


Education

Literacy level of population % Increase 83% 80% 2002 Census

Number of read hours in home per day No. Increase 1 Socio-Economic Study

Number of read hours in school per day No. Increase 8 Socio-Economic Study

Average eneregy cost per school Tsh/month Decrease 136 300

Tanzania Rural Electrification Study

Agriculture Percentage of households with farming activities % Increase 84% 92%


Information, Communication and Entertainment


Page 53 of (68)

Number of community out-door lights No. Increase 0 Socio-Economic StudyHealth

Usage of kerosene and other fuels kWh/month Decrease 52


Average energy cost of a health institution Tsh/month Decrease 163 500


Business and Industries

Percentage of households with small industry activities % Increase 3% 6%


Infrastructure

Percentage of households with unprotected source of drinking water % Decrease 54% 49%


Total number of crimes 2005 No. Decrease 15 000 District Statistics Women's Socio-Economic Status

Women's income per capita and month Tsh/month Increase * 2002 Census

Portion of women with primary school education % Increase 63% 56% Socio-Economic Study

Occupation rate of Women at working age (18-60) % Increase 30% 37%


9.6 Crosscutting Issues

HIV/AIDS situation

The situation regarding HIV/AIDS in the project area is considered bad and very alarming unless something serious is done to rectify the situation. According to the district Medical officers and with the information obtained from the district Aids Coordinators, the data indicates an increasing degree of HIV/AIDS at a fast rate.

Causes for such rise were pointed out as:

• Inheritance of widows with intension to control the husband’s property

• Fish business, which involves interaction with people from other parts of the country.

• Traditional dances that bring people together a whole nigh leading to prostitution.

• Polygamist is highly practiced

• Too many centres for people coming to the area to do business on short time basis

• The culture of allowing adolescents to live in their separate houses from the parents and family members. This gives children, who are just maturing, temptation to start sexual relations at a very young age.


Page 54 of (68)

Given the extent of the effects of this disease it will affect the number of potential customers for electricity and when the affected fall sick a lot of resources and finances will be directed towards attending the sick persons instead of paying for electricity.

The district hospitals have conducted public awareness meetings at the wards in the area. There are posts all over the area warning about the dangers of the HIV/AIDS disease.

During electrification work the construction crew will be in touch with the resident community and in the course of integration there will develop relations leading to transmission of the disease. It is therefore important to include mobilisation and awareness campaigns on HIV/AIDS to all concerned communities.

TANESCO have since 2000 a HIV/AIDS/STD2s prevention programme, HIV/AIDS campaigns and they were the first among parastatal and private organisations to embark such a programme. The main programme objective is to reduce mortality rate due to HIV/AIDS/STDs. Main strategies include education, information on important behaviour changes, institute Company Co-ordinators and Peer Health Educators, provide counselling services, and to collaborate with other institutions. Through these measures, it is believed that the seriousness of HIV/AIDS/STDs will be better understood and bring knowledge to all people living in the project area.

Table 25 The HIV/AIDS situation in Mbinga 2002-2005

Year Male Female Total Cases Deaths Cases Deaths Cases Deaths

2002 90 34 41 18 131 522003 42 12 60 16 102 282004 86 27 84 25 170 522005 120 28 175 23 295 51

Total 338 101 360 82 698 183

Gender Equality

The empowerment of women and improvement of their status in the society are important goals and are essential for the achievement of sustainable development. The objectives are to achieve equality and equity between men and women and to enable women to realize their full potential. The availability of electricity will bring out changes at household level in terms of empowerment of women. The availability of electricity lighting will help reducing the effect of smoke emitted form kerosene lamps thus causes various kinds of diseases. For those households who will afford to cook with electricity, it will become a relief for women who have the burden of fuel gathering. Further, they are also exposed to a variety of health hazards form cooking over poorly ventilated indoor fires. Mechanical or electrified water pumping will also relieve women’s burdens and makes basic household sanitation and subsistence activities much healthier and less time-consuming.

Lighting is of particular significance for gender improvement. Global evidence has shown that availability of lighting in the home increases women’s literacy and educational levels, and extends the working day of women for income-generating activities. Lighting in public places also

2 Sexually transmitted diseases


Page 55 of (68)

increases the safety of communities, particularly for women, and allows women greater access to public gathering. Street lighting also opens up opportunities for extended trading hours by street vendors, an income-generating activity favoured by women. Women who are restricted in their ability to leave the home or participate in public affairs will benefit more than men on radios or TV for news, information, and entertainment. With electricity, families will have more time together for social events.

During project implementation, Information campaigns on prospects for electricity use should be organised and open for both women and men. Information channels shall be sought in order to especially reach also women and women organisations. That may change the traditional patterns in households shall be highlighted, such as electrical cooking, lighting and access to information via radio, TV and computers. Small-scale businesses based on the use of electric equipment shall be exemplified. In the information campaigns, TANESCO shall include examples and information that specifically inspire the women to start their own businesses.

Human Rights

Broader access to information and improved communication technologies, and thus information will be possible with reliable electricity supply. Access to information will help people distinguish their human rights and threats.

Peace keeping

Generally, the project lines passes through areas with different indigenous and non-indigenous ethnic groups. Social disquiet will be insignificant as most of the workers (laborers) are expected to come from the respective villages. Social conflict sometimes arises between nearby communities and construction work-forces. This is deemed not to be a problem, because the communities in this area have been accustomed to the passage of travelers, visitors and commercial plantation workers for several generations.

With higher population density and increasing interaction between different groups, diseases will spread, including HIV/AIDS.


Page 56 of (68)

10 Logical Framework Approach (LFA) Workshop

10.1 Objectives of the Planning Participatory Workshop

The main objective is to involve local stakeholders in clarifying and analyzing problems, objectives, constraints etc in order to prepare problem and objective trees seen in Annex 9 as well as a logical framework matrix (log frame) for the project.

10.2 Scope and Methodology

Scope

• The scope is to compile relevant information on the project with relevant stakeholders. • Assess and analyze present situation i.e. problems people are facing due to not having

reliable electricity. • Propose improvements that people would like to achieve

Methodology The methodologies used include the following:

• Field visit to the project area to meet relevant stakeholders and identify those who are committed to development and can actively contribute during the workshop.

• Carrying out the workshop by: - analysing participation - to see if all relevant stakeholders are well presented

- dividing stakeholders/participants into groups of 4-5 people

- each group is then asked to analyse present situation of Songea, Namtumbo and Mbinga districts and to present their existing problems they are facing by not having reliable electricity on small yellow cards, one problem on one card. The participants are asked to write as many problems as they can.

- all cards are collected and mixed up together.

- analysing each problem identified by the small groups by reaching minimum consensus between stakeholders that a particular problem is indeed a problem they are facing due to lack of reliable electricity. Some of the problems identified may completely have no relationship with lack of electricity and these cards are thrown away.

- building a problem tree using problems cards, which have been agreeable by the participants by identifying main cause-effect relationship. A core problem in these districts, which is insufficient supply of electricity/lack of electricity, is placed at the centre. The substantial and direct causes of the core problem are placed at the bottom and then direct effects of core problem (lack of sufficient and reliable electricity) are placed on top

- constructing objective tree by transforming the problem tree. This process involves transforming the problems into positive statements. While problem tree shows cause


Page 57 of (68)

effect relationship, objective tree shows means-end relationships - the means by which the electrification project can achieve the desirable ends or future desirable conditions.

10.3 Participants

The proposed electrification project covers six districts out of which Songea, Namtumbo and Mbinga were invited. Consequently participants for the workshop were invited from all these districts. Out of thirty (ten from each district) participants invited, 29 attended the workshop. It was a multidisciplinary event as can be seen in the list of participants below. Following the LFA workshop, it was decided to also incorporate Ludewa town and associated villages along the 33 kV line Madaba-Ludewa. It is considered that the three districts that were present at the LFA workshop are representive to the LFA anlaysis.

List of participants: Songea District; Name

Occupation Place

1. Kalokola, D.E. Civil Engineer Songea Municipal Council 2. E. Mwakambaya Business man Peramiho Songea 3. Haule, E.B.C Health Office Songea District 4. Ms. Nuru Hemed Student Ruhuwiko Sec. School 5. Kamoza O. Ngando Student Songea Boys Sec. School 6. Hadelin Hyera District Trade Officer Songea District Council 7. Mgwassa B.H. District Planning Officer Songea District Council 8. Philipo Bushiri Nursing Officer Regional Hospital- Songea 9. T. Kameka District Education Officer Songea District Council 10.Dismas Mgani Business man TCCIA Mbinga District; Name

Occupation Place

1. Hyasinth Ngwatura Farmer Farmers Association 2. Birago, O.R District Planning Officer Mbinga 3. Ms. Joan Ngapomba Business man Mbinga 4. Ms. Edna E. Hyera Business woman Mbinga Women Society 5. Edwin Kawonga District Education Officer Mbinga 6. P.M. Mdaki District Natural Resources

Officer Mbinga

7. Christopher Ndomba Headmaster Mbinga Secondary School 8. Ms. Bonitha Kumburu Small business woman Mbinga 9. Steven Mateso Small scale industrialist Mbinga Namtumbo District; Name

Occupation Place


Page 58 of (68)

1. Ms. Anna Shomali Farmer Namtumbo 2. Fadhili Kitete Farmer Namtumbo 3. Ramberta K. Kapinga Business man Namtumbo 4. Daniel Mgani Carpenter Namtumbo 5. Ms. Bertha Ndowa Small business woman Namtumbo 6. Dr. Festo Ndowa District Medical Officer Namtumbo 7. Onesmo A. Mapunda District Planning Officer Namtumbo 8. Longnus Th. Sanga Farmer/Business man Namtumbo 9. Haji Lyuma Small business man Namtumbo 10. Faraji Msuya District Water Engineer

10.4 The core problem

The core problem identified by the participants during the workshop has two different situations. For Mbinga and Namtumbo district the core problem is lack of electricity while for Songea district is insufficient and unreliable electricity. The generator-powered electricity available in Songea urban council is not sufficient for urban use let alone extension to Songea district rural areas or Namtumbo and Mbinga districts. Although Ruvuma region is one of the four big regions in Tanzania in production of cereals (maize, rice, millet, beans etc), this lack of electricity inhibits agro-processing and consequently improved agricultural productivity. Lack of electricity causes coffee farmers in Mbinga district to transport coffee to Mbozi district in Mbeya region for processing. As a result this cause low income for many of the coffee farmers in Mbinga district. Lack of agro processing industries in these districts also cause selling of unprocessed farm products which in turn cause low price of farm products.

A more serious direct effect of lack of electricity identified by the participants is that lack of electricity in these districts and the region as a whole threatens national unit. It was highlighted that the region and other regions in south of Tanzania have been forgotten since the country got independence, more than forty years ago. Participants felt that regions, which are situated in north of Tanzania, are more privileged. Other main direct causes and direct effects of the core problem can be seen in the problem tree below attached as Annex 8.


Page 59 of (68)

11 Primary Objectives

11.1 Securing commercially viable and sustainable electrification

A major challenge for rural electrification projects is to secure revenues, preferably in the short and medium term. Most important are the income bringing uses of electricity, i.e. activities that can expect positive net cash flow when connecting to the TANESCO services. Thus, these customers have the ability to pay regularly for services and are also foreseen to be faithful customers provided a high service level. Contributing to increasing the monetary flow also boosts the general purchasing power in the area.

Potential income bringing uses of electricity comprise of businesses that today use other energy sources. Lighting is one example of important area of usage for electricity, resulting in a pro-longing of working days.

Other areas for electricity usage that support poverty reduction, albeit more indirectly, include water supply, sanitation, health care, education and communication. The incentives for TANESCO to supply these loads are mainly based on political decisions, and TANESCO can help to secure the progress in the social welfare by committing the local authorities to continuous future purchase of electric services. TANESCO can also provide know-how on suitable installations and electrical equipment for these sectors. For these purposes it is important that the electricity expenditure is within the limits of the local authorities budget.

The environmental aspects are also of major importance. Electrification project mitigates combustion of fossil and non-fossil fuels and leads to a more sustainable energy system. A decrease in the usage of fossil fuels mitigates climate change due to reduced carbon dioxin emission, as well as a reduction of Tanzania’s dependency on imported fuels. Less usage of non-fossil fuels reduces the stress on biomass resources, and enhances the domestic indoor air quality.

11.2 Efficient project implementation

Extending the national grid is costly, and if the realisation of the project is inefficient the cost may escalate rapidly. It is therefore paramount that the project is well planned, organised and supported by with concerned parties, in particular local politicians. Moreover, project implementation must pay due regard to prevailing national and donor policies. These are cross-cutting rather than project specific, and interaction with local authorities and other on-going projects facilitates and ensures the incorporation of relevant policies.

Reasons for local political support include; • Guidance in identifying important customers

• Securing that way-leave negotiations are not postponed or left unsolved


Page 60 of (68)

• Securing important NGOs that may have site-specific knowledge regarding important businesses, health issues, environmental issues, ethical conflicts, or other get involved in the planning process.

Implementation of large-scale projects tends to stir up activities in the area. For different reasons, local people are attracted to on-going activities, which may lead to new and unforeseen local issues that should be included on the project implementation agenda. The project will benefit from good communication and co-operation with local authorities for dealing with all possible issues. One problem that may occur is the spread of HIV/AIDS. It is therefore important for the project to be one step ahead regarding HIV/AIDS, and to apply a pro-active policy with clear statements by using TANESCO HIV/AIDS policy.

11.3 Marketing of TANESCO services

It has been observed with the ongoing Sida funded projects of Serengeti and Urambo that rate of connection of customers is low. The following are the proposed strategies for increasing rate of connection of customers especially during the initial months of operation after completion of project.

Marketing of electricity services is paramount for attracting as many consumers as possible as early as possible. Marketing activities should be tailor-made for the specific load types identified in the project area that is designed to reach both residents as well as businesses.

People’s poor knowledge about electricity and its potential use, inability to pay connection fees up-front, inability to meet required housing standards for house-wiring, unstable economy are all factors that delays the electrification process and therefore important for TANESCO to include in their marketing actions.

Other recommended activities for a higher connection rate include:

• One of the Terms of Reference for the Implementation Consultant will be to design an electricity marketing strategies

• Electricity Marketing campaigns to start early during project construction and has to be a continuous activity to be carried out by TANESCO

• Customers connection gangs to be formed for Iringa and Ruvuma regions to connect all identified potential customers (See Appendix A)

• The Construction contractors to know exactly where are the potential customers and include the same during design stage

• TANESCO to lower connection costs in the first months (say within 3 months) after project completion. TANESCO has done this before in new districts of Sengerema, Geita, Meatu etc.

• Customers to be allowed to pay conncection in installments. TANESCO has approved this since January 2005 on which a 12-months period is allowed.


Page 61 of (68)

Proposal of using SCRATCH CARD technology as Pre-paid(LUKU) Tokens in the project towns of Songea, Ludewa, Namtumbo and Mbinga.

The number of customers presented in chapter 4.1 is the number of customers that are assumed to be connected to the grid. However, there is a large group of secondary users who will benefit from electrification in different ways, who are not included in this number. By electrification of health centers, schools and other public facilities and providing the area with street lights and piped water etc, a much greater number will have the advantage of electricity. The project area covers six districts with a total population of almost 1.5 million. This indicates, that the number of beneficiaries of the project will be large, especially considering the long-term aspect that the project will contribute to an overall economic development in the project area.

11.4 Anti-Corruption Strategy

In order to avoid corrupt practices, TANESCO’s Anti-Corruption Action Plan will be applied during implementation of the project. The Action plan attached as Annex 12 includes issues such as delays in electricity connection to new customers, poor billing system, poor response to emergency calls, unreliable power supply, long outstanding bills and energy theft.

11.5 Network implementation

The project contains two technical principle parts where 132 kV is considered a transmission part and 33, 11 kV and low voltage connections are considered distribution part. It is considered both parts will be procured as one lot thus reducing the co-ordination requirements and minimise the administration of the procurement. The project is proposed to be executed in two phases, one Inception phase and one Implementation phase. A nominal period of 1 year is considered for the Inception Phase, including all decisions by TANESCO and the financiers and about 3 years for the Implementation phase, due to the size of the entire project. The Inception Phase covers project preparation, design and procurement of contractors, the Implementation Phase includes construction and commissioning. Both phases includes project management, preferably in accordance with the FIDIC Yellow Book. TANESCO is proposed to assign a Project Implementation Consultant (PIC) to assist during these two phases. The focus of the consulting services during the inception phase is to assist TANESCO to make all necessary preparations for the implementation phase in professional manner as well as in accordance to applicable standards and procedures. The Engineer shall assist TANESCO in fulfilling all requirements for ICB in accordance with TANESCO procurement rules as well as the financiers requirements. For the inception phase the services will cover supervision and monitoring of works. The consultant shall act as the Engineer in accordance with the meaning in FIDIC during the whole project and be present full time at site during the period of ongoing work. The main services to be provided by a PIC shall include, but not necessarily be limited to:

Inception phase

• Confirm the cost estimate of the project document; • Plan an HIV/AIDS awareness campaign to be conducted by the selected contractor;


Page 62 of (68)

• Assist TANESCO in conducting an electric use and safety campaign; • Prepare complete tender documents in close cooperation with TANESCO for selection of

contractor; • Assist TANESCO during the tendering process; • Assist TANESCO during evaluation and contract negotiations; • Review contractors time schedule in order minimise negative implications to TANESCO’s

normal activities; • Perform a stakeholders meeting in the project area;

Implementation phase

• Provide a project manager to be full time in Tanzania; • Provide a site manager to be full time at site as long as the contractor is present at site, to

cooperate with the site engineer appointed by TANESCO; • Assist TANESCO in selection of customer connections; • Act as the engineer in accordance with the FIDIC; • Supervise and monitor the works to ensure proper workmanship; • Participate, when necessary, in shop tests; • Monitor progress of work; • Supervise tests and pre-commissioning of the works; • Review any documents issued by the contractor; • Perform project meetings; • Inspect all material at arrival to site; • Certify contractors invoices; • Perform final inspection of the work; • Review as-built documentation; • Issue taking over certificate. A least cost approach should be applied to all works, yet comply with TANESCO requirements, standards and implementation policies. It is suggested that the TANESCO standards are reviewed and revised to better allow for least cost solutions in especially rural electrification project.

11.6 Compensation to Land Owners

The compensating procedure in Tanzania includes:-

• Selection of route or substation location

• Stakeholders meeting (Politicians, Executive Directors, people in the project area) to create awareness.

• Appointment of Government valuers who will produce the valuation report to be signed by the Chief Government Valuer.


Page 63 of (68)

• Identification of properties to compensated through a compensation report signed by local leaders (WEO, VEO etc).

• Payments of compensation are made through District Executive Director.


Page 64 of (68)

12 Implementation Strategy

12.1 Project Strategy

It is envisaged that all work related to the extension of Makambako substation, construction of about 250 km 132 kV overhead line, a new 132/3 kV substation in Madaba, a new 132/33/11 kV substation in Songea, 33 kV distribution systems Madaba- Ludewa, Namtumbo- Songea-Mbinga and 19 kV SWER Mbinga -Mbamba Bay, installation of distribution transformers and construction of low voltage lines are to be procured in one lot executed by one main Contractor. In order to give as many customers as possible the benefit from electricity, TANESCO is responsible for connecting customers according to regular procedures. It is proposed that payments of service lines by instalments established by TANESCO in January 2005 be exercised in connecting potential customers. This paying modality will be part of TANESCO market strategy plan in increasing number of prospective customers. It is also strongly suggested that materials for service line works orders be supplied under the project by contractor.

The Modus Operandi of the proposed project shall be like that of implementation of Makambako, Urambo and Serengeti projects being funded by Sida.

• Regards shall be taken to politically anchorage the implementation in the district, and to minimize possible conflicts or delays;

• TANESCO shall strive for broad participation in information meetings etc; • TANESCO shall seek to support a market where both women and men can benefit from

electricity supply, and thus act for gender equality in poverty reduction; • When building the net-work, environmental impact shall be minimized; • TANESCO shall demonstrate that their HIV/AIDS policy is carried out through the whole

project implementation. This can be effectuated through the contractors involvement

12.2 Management and Organisation

In order to obtain sustainable results it is absolutely vital that well qualified resources are allocated to the development and monitoring of the rural electrification plan. In addition to the specific technical skills related to these projects, skills are required of project management, financial and economical analysis, progress monitoring, environmental as well as socio- and crosscutting skills. Through the initial stages of this project TANESCO staff has increased their participation in the various tasks. The objective is also that these tasks in a near future could be entirely managed by TANESCO staff.

Significant efforts have been made to streamline the execution of rural electrification projects.

12.3 Proposed Project Implementation Unit (PIU)

Due to the nature of the project, it is proposed that the PIU will comprise members from Directorates of Operation, Distribution and Customer Services, Corporate Planning and Research, Transmission and Control System, Legal department, Public Relations Department. An Organizational Chart of the PIU is shown in Annex 10. It is also proposed that the site will be managed by a Project Coordinator who will oversee all the activities in liaison with Regional


Page 65 of (68)

Managers of Ruvuma and Iringa. It is also proposed that in order to expedite connection of customers, special gangs under the Project Coordinator will be formed in Iringa and Ruvuma regions.

12.4 Organizational Chart for Operation and Maintenance

It is also proposed that after completion of the project, operation and maintenance of the 33kV lines, distribution transformers and low voltage lines will be carried out by Regions of Iringa and Ruvuma. Operation and Maintenance of grid substations (Madaba and Songea) will be handed by the Directorate of System Control and Transmission. Maintenance of the 132kV line will be taken care by the same directorate. An Operation and Maintenance Organizational Chart is attached as Annex 11.

12.5 Project monitoring and evaluation

The importance of sufficient project monitoring cannot be stressed enough. There are mainly two reasons to adapt strict monitoring principles. One is directly related to project management and the other reason is related to the impact of the project. Through the use of accurate project progress indicators it can be determined if a project is or has been well managed. The draft Logical Framework Matrix in Annex 7 includes a number of the outlined project’s most central activities and their progress indicators. The Logical Framework Matrix should be used as a project activity template for rural development projects. TANESCO will also be required to set up a separate Project account in order to monitor the progress of the project. An important aspect is to have an audit trail for all transactions funded by the project financers.

In order to assess the electrification project’s long-term impact it will be necessary to review the monitoring indicators over a longer period – normally at least 5-6 years. Trough this, it will be possible to verify the relevance of TANESCO's market survey and the assumptions related to project feasibility. The monitoring activities will lead to a better understanding of how rural electrification schemes can contribute to poverty reduction and sustainable development in Tanzania. It is important that the monitoring indicators are few, that they can be widely communicated and that they are simple to handle. In the Makambako-Songea, project monitoring and data compilation will be handled by TANESCO’s head office with assistance from the Regional office in Ruvuma and Iringa.


Page 66 of (68)

13 External Risks Factors and Assumption

Project feasibility: There is a risk that the connection rate is considerably lower than assumed. The risk is mitigated by early and comprehensive marketing activities.

Further, there is a risk that connected customers have lower paying ability than assumed. This risk is hard to mitigate directly, but it is thought that instalment payments of connection fees are help-full, as well as information on agreements and the possibility to be disconnected.

Indirectly, TANESCO should seek to mitigate the low revenues through supporting income-bringing activities of electricity.

Project implementation: It is assumed that way-leave negotiations are sorted out by support of local politicians in due time for project implementation. TANESCO must require land for Madaba and Songea substation in due time. There is a risk that the project is delayed if these issues are not properly addressed.


Page 67 of (68)

14 Project Recommendations

Alternative power supply: In the feasibility study have different types of alternative solutions for power supply to the project area been identified and analysed. This is especially important if the outcome from the financial analysis shows a poor economical result. As a consequence of the result of the feasibility study, one of the alternatives to connect the identified villages to the TANESCO main grid were selected as main alternative (designated Alternative 1 in the Feasibility study). Other alternatives, containing any kind of isolated islands i.e. powered by diesel generators or, more preferably hydropower, wind or solar panels were also studied but only one alternative with hydro power could be identified in the project area (Alternative 4). This alternative with potential hydropower generation in Nakatuta will only by sufficient for the initial period of the project and must be complemented with other electric power generation. Further, the cost for the hydropower exceeded the cost for the other alternatives. Tariffs:. In the financial analysis, a 100% grant financing of the distribution part of the initial investments is assumed. Even under these circumstances it will have a negative cash flow. In other words, the total revenues based on today’s tariffs do not cover the operating costs consisting of supply cost (average electricity production cost), operation and maintenance costs for the extended distribution network. The tariff study has also focused on this specific topic. Although the financial results of the distribution part are poor, the tariff study clearly indicates that the required tariff levels in order to attain viable results are not necessarily out of range. For the transmission part soft credit is assumed, since this part shows a viable financial result. The economic analysis shows a significant potential. The observed alternative energy sources used today are considerably more expensive compared to the use of electric power. For these reasons, the forecasted loads are relatively price insensitive. From a customer perspective, this indicates that electricity is affordable in the project area even provided an increase of the current tariff. The strategy of the Government of the United Republic of Tanzania of electrifying rural areas, of which electrifying the Makambako-Songea is one possible area, is supported by the results of the feasibility study, thus under the prerequisite that it is acceptable for TANESCO to operate new areas with an initial negative cash flow or a government decision to increase tariff levels. Based on such an approach, TANESCO is recommended to apply for the financial assistance of 21.9 million USD for transmission and 21.6 million USD for distribution of rural electrification of the project area, which covers all material investments plus 6.5 million USD for contingencies.

Connection Rate: Considering similar ongoing projects where the rate of connection of customers has been low, it is important for TANESCO to follow the customer connection strategies mentioned above. The strategy includes awareness campaigns, marketing strategies, lower initial connection costs etc.


Page 68 of (68)

Environment: The transmission and distribution part of the project have not been found to cause any major affect to the environmental conditions within the project area that can not be managed by proper mitigation measures. Monitoring especially during the construction period will be required to ensure that adequate mitigation measures are implemented. The environmental monitoring is proposed to be conducted by a Supervising Engineer who will secure compliance with the environmental policies. After construction, no further major monitoring should be required, other than periodic inspection by TANESCO and concerned District Councils.

Optical ground wires: Optical ground wires (OPGW) have been included in the project approach since it is considered to provide reliable access to land-based (internet) communication, internal TANESCO telephone communication, allow for introduction of new payment principles, to a relatively low investment cost. Also for a minimum installation of number of fibres the OPGW link will still give TANESCO a surplus capacity suitable for leasing to other operators of communication needs. Consequently, to fully utilise all benefits from OPGW separate business plan should be established. Therefore, OPGW installations have a significant potential for additional business to power supply.


Annex Page 69

Annex 1 Cost Estimate 1. Substations Extension of 132 kV at Makambako S/S New Substation Madaba 132/33 kV

S/S New Substation Songea 132/33/11 kV

Item Item Item Civil Work 385 256 Civil Work 384 615 Civil Work 641 026 Switchyard, HV Equipment and structures 169 045 Power Transformers, Shunt Reactor

and Auxiliary Transformer 257 769 Power Transformers, Shunt

Reactor and Auxiliary Transformer

1 115 385

Relay, Control, Supervision, Communication and Auxiliary Power

357 517 Switchyard, HV & MV Equipment and structures

382 757 Switchyard, HV & MV Equipment and structures

576 923

Relay, Control, Supervision, Communication and Auxiliary Power

192 308 Relay, Control, Supervision, Communication and Auxiliary Power

435 897

Total Cost 911 819 Total Cost 1 217 449 Total Cost 2 769 231 2. Lines 33 kV feeder from Makambako S/S, Njombe S/S, Madaba S/S and Songea (north)

132 kV line Makambako-Songea

Item Item Item

Songea (north) - 33 kV lines +LV lines

760 587

Makambako - 33 kV lines +LV lines 1 226 453 Songea-Namtumbo - 33 kV lines +LV lines

4 619 722 132 kV Line, 260 km 15 600 000

Njombe - 33 kV lines +LV lines 885 973 Songea-Mbinga - 33 kV lines +LV lines

4 067 234

Madaba-Ludewa - 33 kV lines +LV lines 7 854 440 Mbinga - Mbamba Bay C 734 882 Songea-Waterpump Station 24 960

Total Cost 9 966 867 Total Cost 10 207 385 Total Cost 15 600 000

GRAND TOTAL 40 672 750


Annex Page 70

Annex 2 Income Statement Transmission

Income statement Makambako-Songea Electrification - Transmission (thousand USD) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Sales (tariff) 0 1766 2441 3052 3612 4130 4616 5075 5515 5939 6352 6757 7158 7558 7959 8362 8770 9185 Connection fee 0 1593 238 215 199 186 176 168 162 156 152 148 144 141 139 137 136 135 Service fee 0 72 87 100 111 121 130 138 146 153 160 166 172 178 184 189 194 199 Demand fee 0 109 110 111 112 114 115 116 117 118 119 120 122 123 124 125 127 128 Total Revenues 0 3540 2876 3478 4034 4551 5037 5498 5939 6366 6782 7192 7597 8001 8405 8814 9227 9646 Cost Savings 0 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 2198 Total Benefits 0 5738 5074 5676 6232 6749 7235 7696 8137 8564 8980 9390 9795 10199 10603 11012 11425 11844 O&M cost 0 329 329 329 329 329 329 336 342 349 355 361 366 372 378 384 389 395 Supply cost 0 1316 1819 2275 2692 3079 3441 3783 4110 4426 4734 5037 5336 5634 5932 6233 6537 6846

Total Operating Costs 0 1645 2148 2604 3021 3408 3770 4119 4453 4775 5089 5397 5702 6006 6310 6616 6927 7241 Operating margin before depreciation 0 4092 2925 3072 3210 3341 3465 3577 3685 3789 3891 3992 4093 4193 4293 4395 4498 4603 Depreciation 0 877 877 877 877 877 877 896 913 930 946 962 977 992 1008 1023 1038 1054 Operating Margin 0 3215 2048 2195 2333 2464 2588 2681 2771 2859 2945 3031 3115 3200 3286 3372 3460 3549 Financing costs (Interest) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Net Profit 0 3215 2048 2195 2333 2464 2588 2681 2771 2859 2945 3031 3115 3200 3286 3372 3460 3549


Annex Page 71

Annex 3 Income Statement Distribution

Income statement Makambako - Songea Electrification Distribution (thousand USD) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Sales (tariff) 0 1935 2679 3352 3968 4540 5075 5582 6066 6535 6991 7440 7884 8326 8770 9218 9671 10131 Connection fee 0 1593 238 215 199 186 176 168 162 156 152 148 144 141 139 137 136 135 Service fee 0 72 87 100 111 121 130 138 146 153 160 166 172 178 184 189 194 199 Demand fee 0 109 110 111 112 114 115 116 117 118 119 120 122 123 124 125 127 128 Total Revenues 0 3708 3113 3777 4390 4960 5496 6004 6491 6962 7422 7874 8322 8769 9217 9669 10127 10592 Cost Savings 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Total Benefits 0 3708 3113 3777 4390 4960 5496 6004 6491 6962 7422 7874 8322 8769 9217 9669 10127 10592 O&M cost 0 324 324 324 324 324 324 331 337 343 349 355 361 366 372 378 383 389 Supply cost 0 2194 3032 3792 4487 5131 5734 6305 6851 7377 7890 8394 8893 9389 9887 10388 10895 11411

Total Operating Costs 0 2518 3356 4115 4811 5455 6058 6636 7188 7721 8240 8749 9253 9756 10259 10766 11279 11799

Operating margin before depreciation 0 1190 -243 -338 -421 -495 -562 -631 -696 -758 -818 -875 -931 -987 -1042 -1097 -1152 -1207 Depreciation 0 863 863 863 863 863 863 882 899 915 931 947 962 977 992 1007 1022 1037 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Operating Margin 0 327 -1107 -1202 -1284 -1358 -1426 -1513 -1595 -1673 -1749 -1822 -1893 -1963 -2033 -2103 -2173 -2244 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Financing costs (Interest) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Net Profit 0 327 -1107 -1202 -1284 -1358 -1426 -1513 -1595 -1673 -1749 -1822 -1893 -1963 -2033 -2103 -2173 -2244


Annex Page 72

Annex 4 Cash Flow Statement-Transmission Cash Flow Statement

Makambako-Songea Area - Transmission (thousand USD) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Cash-flow from Operation Activities Revenues 0 3 540 2 876 3 478 4 034 4 551 5 037 5 498 5 939 6 366 6 782 7 192 7 597 8 001Operating costs 0 -1 645 -2 148 -2 604 -3 021 -3 408 -3 770 -4 119 -4 453 -4 775 -5 089 -5 397 -5 702 -6 006Change in Working Capital 0 311 -192 24 23 22 20 18 18 17 17 17 16 16Net cash flow from Operating activities 0 2 206 535 898 1 035 1 165 1 288 1 397 1 504 1 608 1 710 1 811 1 911 2 011 Cash-Flow from Investment Activities Investments -21 933 0 0 0 0 0 0 0 0 0 0 0 0 0Interests and other charges during construction Extension Investments 0 0 0 0 0 0 -461 -437 -417 -403 -392 -385 -381 -380Net Cash-flow from investment activities -21 933 0 0 0 0 0 -461 -437 -417 -403 -392 -385 -381 -380 Cash-Flow before Financing -21 933 2 206 535 898 1 035 1 165 826 961 1 087 1 205 1 318 1 426 1 530 1 631 Cash-Flow from Financing Activities Grants 0 0 0 0 0 0 0 0 0 0 0 0 0 0Equity 0 0 0 0 0 0 461 437 417 403 392 385 381 380Loans 21933 0 0 0 0 0 0 0 0 0 0 0 0 0Interest charges/Repayment Loans 0 0 0 0 0 0 0 0 0 0 0 0 0 0"Depreciation" 0 0 0 0 0 0 0 0 0 0 0 0 0 0Net cash-flow from financing activities 21933 0 0 0 0 0 461 437 417 403 392 385 381 380 NET CASH-FLOW 0 2 206 535 898 1 035 1 165 1 288 1 397 1 504 1 608 1 710 1 811 1 911 2 011


Annex Page 73

Annex 5 Cash Flow Statement - Distribution Cash Flow Statement

Makambako-Songea Area- Distribution (thousand USD) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Cash-flow from Operation Activities Revenues 0 3 708 3 113 3 777 4 390 4 960 5 496 6 004 6 491 6 962 7 422 7 874 8 322 8 769Operating costs 0 -2 518 -3 356 -4 115 -4 811 -5 455 -6 058 -6 636 -7 188 -7 721 -8 240 -8 749 -9 253 -9 756Change in Working Capital 0 196 -236 -16 -14 -12 -11 -11 -11 -10 -10 -9 -9 -9Net cash flow from Operating activities 0 1 386 -479 -354 -434 -507 -573 -643 -707 -768 -827 -885 -941 -996 Cash-Flow from Investment Activities Investments -21 586 0 0 0 0 0 0 0 0 0 0 0 0 0Interests and other charges during construction Extension Investments 0 0 0 0 0 0 -454 -430 -411 -397 -386 -379 -375 -374Net Cash-flow from investment activities -21 586 0 0 0 0 0 -454 -430 -411 -397 -386 -379 -375 -374 Cash-Flow before Financing -21 586 1 386 -479 -354 -434 -507 -1 027 -1 072 -1 118 -1 165 -1 214 -1 264 -1 316 -1 370 Cash-Flow from Financing Activities Grants 21 586 0 0 0 0 0 0 0 0 0 0 0 0 0Equity 0 0 0 0 0 0 454 430 411 397 386 379 375 374Loans 0 0 0 0 0 0 0 0 0 0 0 0 0 0Interest charges/Repayment Loans 0 0 0 0 0 0 0 0 0 0 0 0 0 0"Depreciation" 0 0 0 0 0 0 0 0 0 0 0 0 0 0Net cash-flow from financing activities 21586 0 0 0 0 0 454 430 411 397 386 379 375 374 NET CASH-FLOW 0 1 386 -479 -354 -434 -507 -573 -643 -707 -768 -827 -885 -941 -996


Annex Page 74

Annex 6 Project Activities and Sub activities for each objective

A: Secure a viable market

A.1. The market survey shall not be older than 12 months, or it shall be up-dated.

(Note that follow-up activities may be required even if the market survey is not older than 12 months, for example as specified in A.1.1.3.)

A.1.1. A market survey, if required, shall be carried out as follows: A.1.1.1. A stakeholders meeting shall be arranged with district representatives in

Songea to discuss the expected load for the entire area and in the following order of priority: a) Businesses and income-bringing activities b) Education c) Health care d) Other public services such as, streetlights mosques, and churches e) Households

A.1.1.2. A list of potential connections concerned shall be made based on the

estimates of district representatives in Songea, and related to the suggested network. More emphasis should be put on understanding the status of higher priority loads. The location of the potential loads shall be specified, their distance to District Township, transport networks, and TANESCO places for retailing LUKU-cards.

A.1.1.3. For the public service loads in different parts of the project area (water

pumping, street-lights), it shall be discussed who will be bearing the responsibility of purchasing electricity. Note responsibilities for all parts of the suggested network.

A discussion on payment responsibilities for public service loads may be required even if the market survey is not older than 12 months, depending on if budgets were settled or not at the time for the market survey.

A.1.1.4. Arrange visits in the villages for in-depth interviews with important potential

customers. A.1.1.4.1. Meeting with selected businesses,

• For larger businesses, use the form Households and businesses, or other as appropriate, be specific on load curve, and possible development plans.

• For those coupled to households use the form, Households and businesses.

A.1.1.4.2. Meeting with selected health care centres and dispensaries, using the

form Health. A.1.1.4.3. Meeting with selected schools, using the form Education.


Annex Page 75

A.1.1.4.4. Meeting with selected households, using the form Households and businesses.

For reasons of continuity for TANESCO, these forms are based on

those used in the recently conducted Rural Electrification Assessment Report. However, since the questionnaire is thought to be far too bulky for the project document preparation, changes are made. Some sections or cells are deleted. Important changes include: • Gender main-streaming through introducing ‘sex’, ‘male/female’

where possible. • Age groups are changed to conform to NBS age groups.

A.1.2. Market survey results shall be compared with experience from previous

studies in newly electrified areas to verify reliability of results and interviewees own estimates.

A.1.3. Estimated connection rates and load growth rates per category shall be

applied based on previously realized and monitored RE projects in Tanzania. A.2. Anchorage results from the market survey. A.2.1. Verify existence of basic market support:

a) Verify existence of technicians able to carry out house wiring. If not satisfactory, discuss possibilities for education with TANESCO regional office.

b) Verify offering of required material for house wiring. If not satisfactory, discuss possibilities for support from TANESCO regional office.

c) Verify availability of most common single phase appliances such as light bulbs/tubes/CFLs, water cookers, fans, radio TV, etc. If not satisfactory, discuss campaigns or incentives for retailers with local authorities.

A.2.2. Connect major business loads as identified. A.2.2.1. Verify availability of appropriate electrical equipment for enhanced

business. It is important to verify that appropriate equipment exists and is available. a) Identify retailers of useful equipment b) Identify workshops with knowledge and spare parts to service

equipment. If the availability is not satisfactory, this shall be flagged and brought up to

discussion with business representatives and local authorities. A.2.3. Connect some health centres & dispensaries planned and budgeted for by

the Ministry Department of Health.

B: Efficient and ethical implementation

B.1. Negotiate way-leaves prior to initiation of construction. B.1.1 Contact with District authorities. B.1.2 Establish conditions of compensation prior to contacting affected parties. B.1.3 Contact affected parties, communities, etc. B.1.3.1 Stakeholders meetings.


Annex Page 76

B.2. Raise awareness of increased risk that HIV/AIDS spread during project implementation.

B.2.1. Effectuate TANESCO’s HIV/AIDS policy. B.2.2. Arrange a HIV/AIDS information seminar for the contractor. B.3. Secure that important NGOs that may have site specific knowledge regarding

important businesses, health issues, environmental issues, ethical conflicts, or other get involved in the planning process.

B.4. Verify results from the Environmental Impact Assessment

C: Marketing

C.1 Marketing of electrification services C.1.1 Prepare information campaign and road-shows on: C.1.1.1 Economic benefits of electricity

a) Comparative to other sources of energy used today in the District

C.1.1.2 Productive uses of electricity b) for traditional production in Makambako-Songea area c) New technology and services not yet introduced in Makambako-

Songea area e.g. IT, fax, internet d) Advantages in attracting investors, tourism, livestock, agriculture and

mining

C.1.1.3 Benefits for education C.1.1.4 Benefits for health C.1.1.5 Benefits for environment C.2 Prepare information campaign on facilitation of payments for connections for:

a) 3 phase b) 1 phase

C.3. Request from Ward and Village Councils the securing of community

involvement from the beginning to cover connection costs for social services and water pumping.

D: Project Management

D.1 Procurement of contractor D.1.1 Prepare Bid Document D.1.2 Tender Evaluation D.1.3 Contract Award D.2 Management of Contractors Design and Planning D.3 Control and Management of Contractors Construction

E: Financial issues

E.1 Establish local TANESCO office E.2 Set up Project accounts E.3 Develop Budget for the project E.4 Establish Billing system E.5 Establish vendor stations


Annex Page 77

F: Monitoring

F1 Monitor project activities and resources used F1.1 Progress reports every three months, presenting activities, results, resources

used and if meetings were held, minutes from meetings inclusive of list of invitees and attendees, their name, their affiliation and their sex.

F.1.2 Project indicators reported.

G: Exit/end of project

G.1. Close PIU G.1.1. Transfer inventory to central office G.1.2. Transfer of assets bought in project to TANESCO. G.1.3. Owner ship of results G.1.4. Completion certificates


Annex Page 78

Annex 7 Logical Framework Matrix

Makambako Songea Project

Intervention logic

Objectively measurable

and verifiable indicators

Sources of verification

Important assumptions

Immediate project purpose

Increase the electricity access by reliable and affordable electricity services in order to improve the living conditions in the project area.

New customers connected to the networks and increased energy consumption in the area.

Consumption and socio-economic reports.

Reliable grid electricity supply.

Outputs Njombe, Makambako and Songea districts electrified through the national grid. Strengthened power network owner. Use of national grid power to increase reliability of power supply. Use of more environmentally sound energy by switching from diesel and

Grid electricity available in the district, and current customers connected. Staff trained in managerial and technical tasks. New consumers to TANESCO billing system. Generators only used as emergency

Power metering. Engineer’s reports. Site inspection, technical reports.

All parties agree on the project implementation. Contractor performs the activities as agreed and materials and equipment available.


Annex Page 79

wood fire generators to grid electricity (mainly hydro power)

backup. Mini hydro power stations connected to the grid.

Activities Inception report

Procurement of materials and contractor Electric safety Campaign HÌV/AIDS Campaign Construction of networks Training of staff

Report handed over Successful contract negotiation Campaign organisation and material Campaign organisation and material Progress reports and site visits Progress reports

Report Contract Campaign Report Campaign Report District electrified Networks in operation

Funds available and sufficient. Operational staff available Customers attracted


Annex Page 80

Inputs Equipment,

materials and consulting services financed by Sida. Local resources for project administration, monitoring and construction works etc. provided by Tanzania. Local production of material for the project, such as; concrete poles, ready-boards, building material, etc.

Funds available Resources available


Annex Page 81

Annex 8 Problem Tree for Songea Area

PROBLEM TREE FOR SONGEA, NAMTUMBO AND MBINGA DISTRICTS

High rate of urban imigration for youth

Low employment and self employment opportunities

Women take long time looking for fire

woods.

High operation costs for fuel stationsFew hours of

generating income

HIV/AIDS problem for young people - prevalence is 13%

Low price of farm products. Poor tourist attraction services (guest

houses, hotels, communication etc. (Mbinga and Namtumbo)

Connection fee and wiring installation costs appear high to

some potentail customers

Insufficient capacity supply of electricity

Electricity Market might be weak

Polution caused by generators, kerosene, etc.

Few hours for teachers to work and students to

study

Poor security for people and properties

Low income to some household

Wayleave for electrification might be a problem (buldings, land, crops etc)

Some employees refuse to work in Mbinga and

Namtumbo

High cost for running generators

Poor health services;unable to use equipments like x-rays, ultrasound, etc.

Inability to use modern facilities in schools, ofices,etc.

Deforestation caused by charcoal making

Eyes problems for students due to use of

poor light

High costs of fire woods.,charcoal,,

kerosene, etc.

Poor technology in processsing farm

products, eg. coffee, vegetables, fruits, etc.

Financial inability for farmers associations

Low standard of living as a result of using poor energy

sources

Loss of life and propety due to unsafe use of

kerosine, petrol etc.

No investers in industries, schools, farms, mines, etc.

Poor distribution of Water

Lack of modern technology in schools, offices, etc.

Failure to use modern ways of poultry keeping

Women take long time in fetching water

Poor communications; TV, Radio, Telephones,

Internet etc.

Damages of electricity appliances caused by unstable power

High costs for those services using electricity (milling m/cs,

Saloons, battery charging, etc.)

Schools fial to follow their timetable due to frequent power cut

Poor preservation of foods.

Lack of electricity threghtens national

unit

Production in small industries takes

longer time

Some houses don’t meet Tanesco's electrification standards (Namtumbo only)

Tanesco's bureaucracy/inefficiency in connecting new customers

Most generators operate for few hours

High cost for fuels eg. Diesel, petrol kerosene etc.

Few financial institutions

Damages in machines due to poor handling of diesel/kerosene/petrol

by retailers (Namtumbo and Mbinga)


Annex Page 82

Annex 9 Objective Tree for Songea Area

OBJECTIVE TREE FOR SONGEA, NAMTUMBO AND MBINGA DISTRICTS

Improved social services

Increased employment and self employment opportunities

Improved fire wood availability

Operation costs for fuel stations decreased

Increased hours for generating income

HIV/AIDS infection rate stabilized

Increased prices of farm products.

Improved tourist attraction services (guest houses, hotels,

communication etc. (Mbinga and Namtumbo)

People afford paying connection fee and wiring installation costs

Sufficient supply of electricity

Commecially viable electricity market be

developed

Clean environment.

Hours for Teachers to work and Students to study

be increased

Improved security for people and

properties

Increased income to households

People's consent on wayleave for electrification sorted out before project

starts

Employees be attracted to work in Mbinga and

Namtumbo

Dependency on petrol/diesel generators decrease

Improved health services;able to use equipments like x-rays, ultrasound,

etc

Ability to use modern facilities in schools, ofices,etc.

Deforestration rate slowed down

Improved light quality for studying

Costs of fire woods.,charcoal,,

kerosene, etc. decreased

Improved technology in processsing farm products, eg. coffee, vegetables, fruits, etc.

Improved and reinforced farmers associations

financiallyImproved standard of

living Safety education on the use of kerosine,

petrol etc. be provided

Investers be attracted in industries,

schools, farms, i t

Improved distribution of water

Use of modern technology in schools, offices, etc.

Improved modern ways of poultry keeping

Reduced time in fetching water

Improved communications services; TV, Radio,

Telephones, internet etc.

Availability of stable power supply

Reduced costs for serviceswhich use electricity (milling m/cs, Saloons, battery

charging, etc.)

Schools enabled to follow their timetable

properly

Improved preservation of

Reinforced national unit

Improved production in small scale

Industries

Building of standard houses for electrification be encouraged (Namtumbo only)

Tanesco's customer service in connecting new customers be improved

Increased financial institutions

Proper handling of diesel, kerosene, and petrol (Namtumbo and Mbinga)


Annex Page 83

Annex 10 Organizational Chart for TANESCO Project Implementation Unit


Annex Page 84

Annex 11 Organizational Chart for TANESCO Operation and Maintenance


Annex Page 85

Annex 12 TANESCO Anti-Corruption Action Plan

Key problem: Poor Customer Service: Potential problems in this area include: Delays in electricity connection to new customers. Poor billing system, poor response to emergency calls, unreliable power supply, long outstanding bills, and energy theft. Goal: To achieve quality customer service record, which is among the best in East Africa S/NO Immediate

Objectives Specific Activities Indicators/Means of

verification Responsible Person/Agency

Expected Outcome

1. To outsource construction of service line for connection of new customers

Number of customers connected

GENERAL MANAGER DISTRIBUTION

Reduction of complaints and increase in revenue collection

1 Speed up process of electricity connection to new and pending customers 2. To purchase enough service

line materials to connect pending customers who have already paid for service line connection

Availability of distribution/service line materials


Reduction of complaints and increase in revenue collection

1. To outsource meter reading activity

Number of contractors entered


Correct billing to customers and hence reduce of complaints

2. To increase the installation of prepaid meters by 20% of the existing prepaid meters

Number of prepaid meters installed


Reduction in customer complaints on incorrect bills and improved cash flow

2 Billing system improve

3. To strengthen the directorate of Information System by training and providing it with modern equipments

Number of staff trained and moderns equipments purchased

MANAGING DIRECTOR

Correct and clean bills, and improved computer proficiency

3 Response to emergency calls improve

1. Strengthen emergency sections by providing them with adequate and reliable transport, increase emergency telephone lines and create new regional and district sub offices

Availability of new regional and district sub offices, and increase in transport facilities and emergency telephone lines


Reduction of complaints and time to attend emergency calls


Annex Page 86

1. Increase generating capacity by installing new power plants

Increase in new generating capacity

GENERAL MANAGER GENERATION

Increase in units of power generated

2. To strengthen transmission system

Increase in new transmission lines and power transfer capability

GENERAL MANAGER TRANSMISSION

Improvements in system reliability

3. Regular inspection, repair and maintenances of transmission lines

Number of inspections, repairs and maintenance done

GENERAL MANAGER TRANSMISSION

Reduction of power outages and energy losses

4. Upgrading of distribution system

Number of substations and lines upgraded


Reduction of power outages and revenue losses

4 Ensure power supply reliability

5. Procure two substations to start with

Number of mobile substations purchased


Reduction of non-technical energy loss and improve revenue collection

5 Control energy theft 1. To strengthen Revenue Protection Units by equipping them with reliable transport and modern Meter Audit Equipments

Availability of reliable transport and meter audit equipments

GENERAL MANAGER DISTRIBUTION & GENERAL MANAGER SUPPORT SERVICES



Annex Page 87

2. To sensitise people on reward system which is aimed at seeking public support in fighting energy theft and vandalism through paying token rewards to members of the public who assist TANESCO

Number of cases/incidences reported

GENERAL MANAGER DISTRIBUTION & GENERAL MANAGER SUPPORT SERVICES


Key Problem: Unawareness of TANESCO workers on issues of good governance in general and corruption in particular Goal: To create awareness and inculcate in the workers the importance of good governance and adherence to laws, rules, regulations and procedures. S/NO Immediate

Objectives Specific Activities Indicators/Means of

verification Responsible Person/Agency

Expected Outcome

1. To sensitise all TANESCO workers in all regions on the need to adhere to laws, rules, regulations and procedures by carrying out workshops and seminars on good governance and the fight against corruption

Number of workshops/seminars conducted

GENERAL MANGER SUPPORT SERVICES

Improved good governance within the company and hence improved service delivery

1 Create strong awareness on issues of good governance and corruption among all TANESCO workers

2. To sensitise customers and other stakeholders on various TANESCO procedures and regulations as regard to service delivery by use of media

Media coverage on customer awareness campaign

Improved customer awareness on various TANESCO procedures and regulations, hence reduction of customers complaints

§

Makambako - Songea 132 kV Transmission Line, Tanzania

Documents

Transcript of Makambako - Songea 132 kV Transmission Line, Tanzania