US global power group, AES Corporation, announced Friday that its subsidiary, AES Tanzania Ltd, has completed the $250m multilateral credit financing from the International Development Association and the European Investment Bank for the Songo Songo Gas-to-Electricity Project. The loans will be extended to the Government of Tanzania on concessionary terms, and then lent to the project.
The Songo Songo project, in which AES Tanzania purchased the majority stake from TransCanada Pipelines International and PanAfrican Energy Corporation, is currently in construction in Tanzania. The other shareholders in the project company, Songas Limited, are CDC Financial Services, Tanzania Development Finance Co. and the Tanzanian power and gas utilities, TANESCO and TPDC. Debt and equity funding will occur pari passu through the remainder of the construction period.
Tenders are in preparation for the construction of the gas processing facilities, the pipelines from Songo Songo Island to Dar es Salaam and the conversion of the existing 112 MW Ubungo power plant in Dar es Salaam to burn natural gas. The project envisages the addition of a fifth, 35 MW turbine to the power plant, as well as future gas sales. Commercial operation is expected in October 2003.
All of the electrical output from the Ubungo plant will be sold through a 20-year power purchase agreement with TANESCO (or its post-privatization successor). Gas not required for the Ubungo plant will be marketed by PanAfrican and TPDC, and transported by Songas according to an agreed tariff.
Helen Wilson, project director for AES Tanzania, commented, “AES is delighted to have been able to conclude the development of this long-awaited project. We commend the Government of Tanzania and the other project parties for their perseverance and commitment to enabling Tanzania to exploit its indigenous gas resources. The Songo Songo project will secure lasting economic benefit and enhanced reliability of power supply for the people of Tanzania.”
Dennis Bakke, president and CEO of AES, stated, “Africa is a place that we can make a major positive contribution in an economically sustainable way. Songo Songo is a good example of that approach”.