Tanzania’s state-owned power utility said it’s in talks with a group of lenders including Citigroup’s domestic unit for a $257m loan to fund gas fired electricity generation.

East Africa’s second-biggest economy had an electricity deficit of 264 MW last February following a drop in hydropower generation after a drought. The resulting power outages caused a slowdown in economic growth to 6.4 per cent in the third quarter of 2011 from 6.7 per cent a year earlier, the National Bureau of Statistics said on Jan. 17.

“The money is needed to fund emergency power projects that we undertook last year to meet demand,” William Muhando, managing director of Tanzania Electric Supply Co. said. “We expect to conclude negotiations with a group of financiers led by Citibank today or tomorrow.”

The government is expected to complete an agreement with HSBC Holdings Plc (HSBA) to fund a 100 MW gas fired plant in Dar es Salaam, estimated to cost $165m, he said.

Electricity output in Tanzania is currently 700 MW, matching demand, “which means the impact of any shortfall is significant,” he said.

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