TANESCO Dragged Into Controversial Tsh.33bn/- PTA Bank loan?

Bank insists money raised from the local money market for TANESCO but the power company says it has no contract with the Bank for this loan facility.


By Jaston Binala.

A Tsh 33 billion/- loan from the Eastern and Southern African Trade and Development Bank (PTA Bank) to the Tanzania Electricity Supply Company (TANESCO) is proving controversial as Tanesco distances itself from the loan while PTA Bank insists it is meant for TANESCO.

PTA Bank announced recently it has raised Tsh 32.6 billion (about $15 million) to support the Tanzanian Electric Supply Company (TANESCO) “for the purposes of power generation equipment”,  and that this amount  would be raised through a locally floated bond.

A PTA Bank statement says  in June 2013, the Bank committed a seven year financing facility of  Tsh. 32.6 billion to TANESCO for the purposes of power generation equipment, adding that initially, the bank raised a one year bridge loan facility in the aforementioned amount, while arranging the issuance of the bond—a financing arrangement which “is in line with PTA Bank’s development mandate”.

But TANESCO says it has no agreement whatsoever with the PTA Bank for any project financing. “It is possible that [the PTA Bank] are just talking. There is no place where we sat to make any agreement that they are giving us that money,”  Adrian Severin, the power company’s spokesman said in an exclusive interview.

The TANESCO Public Relations Officer made the statement when responding to a question seeking identification of a specific project the power company  was planning to invest the Tsh. 32.6 billion from PTA Bank.

PTA Bank announced in Dar es Salaam recently it was “pleased to announce the successful financial close of its second Tanzanian Shillings denominated bond” with a five year tenor [to] support the Tanzanian Electric Supply Company (TANESCO) in its operations. The bank further announced that the innovative bond structure was comprised of a floating rate and a fixed rate portion– both of which were oversubscribed.

The transactions were made possible with the support of the Government of Tanzania through the Ministry of Finance, the Central Bank of Tanzania and the Capital Markets Authority. The successful collaboration between CfC Stanbic Bank and Stanbic Bank Tanzania in their roles of Joint Lead Arrangers, ATZ Law Chambers as Legal Counsel, and KPMG East Africa as Auditors was critical to the success of this landmark local currency issue, the bank said in a statement.

“We have no agreement stating that they are giving us that money,” Severin said conceding however that TANESCO was invited to attend a certain meeting arranged by PTA bank at the Dar es Salaam Stock Exchange (DSE), where the bank officials asked whether they would be allowed to  invest in the power sector.

At the said DSE meeting, Severin said, PTA Bank officials were told they were free to  invest in Tanzania like any other private company because the law governing electricity generation enacted in 2008 permits any private company or individual person to generate, to distribute and to sell electricity. So PTA  bank is free to invest in Tanzania on its own because TANESCO has other areas it is investing in, he said.

The permit to invest in the power generation sector would be issued by the Energy and Water Utilities Regulatory Authority (EWURA) and not TANESCO, he said. TANESCO Managing Director  Eng. Felchesmi  Mramba did not respond to an SMS sent to him asking for clarification on the matter.

From Left: TANESCO Managing Director Eng. Felchesmi Mramba and PTA Bank President Admassu Tadesse (Internet Photos)

From Left: TANESCO Managing Director Eng. Felchesmi Mramba and PTA Bank President Admassu Tadesse (Internet Photos)

A Dar es Salaam based financial consultant, Felix Mlaki said the PTA bank’s interest  in Tanzania as an investment destination is a sign of confidence in the country’s political economic stability and a welcome gesture.

PTA Bank was established as an international financial institution on 6 November 1985 pursuant to the provisions of Chapter 9 of the Treaty (1981) establishing the Preferential Trade Area for the Eastern and Southern African States (PTA), later transformed to the Common Market for Eastern and Southern Africa (COMESA).

PTA Bank’s mission is to be at the forefront of providing development capital and services to advance regional economic growth and integration, through customer focused and innovative financing solutions. Headquartered in Burundi, PTA Bank has regional offices in Kenya, Mauritius and Zimbabwe.

TANESCO is a parastatal organization created in 1964 and owned by the Government of Tanzania. It’s core business involves generation, transmission, distribution and sale of electricity to the Tanzania mainland, and bulk power supply to the island of Zanzibar.  The Company serves consumers across the residential, light commercial, business, government and industrial sectors. TANESCO owns and manages approximately two-thirds of the power generation and 100% of the transmission and distribution facilities in Tanzania.

Admassu Tadesse, President of PTA Bank commented: “We are very pleased to have issued a local currency bond in Tanzania and to have the capacity to provide local currency financing to a key infrastructure enterprise of state to partner with the private sector in the provision of power solutions. PTA Bank is also pleased to be stimulating Tanzania’s capital markets, which will be an important source of local currency financing infrastructure and other sectors”

Further inquiry brought the following response from PTA Bank:  “Dear Mr. Binala, Thank you for your inquiry and your diligence in your research.

“By way of response, let me first inform you that PTA Bank seeks to boost regional economic integration alongside economic growth and diversification, through trade facilitation, infrastructure development, enterprise growth and investment promotion.  Our product and service offerings are primarily trade, project and corporate finance and to a lesser extent, equity finance and guarantees with tenors ranging from short to long-term.  The Bank provides such financing either on a bilateral basis contracting directly with clients or through syndications, whether led by the Bank or by other financial institutions as arrangers.

“In this case, in 2013, PTA Bank committed and disbursed TZS 32.6billion to TANESCO for the purposes of power generation equipment.  The funding was provided as an increase of the syndicated facility arranged by Citibank Tanzania Limited, Citibank N.A., London Branch, Citibank N.A. South Africa, National Microfinance Bank Plc and National Bank of Commerce Limited.  Citibank International Plc is the facility agent.

“As stated in the press release, PTA Bank initially raised a one-year bridge loan facility for the amount of TZS 32.6billion while arranging the issuance of the Bond.  The Bond, therefore, replaces the one-year bridge facility for the TANESCO financing.

“TANESCO is aware of the facility and was represented at the bond listing event last week in Dar Es Salaam.  The financing to TANESCO may, therefore, appear in their books as the above-mentioned syndicated facility and not a direct contract with PTA Bank. Thank you, once again, for your diligence and interest in reporting on the Bond issue.

“Sincerely, Aguere Bultcha (Ms), Personal Assistant to the President,  PTA Bank.”