Climate change risk
ESG challenges in emerging markets
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非洲
Climate change risk
Several renewable energy resources, such as geothermal, solar, wind, biomass, and mini-hydropower, are extensive in Tanzania. The nation's energy market is dominated by the state-owned organization called Tanzania Electricity Supply Company Limited (TANESCO), which does generation and transmission/distribution throughout the country. With growing demand in the energy sector mainly from industrial, extractive operations, and domestic uses, there is a great opportunity for investment in the energy sector.
The Government of Tanzania recognises the role of the private sector in bringing about socio-economic development through investments, and this is realised by having Public-Private Partnership (PPP) frameworks, especially in the agriculture, transport, health, and energy sectors and is considered viable means to effectively address constraints of financing, management, and maintenance of public goods and services, and this ensures efficiency, effectiveness, accountability, quality and outreach of services. To make the framework effective, the Government enacted a law as explained below to ensure the effectiveness of the said framework.
The Public-Private Partnership Act Cap 103 of 2019 (PPP Act), among other things, the Act applies in mainland Tanzania to provide for the institutional framework for the implementation of public-private partnership agreements between the public sector and private sector entities, to set rules, guidelines, and procedures governing public-private partnership procurement, development and implementation of public-private partnerships.
According to Section 8 of the Electricity Act, unless the person has been exempted by EWURA or the activity is exempt under subsection (3) or (4) of Section 18 of the Act, anyone wishing to engage in generation, transmission, distribution, supply, system operation, cross-border trade in electricity, physical and financial trade in electricity, or electrical installation activities must apply to EWURA for a licence under Section 5 of the Act.
According to Section 37 of the Electricity (Development of Small Power Projects) Rules 2020, which was published on July 3rd, 2020, Small Power Producers, Small Power Distributors, and Very Small Power Producers are prohibited from starting a commercial operation until the project has received the necessary licenses or registrations from EWURA.
Power projects can be financed through a variety of methods, including loans and equity. Also, investors or proponents of such projects require guarantees to ensure that their invoices are paid. Accordingly, in most instances, Government guarantees are needed for power projects to fulfill the offtake payment commitments. Nonetheless, private parties are urged to finance and organise projects solely based on their commercial advantages, as Government guarantees for power projects, particularly under the PPP model are hard to come by. In light of the challenges associated with obtaining Government guarantees, alternative liquidity options must be considered which include the following:
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