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Cablegate: Zanzibar Energy Crisis: Z-Bar Govt Likely to Ask Usg

VZCZCXRO6153
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHDR #0108/01 0350918
ZNR UUUUU ZZH
P 040918Z FEB 10
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC PRIORITY 9355
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBS/AMEMBASSY BRUSSELS 1437
RUEHMS/AMEMBASSY MUSCAT 0226
RUEHJB/AMEMBASSY BUJUMBURA 3159
RUEHKM/AMEMBASSY KAMPALA 0132
RUEHLGB/AMEMBASSY KIGALI 1636
RUEHNR/AMEMBASSY NAIROBI 1604
RUEHNY/AMEMBASSY OSLO 0024
RUEHDS/USMISSION USAU ADDIS ABABA
RHMFISS/CDR USAFRICOM STUTTGART GE
RHMFIUU/CJTF HOA//J3
RUEAIIA/CIA WASHINGTON DC
RUEHLMC/MCC WASHINGTON DC
RUEHPH/CDC ATLANTA GA

UNCLAS SECTION 01 OF 04 DAR ES SALAAM 000108

DEPARTMENT FOR AF/E JTREADWELL; INR/RAA: FEHERENRIECH
STATE PASS TO USAID, USTDA

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG ECON ETRD MCC PGOV EPET EAID TZ
SUBJECT: ZANZIBAR ENERGY CRISIS: Z-BAR GOVT LIKELY TO ASK USG
TO SHIP EMERGENCY GENERATORS BY AIR FROM BRUSSELS

REFS: (A) Dar es Salaam 38, (B) 09 Dar es Salaam 871 and (C)
08 Dar es Salaam 839, (D) Dar es Salaam 107

DAR ES SAL 00000108 001.2 OF 004


(U) 1. SUMMARY: The USG should expect a formal request from the
Zanzibar Government (SMZ) seeking assistance for air transport
of up to 32 Caterpillar-brand diesel generator units currently
located in Belgium. Several donors have pledged to provide
support for the purchase of these units. The SMZ says that it
will pay for their ongoing fuel, operation and maintenance. We
strongly support this anticipated request to preserve our health
sector gains and support recent concrete steps toward political
reconciliation on the isles. END SUMMARY.

(U) 2. On January 21, MCC Resident Country Director attended a
meeting of the Zanzibar Government (SMZ). In attendance were
the Minister of Finance, Principal Secretary of the
Ministry of Energy, Lands, Water and Public Works,
representatives from the Zanzibar Electricity Company (ZECO)
and a member of the Tanzanian Union Government's
(GOT) Ministry of Energy and Minerals. There was also a
consultant from Norplan, funded by the Norwegian government to
provide technical assistance in the energy sector to ZECO and
Zanzibar. The purpose of the meeting was to discuss and take
action on a letter sent to the Norwegian Embassy asking Norway
"and other development partners" for assistance with their
current power crisis.

BACKGROUND

(U) 3. Prior to this meeting, the Norwegian-financed consultant
Norplan had presented the SMZ with a variety of options to
partially address the current power crisis (ref A). Norplan
recommended, and the RGOZ subsequently agreed to pursue, the
purchase of up to 32 diesel generator units to be supplied by
a Belgium-based company called "Mantrac" that will produce
26.5 MW of emergency/back-up power.

(U) 4. Meanwhile, ZECO continues to pursue an attempted repair of
the current submarine cable, and still hopes to have the
repair completed and the cable re-energized "by the end of
February." Although there is reasonable chance that the
planned repair will work, there also is significant chance
that it will not, especially given the overall age and
existing state of the cable. Even if it is successfully re-
energized, the cable would not be able to work at its previous
full capacity (40-45 MWs) and instead could be run at best at
20MWs to 30MWs. Thus, there would still be a need for power
shedding/power rationing in Zanzibar, even in the best case
scenario. There also is no guarantee that it would not break
down again sometime in the near future. The new 100 MW
submarine cable being financing by MCC is not expected to come
online and be operational until late in CY 2012. Thus, there
was the perceived strong need to provide additional power on
an emergency basis as soon as possible.

MODALITIES OF ASSISTANCE

(U) 5. At the donor's meeting, the SMZ was keen to demonstrate
that it has the necessary legal authority and emergency
contracting procedures in place to handle donor funds.
Because donors generally have formal relations only with the
GoT, i.e. the mainland Union government, rather than with the
SMZ, this was problematic for some donors. DFID, for example,
said it would need to conduct some form of due diligence on
the SMZ before it could give money directly as part of a
"basket." Norway explained that it had already established a
Project Implementation Unit (PIU) for its rural
electrification projects on Zanzibar and its soon-to-be
completed submarine power cable to Pemba. Although
technically within the SMZ, it was structurally autonomous.
DFID and other donors such as SIDA then agreed that they should
be able to make their contributions via this PIU. JICA said
that they could not contribute cash to such a PIU since their

DAR ES SAL 00000108 002.2 OF 004


aid was generally tied, with strict "buy Japanese" requirements,
but that they might be able to supply individual consultants to
work in such a PIU as needed.

THE PROPOSAL

(U) 6. Discussion then turned to the SMZ proposal, which was based
on the Norplan recommendation. The SMZ proposal called for a
total of USD 19 million to purchase 32 diesel generator units
from Mantrac. (0.8 MWs per unit X 32 = 25.6 MW of power).
There were many questions regarding the numbers set forth in
the SMZ proposal, and the need for more details, more
justification of claimed costs, etc. The SMZ agreed to send
a revised and expanded version, together with a Gant chart
that showed detailed timelines for purchase, shipment,
construction of the small civil works necessary to install the
new diesels, etc., as soon as possible. Donors also demanded
some information from the SMZ on their priorities regarding
planned uses of the emergency power, given that power shedding
and rationing would be needed even if the current cable comes
back on line.

INTERNATIONAL FUNDING PLEDGES

(U) 7. The SMZ asked donors what they could provide. The
representative from the GoT was asked to speak first, but all
he said was that, GoT's Minister of Energy "will continue to
make a follow-up" with the GoT Ministry of Finance and
Economic Affairs. The GoT was unable and/or unwilling to give
and any indication on potential orders of magnitude for GoT
contributions. Foreign donors, however, offered the
following:

--DFID: 2 million pounds, which equals approx USD 3 million.
--SIDA: will contribute only "if there were a substantial
financing gap" and only if a few million were missing to
bridge a final purchase, with a limit of USD 4.0 to 4.5
million.
--JICA: No information available at this time.
--Norway: USD 4 million.

TOTAL: USD 11 million, which roughly equals the estimated cost
of the 32 units from Mantrac at USD 11.7 million.

(U) 8. SMZ estimates the cost of fuel, operation and maintenance
will be USD 44 million from installation until the MCC cable
comes online. The SMZ stated in its letter to Norway that it
is willing and able to shoulder this. The donors were
generally very positive, but also made clear that all such
pledges were conditioned on further info from the SMZ and
various internal approvals.

U.S. ASKED ABOUT PROVIDING AIR SHIPMENT

(U) 9. MCC Director made the point that the USG, through MCC, was
providing the long term solution to the power question by
supplying the new 100 MW cable. Bids were already in process
even before the latest crisis, and were due very soon.
Moreover, we already had made informal inquiries about the
possibility of emergency assistance as soon as the crisis hit.
The MCC Director explained, however, that USAID's OFDA
emergency funds were normally used for hurricanes and floods,
etc., not problems of the sort that Zanzibar was facing.
Given the recent disaster in Haiti, most eyes in Washington
(and budgets) were understandably focused there. The Japanese
made a similar point, stating somewhat more bluntly that
"Japan provides emergency assistance for natural but not man-
made disasters."

(U) 10. Given the USG's well-known reluctance to contribute to
basket funding such as that under discussion by the other
donor partners, MCC Director was specifically asked whether
the USG could provide any assistance with transporting the

DAR ES SAL 00000108 003.2 OF 004


diesel units to be purchased. When pressed, MCC Director said
that we would need to see much more detailed information as to
exactly what type of power units, what size and weight, etc.,
before the question could even be asked. The SMZ was quick
to respond that it would supply all such information as
rapidly as possible and make a formal request. It has yet to
do so.

CURRENT STATE-OF-PLAY

(SBU) 11. SMZ signed a letter of acceptance with Mantrac for the
generators January 29, and the full contract will be signed
February 2. Total price at the time of signing went up to
USD 12.985 million, including installation costs. The SMZ
says it had to sign the contract first and then go to donors
later because Mantrac was going to reallocate the generators
to Haiti. This demonstrates the dire straights the SMZ sees
itself in.

OTHER DELIVERY ALTERNATIVES

(U) 12. Some limited information on estimated transport costs and
times was included in the Norplan report and discussed at the
meeting. These alternatives were:

-- (1) Via Commercial Air. Estimated cost of USD 5 million and
transport times of 14 days (10 days to Dar and 4 days to Zanzibar,
based on the assumptions that the machines are too big or heavy
for direct flight to Zanzibar);

-- (2) Via "normal" commercial ship, i.e. with other cargo and
transport around Cape of Good Hope. Estimated cost of USD
0.2 million and 4-5 weeks once loaded at port.

-- (3) Via "charter" ship. Estimated cost of USD 0.5 million
and 6 weeks.

(U) 13. There is a clear desire on the part of the SMZ to get the
diesels operational as soon as possible, given the ongoing
problems and damage to eth Zanzibar economy. Other donors
were very supportive of the SMZ position and also would like
to see such a USG contribution.

COMMENT: U.S. Mission Dar es Salaam Supports this Imminent Request

(SBU) 14. The Tanzania Union Government has not and will not take an
official position on this request. Power is not a "Union
competency" and so the Union Government will not put the Zanzibar
Government's request in perspective with competing mainland priorities
(such as responding to road and rail damage in central Tanzania due to
recent flooding). As regards non-Union issues, mainland Tanzania and
Zanzibar might as well be two different countries as far as both Union
and Zanzibar officials are concerned.

(SBU) 15. We support this request for the following reasons:

-- Continued lack of distributed electrical power in Zanzibar's main
island of Unguja puts at risk our considerable health sector
achievements there and introduces new health vulnerabilities due to lac
of fresh water and insufficient power supply to healthcare facilities.
For example, household spraying to prevent malaria has been
indefinitely delayed due to lack of power and fresh water. Our
anti-malaria successes in Zanzibar have drawn worldwide attention. Thi
delay risks retrogression in our fight against malaria deaths on the
island.

-- Zanzibar's political leadership, both in government and
opposition, have recently taken concrete steps to achieve a settlement
ending decades of bitter, violent politics (ref D). The Zanzibar
parliament's unanimous vote in favor of the settlement presents an
historic opportunity for the people of Zanzibar to overcome these
debilitating divisions. The Union government, as well as the USG at th
highest level and other prominent donor governments, have long

DAR ES SAL 00000108 004.2 OF 004


championed such a settlement. Support for Zanzibar in this hour of nee
makes a strong statement that constructive politics attracts favorable
responses from the USG.

-- If we transport the generators the public image will be of
American generators (Caterpillar brand) flown in on American aircraft t
assist the people of Zanzibar. This will be the public image despite
the fact that other donors fund the actual purchase of the machines.
American influence will further rise in the isles at a particularly key
moment as the power-sharing deal is implemented.

LENHARDT

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