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Cablegate: Zanzibar Energy Crisis: Z'bar Govt Likely to Ask Usg To

VZCZCXRO3714
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHDR #0083/01 0330711
ZNR UUUUU ZZH
P 020711Z FEB 10
FM AMEMBASSY DAR ES SALAAM
TO RUEHC/SECSTATE WASHDC PRIORITY 9285
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBS/AMEMBASSY BRUSSELS 1434
RUEHMS/AMEMBASSY MUSCAT 0167
RUEHJB/AMEMBASSY BUJUMBURA 3096
RUEHKM/AMEMBASSY KAMPALA 0069
RUEHLGB/AMEMBASSY KIGALI 1573
RUEHNR/AMEMBASSY NAIROBI 1541
RUEHNY/AMEMBASSY OSLO 0001
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 03 DAR ES SALAAM 000083

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

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

DAR ES SAL 00000083 001.2 OF 003


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. END SUMMARY.

2. On January 21, MCC Resident Country Director attended a meeting
of the Zanzibar Government (SMZ). In attendance were was 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
----------
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.

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
------------------------

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 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
------------

6. Discussion then turned to the SMZ proposal, which was based on
the Norplan recommendation. The SMZ proposal called for a total of

DAR ES SAL 00000083 002.2 OF 003


US$ 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
-----------------------------

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 +/- 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$4 million.
TOTAL: US$ 11 million, which roughly equals the estimated cost of
the 32 units from Mantrac at $11.7 million.

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
---------------------------------------

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."

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 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
---------------------

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

DAR ES SAL 00000083 003.2 OF 003


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?
---------------------------

11. 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 Air. Estimated cost of US$ 5 million and transport times
of 14 days (10 days to Dar + 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 US$ 0.2
million and 4-5 weeks once loaded at port.
-- (3) Via "charter" ship. Estimated cost of US$ 0.5 million and 6
weeks.

12. 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.

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