9 August 2017

Tanzania: Dangote Cement to Start Using Gas to Power Tanzania Plant

Dangote Cement plans to start using its own gas-powered plant in Tanzania by September to reduce its reliance on diesel gensets and reduce its operational costs.

The firm has previously run into trouble with President John Magufuli's administration over tax on diesel imports to run its Mtwara plant, and a ban on coal imports.

This made the cement manufacturer to suspend its operations last December, citing technical problems and high production costs.

Now, in its first half-year results, Dangote says that it has invested $90 million in the construction of the coal/gas-fired power station to be fed with natural gas at a negotiated rate by the Tanzania Petroleum Development Corporation.

Dangote announced that the Mtwara plant increased volumes by more than 64 per cent to nearly 388,000 tonnes in the first half of 2017, pushing the six months sales to more than 400,000 tonnes.

"The factory is still reliant on diesel generators, which results in net income losses that weigh on our operations outside of Nigeria," the firm said.

"However, we expect to have gas turbines installed by September, which will immediately bring the plant into profitability."

From the negotiated talks between the firm's owner Aliko Dangote and President Magufuli, the cement maker was allocated land to mine coal to fuel the plant in the coming years.

The Energy Ministry awarded a coal mining licence to Dangote on March 11, covering 9.98 square kilometres in the Ngaka area.

In August 2016, Tanzania banned the importation of coal, insisting on use of its own. Dangote Cement used to import its coal from South Africa at a cost of $103 per tonne. Dar said that its coal was selling at as a low as $90.

The firm is now banking on the construction of the Dar es Salaam-Morogoro standard gauge railway and the construction boom in the administrative capital Dodoma to accommodate government departments to boost its second half earnings.

The three-week shutdown last year seems to have affected the cement maker's market share, which dropped to 17 per cent as at end of June 2017, compared with 23 per cent in the same period last year.

Sales volumes in Dangote Cement's African operations increased by 12.6 per cent to 4.7 million tonnes.

Within the region, the Ethiopian market - which were also briefly affected last year by the Oromo protests and local community bickering -- led in the consumption of cement manufactured by Dangote, with sales rising to 1.1 million tonnes.

"Our pan-African operations are growing. We saw our first sales from Sierra Leone in the first quarter, and our new plant in the Republic of Congo will be in production at the end of July, further increasing our footprint across Africa and strengthening our position as the leading manufacturer of cement," said CEO Onne van der Weijde.


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