TANZANIA Petroleum Development Corporation (TPDC) has explained that servicing of the 2.409tri/- debt due to the investment in mega natural gas projects in Lindi and Mtwara Regions led to the losses in three consecutive years.
This explanation comes following last week report by the Parliamentary Investment Committee (PIC) listing TPDC among the three loss making public institutions in the country.
"The mega investment made by the government after securing 1.2 billion US dollars (about 2.409tri/-) loan from Exim Bank of China to increase natural gas supply for electricity generation is the major reason for the TPDC losses," the Acting TPDC Managing Director Mr Kapuulya Musomba said in a statement issued yesterday.
Musomba added, since this is a long-term investment in natural gas pipeline and gas processing plants in Lindi and Mtwara, it is impossible to realise profit in a short period of time since project started to operate in 2015.
He said in the first year of its operations 2015/16, the books recorded 341bn/- loss due to investment made in natural gas pipeline and natural gas processing plants.
The fluctuation of the shilling against the US dollar to 2230/- per dollar in 2016 from 1600/- in 2013 is also the contributing factor to the increased losses.
This pushed up the loan to 170bn/- which is equivalent to 50.4 per cent of the total loss recorded in 2016. He said also the payment of 71.05bn/- interest on the loan, representing 21 per cent of the total loss registered in 2016 contributed to the mounting losses.
Furthermore, payment of 61.50bn /- investment depreciation, which is equivalent to 18 per cent of the total loss in the year under review, increased the losses. To address the situation, he said TPDC has embarked on recruiting new customers in order to increase gas supply and sales in the country.
This year, TPDC will connect six new customers including Tanzania Electric Supply Company Limited (TANESCO), the initiative that will increase the use of natural gas and boost the corporation's income.
To implement cost cutting measures, Mr Musomba said the project is run by Tanzania Gas Supply Company (GASCO), a subsidiary of the TPDC since 2017 instead of the contractor. He said the project has been successful as it has led to increase the use of natural gas in generating electricity which currently contributes over 50 per cent to the national grid.
Despite the challenges, he added that TPDC has continued to be one of the largest taxpayers in the country after paying 118bn/- in three years and this year will pay 100bn/- dividend to the government.