You are correct in your assumption that electricity is in short supply across most of southern Africa, and that many businesses across Tanzania experience frequent disruptions due to limited availability.
Tanzania operates its entire national economy on approximately 600Mw of available power supply, which is roughly half of the total installed capacity.
Unfortunately, a lack of maintenance and low water infalls to dams that supply hydroelectric power stations means that Tanzania's power supply problems remain chronic.
ATQ's proposed 450Mw power station to be built at Mbalawala will substantially increase the national power supply. It is one of many proposed power stations for Tanzania, but it remains the only one that has a completed BFS and is the only one being proposed by a company with major thermal coal assets. In short, it is the only one with a realistic chance of actually being built at this time.
The Tanzanian Government has also given its in-principal agreement to expand the capacity of the proposed Mbalawala Power station if required, and no doubt this option has obvious benefits for both Tancoal and the Tanzania Government.
Coal, although abundant in the ground, is a commodity that Tanzania imports from South Africa at a cost of approximately $120/t FOB Richards Bay. Last year approximately 230,000 tonnes of thermal coal was imported to Tanzania, and trucked from Dar Es Salaam to the cement companies and breweries and other smaller industrial users in central Tanzania.
As you can imagine, it would be possible for Tancoal to supply all the local customers in Tanzania with thermal coal at a discount to the Richards Bay rate, and still enable the company to make very healthy profits.
ATQ is confident that once it establishes a reliable local supply of affordable coal, it will actually stimulate increased coal demand from domestic customers, as other businesses switch from deisel oil to coal.
There is also the potential to sell coal in neighbouring countries like Malawai and Zambia, and Tancoal has already received expressions of interest from potential customers.
Equally, once additional electricity generation capacity is added to the national grid, this is expected to result in increased demand for power, as people buy more consumer electronic products and white goods, and as business invests in new machinery and technology.
The potential to export electricity to neighbouring countries across southern Africa is also a strong possibility, as this would generate much-needed foreign income and stimulate growth and economic development throughout the region.
This once again illustrates the transformational nature of the Ngaka Coal Project to Tanzania, and why it is truly a "nation building" project that will improve the lives of over 40 million people.
Disclosure: I manage media and investor relations for ATQ.
ATQ Price at posting:
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