Expanding renewable energy access for rural communities in Africa is a challenging task. In most of the cases, government investments and donor funds have proved insufficient to expand access to modern energy in rural areas in a sustainable manner. However, energy production and distribution in rural areas in Tanzania is now a national priority and a promising business opportunity, because national policy and legal framework provide a good environment for investments and subsides from co-financing feasibility studies to project realization. Still, there is a great need for mobilizing financial resources to expand energy access for rural communities. A partnership between non-profit and for-profit actors is here proposed in order to rapidly expand energy access and meet national programmatic targets for electrification and energy production. Essentially, Non-Profit/ For-Profit Partnerships (NPFPP) occupy a fruitful “middle ground” between commercial private sector projects, focused primarily on profit; and public/non-profit sector projects, focused primarily on enhancing access. In a nutshell, effective NPFPP couple profit with energy access. This article explores the concrete possibility of a NPFPP between CEFA, an Italian NGO specialized in rural electrification, and a private partner for the realization of a Small Hydro Power project in Ninga, Tanzania.

1. 1
NON-PROFIT/FOR-PROFIT
PARTNERSHIPS IN SHPP: CEFA’S
EXPERIENCES AND
PERSPECTIVES IN TANZANIA
NON-PROFIT/FOR-PROFIT
PARTNERSHIPS IN SHPP:
CEFA'S EXPERIENCES AND
PERSPECTIVES IN TANZANIA
2014
Authors: Jacopo Pendezza CEFA Tanzania

2. 2
Disclaimer:
This document was prepared by CEFA Onlus, Bologna, Italy on the basis of in-depth studies and analyzes and has recently
received the ‘Best Paper Award – Renewable Track’ prize at POWER-GEN Africa 2014 Conference, Cape Town, South
Africa, 17-19 March 2014.
The document cannot be, in whole or in part, distributed, directly or indirectly, to any third person in any country without the
prior permission of CEFA Onlus. Every person who comes into possession of this document, prior of any use, may notify
CEFA, which will assess the eligibility on utilization.
To be cited as:
Pendezza, J. (2014), ‘Non-Profit/For-Profit Partnerships in SHPP: CEFA’s Experiences and Perspectives in Tanzania,
paper presented at POWER-GEN Africa 2014 Conference, Cape Town, South Africa, 17-19 March 2014.

3. 3
CONTENTS:
Abstract 5
Rural Energy sector in Tanzania 5
The Potential of Small Hydropower in Tanzania 8
CEFA and Rural Electrification in Tanzania: 25 years of commitment 9
Looking for a bigger impact: the NPFPP model 13
What next: the concrete example of the Ninga SHPP 14
Conclusions 19

4. 4

5. 5
Abstract
Expanding renewable energy access for rural communities in Africa is a challenging task.
In most of the cases, government investments and donor funds have proved insufficient
to expand access to modern energy in rural areas in a sustainable manner. However, en-
ergy production and distribution in rural areas in Tanzania is now a national priority and
a promising business opportunity, because national policy and legal framework provide
a good environment for investments and subsides from co-financing feasibility studies to
project realization. Still, there is a great need for mobilizing financial resources to expand
energy access for rural communities. A partnership between non-profit and for-profit
actors is here proposed in order to rapidly expand energy access and meet national
programmatic targets for electrification and energy production. Essentially, Non-Profit/
For-Profit Partnerships (NPFPP) occupy a fruitful “middle ground” between commercial
private sector projects, focused primarily on profit; and public/non-profit sector proj-
ects, focused primarily on enhancing access. In a nutshell, effective NPFPP couple profit
with energy access. This article explores the concrete possibility of a NPFPP between
CEFA, an Italian NGO specialized in rural electrification, and a private partner for the
realization of a Small Hydro Power project in Ninga, Tanzania.
Rural Energy sector in Tanzania
Tanzania’s power supply consists of the national interconnected system and several
mini-grids serving areas located far from the national grid. National electrification rate
is 18.4%, set to arise 75% by 2035, but rural electrification coverage is sensibly low, with
less than 7% of the rural population (2.2 million) having access to electricity.
The country’s installed electricity generation capacity is 1,564 MW (as of March 2013),
of which 1,438.24 MW is available in the main grid, with the balance of 125.9 MW ac-
counted for by Small Power Producers (SPPs), mini grids, and imports. About 62% of grid
generation capacity is from thermal (32% from natural gas and 29% from oil), whilst 35%
is from large hydropower, with the remainder from small renewable-energy power and
imports. The country suffers from severe droughts over the last decade, low coverage
of the electric grid and an increasing shortage of electric power production capacity in
relation to demand, which roughly grows with the economic growth. The reliability of
the electric grid power is low, with frequent brownouts and blackouts. There was an esti-
mated private individual installed capacity (small generators) in 2011 of 300-400MW not
connected to TANESCO producing at about €0.26/kWh using diesel.1
The update Power
System Master Plan (PSMP, update 2012) estimates now a 565 MW installed capacity
from private gensets.
The rural electrification sector is defined by law and well regulated under the Ministry of
Energy and Minerals (MEM). The Rural Electrification Agency (REA), the Energy and Wa-
ter Utilities Regulatory Authority (EWURA) and Tanzania Energy Supply Company (TANE-
SCO) are thus the 3 key actors under MEM in Tanzania dealing with rural electrification,
renewable energy and market development.
The Electricity Act (2008) describes the power generation, distribution, tariffs, and a spe-
cific section on RE plans & strategies, organization and actors such as REA and EWURA.
There is a Rural Electrification Fund (REF) managed by REB board (MEM & MoF trough
REA) and fed by the government, World Bank, SIDA, NORAD and by a 3% levy. Detailed
guide exists to prepare and submit applications. In addition there is a Power Sector Mas-
ter Plan (PSMP) which has been revised in 2012 and a Rural Electrification Investment
Prospectus.
1 Final Report on Joint Energy Sector Review for 2010/11, MEM, September 2011

6. 6
A Rural Energy Master Plan was produced in 2005 and is under revision wherein the up-
date started with 4 regions under IREP project. The objective for electricity access is 30%
by 2015 and 50% by 2020, from 18.4% in 2012. As of 2013, there is only 7% electricity
access in rural areas. The first objective is to electrify all district centers and to reach 16%
by 2015 in rural areas.2
Figure 1: Tanzania Existing Network and Proposed Extensions (SREP 2013)
EWURA is also regulating the private sector’s participation through the tariffs and Stan-
dardized Power Purchase Agreement (PPA) for private actors as IPPs (independent pow-
er producers), SPPs (small power producers <10MW), SMPPs (very small power produc-
ers < 100kW), DNO (Distribution Network Operators), SPD (small power distributor).
A state-owned utility called TANESCO is in charge of urban electrification while REA is in
charge of peri-urban and rural electrification. REA has implemented more than 140 grid
extensions. TANESCO still has the monopoly for distribution. For the past several years,
TANESCO has experienced serious management issues which have led to a difficult fi-
nancial situation (high demand, too low tariffs). Network quality is very poor despite
high-level standards. The benefits from reform engaged by the government and interna-
tional donors to restructure TANESCO and to invest in the production and transmission
infrastructures will take years from now.3
The end-user retail tariff is uniform on TANES-
CO network (60 to 273 TZS/kWh for domestic categories, €0.03 and €0.12 respectively).4
The average retail tariff is estimated at 174.89 TZS/kWh, €0.08/kWh.5
A 3% tax is levied
on the tariff for REA and EWURA. As for the off-grid, tariff is determined by the kind of
technology used and investment cost.
The new institutional framework is favorable to Independent Power Producer and to re-
newable energies with feed in tariffs (FIT) determined by EWURA for on-grid and off-grid
injection. IPP regime is set with standard procedures, PPA and annual licenses (>1MW).6
2 The Power System Master Plan, MEM, May 2013
3 Scaling-up Renewable Energy Programme (SREP), Investment Plan for Tanzania.
4 For this study we assume the following change rate: EUR 1= TZS 2,200.
5 The official tariff structure (fixed and variable parts per categories) doesn’t really help for tariff
comparison and analysis. The actual average tariff should be calculated as the ratio between the
total yearly income from electricity sales and the total energy consumed by customers. The average
tariff of TANESCO is estimated to be around €0.08/kWh.
6 Low Carbon Mini Grids, “Identifying the gaps; building the evidence base” Volume 1 (Chapters
1 and 2) Support Study for DFID Final Report November 2013, IED.

7. 7
The MEM has adopted in 2007 Standardized Power Purchase Agreements (SPPA) and
Standardized Power Purchase Tariffs (SPPT) for interconnecting and selling power (<
10MW) to the main grid and to mini-grids (cf. below Tables 1 and 2). The tariffs are ne-
gotiated through SPPA under SPP guidelines and Standardized Tariff Methodology and
reviewed annually by the Working Group WGSPD hosted by EWURA to accommodate
uncontrollable operational costs. The following tables shows the evolution of FIT in Tan-
zania during the past three years:
Table 1: FIT for Main Grid (174.89 TZS = 0.08 EUR)7
Description 2011
Tariff
TZS/kWh
2012
Tariff
TZS/kWh
2013
Tariff
TZS/kWh
Standardized Small Power Purchase
Tariff
121.13 152.54 174.89
Seasonally adjusted Dry season 145.36 183.05 209.87
Standardized SPP
Tariff Payable inn
Rain season 109.02 137.29 157.40
Table 2: FIT Tariff for Mini-Grid (490.13 TZS = 0.22 EUR)
Description 2011
Tariff
TZS/kWh
2012
Tariff
TZS/kWh
2013
Tariff
TZS/kWh
Standardized Small Power Purchase
Tariff
380.22 480.50 490.13
If the Independent Power Producer (IPP) sells hydro-power to TANESCO’s main grid,
there are two feed-in tariffs depending on the season (rain/dry). The feed-in tariff is
calculated by EWURA as the average of the avoided costs of supply and the incremental
cost of mini-grids. For 2013, the feed-in tariff for main grid was set at an average of TZS
174.89/kWh (€0.08/kWh) and for mini-grids was set at TZS 490.13/kWh (€0.22/kWh). If
the IPP sells to other customers than TANESCO, it can propose tariffs, which must be ap-
proved by EWURA. Standardized documents for power purchase agreements (SPPA) are
available for SPPs with small power systems (<1MW). There are currently 12 registered
and operating SPPs: 1 operating an isolated MG, 11 selling to the grid/TANESCO.
Current government incentives include tax exemption (VAT & import duties) for main
solar components (panels, batteries, inverters and regulators). No tax exemptions are
provided for other renewable technologies (wind, hydro, biomass), unless the project
is under international donor-funded programme, e.g. 10th
EDF from European Commis-
sion.
The green mini-grid experience in Tanzania is still very limited. TANESCO is running 21
diesel-based off-grid stations supplying isolated mini-grids for small towns (installed ca-
pacities ranging from 400kW to 12MW and 8 stations have peak loads below 1MW).
TANESCO’s priority is to connect those isolated grids to the main grid.
For off-grid areas where over 80% of the population does not have access to electricity,
there is a huge potential for small-scale renewable technologies. Renewable energies
have a key role in the government’s strategy to electrify rural areas.8
7 Data from EWURA website.
8 Renewable sector in Tanzania, UKTI, 2012, www.uktradeinvest.gov.uk

8. 8
The Potential of Small Hydropower in Tanzania
Hydropower is the most popular and the oldest renewable energy source used to pro-
duce electricity for rural grids. Abundant and old experiences exist in several developing
countries. Typical capacity range from few kW (micro-hydro) to few MW (small-hydro),
depending on various factors as hydrology, load demand, geographical constraints. The
infrastructure and civil works can be rather complex and costly depending on the wa-
ter collection system (pond, weir, channel, forebay, and penstock). The powerhouse
is pretty standard hosting one or more turbines, alternators and control system. The
technology is quite simple and well mature, allowing local repairing, etc. There are sev-
eral examples of local manufacturing or assembling companies in Africa dealing with
cross-flow or pelton turbines for rural applications. Investment costs for micro or mini
hydro plant are generally claimed to be low but they are often higher than expected, as
they are extremely variable and site-specific. Moreover the long preparation (studies,
ESIA, permits) and lead times are other hurdles.
The assessed potential of small hydropower resources up to 10 MW in Tanzania is 480
MW. The installed grid-connected, small-hydro projects contribute only about 15 MW.
Most of the developed small-hydro projects are owned by private entities and are not
connected to the national electricity grid. Five sites in the 300–8,000 kW range are
owned by TANESCO. More than 16 are owned by faith-based groups, 29 with a 15–800
kW range in capacity and an aggregate capacity of 2 MW. Of the 11 projects for which
Small Power Purchase Agreements (SPPAs) have been signed, four are mini-hydro proj-
ects, with a combined capacity of 20.5 MW, whilst the others are biomass powered.
Examples include Mwenga, a 4 MW hydro plant that supplies power to nearby rural
villages, with the excess sold to TANESCO; AHEPO, a 1 MW privately-owned small hydro
project in Mbinga, currently under construction, that will supply power to TANESCO’s
isolated grid and directly to communities. In addition, TANESCO has signed Letters of
Intent for six small hydro projects with a combined capacity of 29.9 MW. Several small
hydro projects are also being developed as isolated mini grids.
Moreover, different instruments and projects are put in place by the government and
donors to support the hydro-power sector. Currently, the MEM is conducting small-hy-
dro feasibility studies in eight regions: Morogoro, Iringa, Njombe, Mbeya, Ruvuma,
Rukwa, Katavi, and Kagera. The British NGO GVEP International, in partnership with
the REA, is supporting the development of six hydro mini grids, with a total capacity of
7.4–8.8 MW. The REA has awarded some 20 TEDAP matching grants to private-sector
developers for small hydro pre-feasibility studies. In addition, the Energy Sector Man-
agement Assistance Programme (ESMAP) has approved funding for renewable-ener-
gy resource mapping, starting with small hydropower, including two-year hydrology
measurements. The United Nations Industrial Development Organization (UNIDO) is
co-funding the development of six mini grids based on mini/micro hydropower, whilst
the EU is financing four Hydro Power projects (including one developed by CEFA).9
Hydro plants can be commercially attractive if the output of the least-cost design can
be sold. However this output often exceeds the local demand that could be supplied by
a mini-grid. In such cases, the connection to main grid is therefore required.
9 Scaling-up Renewable Energy Programme (SREP) Investment Plan for Tanzania.

9. 9
CEFA and Rural Electrification in Tanzania: 25 years
of commitment
CEFA (European Committee for Training and Agriculture) is an Italian NGO that promotes
initiatives of development, cooperation and international volunteer service. Founded in
1972 by a group of agricultural cooperatives based in Bologna, CEFA supports projects
aiming to promote integrated self-development in rural regions of the Mediterranean,
East Africa and Central/South America. Active in Tanzania since 1976, CEFA promotes
interventions in the fields of:
• Rural electrification
• Water supply
• Agriculture
• Agro-processing
In 2007 CEFA decided to start implementing projects in Dar es Salaam addressing urban
poverty, counting on the experience acquired by the organization in urban contexts in
Albania, Morocco and Kenya.
CEFA’s commitment to rural electrification in Tanzania lasts since 25 years. In this period
the organization has realized three mini hydro-electric power plants, providing electricity
to hundreds of people living in the rural areas of the Iringa and Njombe Regions. Careful
planning procedures for technical capacity, good institutional arrangements, managerial
capacity and economic considerations, as well as multi-stakeholder involvement from
the planning phase onwards, have resulted in the sustainable operation of the three hy-
dro power plants.10
Such commitment in the sector continues still today, with a current
upgrade project in Ikondo, allowing more and more families to benefit of the opportuni-
ties offered by having electricity in their villages. Here follows a brief description of what
has been realized until now by CEFA in this field.
Matembwe:
Matembwe, in the Njombe District, is where CEFA realized its first hydro power plant
in Tanzania, thanks to funds granted by the Italian Ministry of Foreign Affairs, Belgian
Ministry of Foreign Affairs and the European Union. The construction of the dam began
10 Jonker Klunne, W. & Michael, E.G., Increasing sustainability of rural community electricity
schemes—case study of small hydropower in Tanzania, International Journal of Low-Carbon Te-
chnologies 2010, 5, 144–147

10. 10
in 1981, while the power plant was completed in 1984. At present the power plant and
the distribution network are owned and managed by the Matembwe Village Company
– MVC Ltd, a local entity established by CEFA together with the other partners of the orig-
inal project (Catholic Dioceses of Njombe, District of Njombe and Village of Matembwe).
Summary details
Type of facility Reservoir micro hydro plant
Commissioning year 1984
Funded by Italian Ministry of Foreign Affairs; Belgian Ministry of
Foreign Affairs; European Union; CEFA
Ownership Matembwe Village Company – MVC Ltd (CEFA, Cath-
olic Dioceses of Njombe, District of Njombe and
Village of Matembwe)
Output power 120 kW
Villages served Matembwe and Image
Distribution network 19 km of MV
Households connected 556
Public institutions and eco-
nomic activities connected
64
Aqueducts powered 4
Connection with TANESCO Yes (in 2015).
Bomalang’ombe:
Bomalang’ombe, in the District of Kilolo, is where CEFA built its second hydro power plant,
on the model already experimented in Matembwe. The project, co-funded by the Italian
Ministry of Foreign Affairs and the European Union, intended to favour the development
of the village of Bomanlg’ombe by providing it with electricity. The construction of the
dam started in 1996, while the power plant was completed in 2001. The availability of
electric power, together with the rehabilitation of the road for Kilolo, determined a rapid
development of the village of Bomanlg’ombe, that in these years has seen its population
grow from 5.000 to more than 12.500 inhabitants. At present the power plant and the
distribution network are owned and managed by the Bomalang’ombe Village Company
– BVC Ltd, a local entity established by CEFA together with the other partners of the orig-
inal project (Catholic Dioceses of Iringa, District of Kilolo and Village of Bomalang’ombe).

11. 11
Summary details
Type of facility Reservoir mini hydro plant
Commissioning year 2001
Funded by Italian Ministry of Foreign Affairs; European Union;
CEFA
Ownership Bomalang’ombe Village Company – BVC Ltd (CEFA,
Catholic Dioceses of Iringa, District of Kilolo and
Village of Bomalang’ombe)
Output power 250 kW
Villages served Bomalang’ombe and Lyamko
Distribution network 17.3 km of MV
Households connected 252
Public institutions and eco-
nomic activities connected
76
Aqueducts powered 3
Connection with TANESCO No
Ikondo:
Ikondo, in the District of Njombe, is where CEFA realized its third hydro power plant. Un-
like the previous two sites, Ikondo is a run-of-river plant, which uses the water provided
by the river Kyepa. The project, co-funded by the Italian Ministry of Foreign Affairs and
the European Union, intended to help start-off the development of the village of Ikondo,
a very isolated settlement in the District of Njombe. The construction of the plant start-
ed in 1999 and was completed in 2004. At present the power plant and the distribution
network are still owned and managed by CEFA.
Summary details
Type of facility Run-of-the-river micro hydro plant
Commissioning year 2004
Funded by Italian Ministry of Foreign Affairs; Europe-
an Union; CEFA
Ownership CEFA (to be handover to MVC Ltd)
Output power 83 kW
Villages served Ikondo

12. 12
Distribution network 8 km of MV
Households connected 130
Public institutions and eco-
nomic activities connected
46
Aqueducts powered 1
Connection with TANESCO Yes (in 2015)
Ikondo II
The current electrification project of CEFA is an upgrade of the previous project in Ikon-
do. The project, co-funded by European Union under the 10th
EDF, started in September
2011 and will allow in 2015 to upgrade the output of the power plant up to 430 kW
and to increase the actual distribution grid reaching 4 new villages and connecting to
the Matembwe grid and to TANESCO grid in order to sell the excess of production. At
the end of the project the power plant and the distribution network will be owned and
managed by the Matembwe Village Company – MVC Ltd.
Summary details
Type of facility Run-of-the-river micro hydro plant
Commissioning year 2015
Funded by European Union; CEFA
Ownership CEFA (to be handover to MVC Ltd)
Output power 430 kW
Villages served Ikondo, Nyave, Ukalawa, Isoliwaya, Kanikele
Distribution network 47 km of MV (in 2015)
Households connected 280 (in 2015)
Public institutions and eco-
nomic activities connected
75 (in 2015)
Aqueducts powered 1
Connection with TANESCO Yes (in 2015)

13. 13
Looking for a bigger impact: the NPFPP model
The concrete experience of 25 years in Tanzania CEFA coincides with the scientific litera-
ture: the availability of safe, reliable and affordable energy is a prerequisite for sustain-
able development both at micro-level and at national level.11
The provision of energy
services through renewable energy (in our case, Hydropower) is capital intensive and
requires significant upfront costs compared to conventional energy technology. In most
of cases, government investments and public budgets have proved insufficient to expand
access to electricity and modern energy in rural areas in a sustainable manner. Mobilizing
financial resources to expand local energy services delivery in Tanzania is therefore an
imperative.
In a scenario that has seen decreasing more and more funds for development coopera-
tion, and at the same time increase the demands from donors in terms of the impact of
actions supported (e.g. the extension of the areas of intervention and number of bene-
ficiaries involved), a new approach is necessary regarding the action of Non-Profit actors
like CEFA in developing countries.
Non-Profit/For-Profit Partnerships (NPFPP) are one of the best mechanisms to supple-
ment and overcome budgetary constraints for widening access to energy services, es-
pecially to the local communities, as they can allocate project-risks between the public/
non-profit and private sector. Profit motivations are blended with social concerns and
empowerment of targeted communities. This type of partnership in recent years has
often been advocated by some of the major international donors, and today has almost
the contours of obligation.
An interesting approach towards forming partnerships between CEFA and the private
sector to provide energy services to the communities with emphasis on viable, long-term
sustainability is shown in Figure 2. The NPFPP schema operates on the twin foundations
of sharing risks and rewards. Risk sharing is reflected by the resources invested by the
private and non-profit sector in the partnership. There could be several NPFPP options
depending upon the mix of risks and roles assigned to each of the partners.
Figure 2. The NPFPP model
The partner which invests more is the one which takes the highest risk or is the least ‘risk
averse’. Apportioning of rewards is generally in proportion to risk taken. Additionally, re-
11 A. Pueyo; C. Dent; F. Gonzalez; S. DeMartino, The Evidence of Benefits for Poor People of Incre-
ased Renewable Electricity Capacity: Literature Review, Institute of Development Studies UK, 2013.

14. 14
wards are also reflected in the availability of tangible incentives for the different players
in NPFPP: fulfill corporate social responsibility and cost recovery/profit for the private
actor; achievement of its mandate of delivering basic services to local communities for
the non-profit actor; availability and access to basic services for the target communities.
This incentive system is the key to sustainability of any NPFPP venture.12
The long experience of CEFA and the scientific literature13
suggest that the inclusion of
multiple stakeholders in program design, implementation, and evaluation can enhance
the efficacy of renewable energy deployment. The involvement of women’s groups, mul-
tilateral donors, rural cooperatives, local government, local micro financial institutions,
nongovernmental organizations and other members of civil society, and even consumers
can increase both the performance and legitimacy of partnerships. They improve per-
formance since input from multiple stakeholders can accelerate feedback; they improve
legitimacy since programs with a broader base of support, and community involvement,
are less likely to be opposed or protested. The partnership benefits from addition to the
pool of resources of the public and private sector, and the resources (social, human,
financial, political and psychological capital) of the communities themselves. Not only
does the delivery of energy services become more efficient, there are additional bene-
fits that may follow like empowerment of the communities, social rehabilitation of those
suffering from disease, changing the way the private sector fulfills its corporate social
responsibility and enhancement of social development for the communities involved.
This is an important task to be carried out by CEFA in the NPFPP scheme.
What next: the concrete example of the Ninga SHPP
At CEFA we are now aware that only with a qualitative jump we can achieve such an
impact to be incisive for a large population that needs energy access. It was therefore
decided to take advantage of the opportunities and instruments that are in place now
in Tanzania to design a new project, which’s size and impact significantly differ from the
previous ones. The site for the next intervention is in the Njombe District, Njombe Re-
gion (former Iringa), Rufiji River Basin. The interested river is the South Ruaha, affluent
of the Mnyera river and part of the Kilombero River tributary basin.
Technology: Run of river hydropower plant.
12 A. Mukherjee, Engaging Communities in Public-Private Partnerships in the Delivery of Basic
Services to the Poor: Inter-country Models and Perspectives, United Nations Economic and Social
Commission for Asia and the Pacific, Bangkok, 2005.
13 B.K. Sovacool, Expanding renewable energy access with pro-poor public private partnerships
in the developing world, Energy Strategy Reviews 1 (2013) 181-192.

15. 15
Installed capacity: 4,000 kW
Gross head: 73 m
Design Flow: 6.91 m3/s
Impact
The number of connections in the first phase (Year 2017) will be 1,680 households, 169
commercial, 99 Public Services and TANESCO with a maximum electric power generation
of 21,750 MWh to meet the energy load of identified customers and surplus bulk sales
to TANESCO.
Costs
Investment for initial phase of 4 MW – € 7.3 million (Tshs 16,060,000 million), and es-
timated O&M for Power generation & Distribution of € 183,000.00 (Tshs 402.6 million)
per annum.
Unit (production) costs are approximately 2.69 €c/kWh (59.10 Tshs/kWh) over a 10 year
time horizon.
Electric Line and Connection to the Grid
The served villages will be Ninga, Lima, Isitu, Ikuna, Lole, Upami and Ilengitu. Ninga SHPP
will be part of a system of rural electrification schemes implemented by CEFA since years.
The connection to the national grid will favour sustainability of the whole system while
allowing an extension of the rural areas served.
Summary details (Foreseen)
Type of facility Run-of-the-river small hydro plant
Commissioning year 2017
Proposed financial model Developer equity; credit lines; grants from Inter-
national donors, REA, etc and commercial loans
Ownership To be handover to local entity
Output power 4,000 kW
Villages served Ninga, Lima, Isitu, Ikuna, Lole, Upami and Ilen-
gitu
Distribution network 18 km of MV
Households connected 1680
Public institutions and econom-
ic activities connected
268
Connection with TANESCO Yes
Cost Evaluation
The cost evaluation is conducted per gross categories of works, namely: Civil Works, Site
mobilization, Access road, Powerhouse and outlet, Intake, Penstock - supply and lying,
Electric line and connection to the grid, Electromechanical equipment. The cost of the
works is evaluated on the base of a very recent experience made by CEFA in Ikondo. The
cost is evaluated under the assumption that project works and services are contracted to
professionals and contractors whether local or international. Furthermore the summary
of costs shown in Table 3 is prepared following the required scheme of a Europe Aid
grant, in particular contingencies and overhead are set at the required percent value and
an item ‘other costs and services’ has been included to take in account possible required
‘visibility actions’, publications, financial services, etc. Part of the project cost, namely

16. 16
the connections to final users (including LV lines) may be supported by a performance
grant from REA and the feasibility study may be supported by a matching grant from
REA. In December 2013 CEFA made a request for this support and the beginning of the
feasibility study is foreseen in April 2014.
Table 3 Ninga SHPP - Estimated project cost
Financial Assessment
The following assumptions have been made:
Sale of excess energy - Price per kWh.
The implementation period may take 2 years or more. Under the assumptions that the
HPP enters in operation in 2017, the price per kWh payable by TANESCO is evaluated on
the base of the actual EWURA fixed price (174 TZS/kWh), increased by an annual per-
cent equal to 1%. Consequently the projection price to 2017 would be 182 TZS/kWh. For
further evaluation we estimate an increase of 2% per year.
Distribution to Villages – Price per kWh
In order to make its rural electrification interventions sustainable CEFA has always fore-
seen that users connected to its distribution grids pay for the electricity consumed.
Tariffs are determined keeping in consideration both the power plant’s necessity of
being sustainable and the local communities’ average level of income. Specific tariffs
have been established for different consumer groups. Currently users in different grid
managed by CEFA are divided in: private households, economic enterprises and public
service providers. Tariffs are reviewed periodically in order to compensate inflation and
possible increases in running costs.
Table 4 CEFA’s hydropower plant consumers’ tariffs by year [TZS/kWh]

17. 17
Consumer groups 2008 2009 2010 2011 2012 2013
Private households 52 70 70 70 70 100
Economic enterprises 91 120 120 120 120 175
Public service providers 36 50 50 50 50 70
According CEFA’s experience, payments are collected on a monthly basis. CEFA’s pay-
ment collection officer first of all goes to each user in order to read the consumption
data reported on every user’s meter. The collected data are then processed by a soft-
ware that determines for each user the actual monthly consumption and the result-
ing bill, which is calculated according to the consumer group the user is registered in.
The tariff scheme foresees for all the consumer groups a minimum monthly payment of
3,000 TZS, even when users’ consumptions are particularly low. Electricity tariffs appear
to not be a problem for the households and private enterprises already connected to
the grid. In fact, since the beginning of operations, bill payment rates have been always
100%. This is mainly due to the fact that the tariffs set throughout the years have always
been particularly favorable and cheaper than the ones applied by TANESCO.
In order to carry out a sound evaluation we assume that the prices of table 4 will be
increased of 20% at the commissioning date and that further on they undergo a rate of
increase of 2% per year.
The mix of users for this project has been evaluated as follows:
Households 85%
Commercial 10%
Public Services 5%
On this basis an average tariff can be calculated.
In the following Table the proposed tariffs to the owned local grid and the price of the
energy sold to TANESCO are shown.
Table 5: Proposed tariffs and projections
For future collection of payments, taking in account the high number of connections,
CEFA will likely turn to a pre-paid system.

18. 18
Economic analysis
The purpose is to determine whether or not the project can be economically viable. In
case of non-viability, a grant component has to be determined in order to make the proj-
ect viable. A typical financial model can be: 20% developer equity, a credit line (70/80%
of the investment) from REA, loans from commercial banks, grants from International
donors (such as REA, European Commission, GVEP, UNIDO, etc) and Performance grant
from REA for the connections. The assumed criterion is a required payback period (taking
in account a certain discount rate for the own resources) of maximum 7 years and/or an
IRR of at least 15% at the 15th
year. As shown in next Table 6 the investment seems to be
very attractive, even without any grant component.
Table 6: Economic evaluation
Disc. rate on investment 8.00% Depreciation 365,000 €/year 20 years
Grant 0 Annual generation 21,750 MWh
Price of Energy 0.0795 €/KWh 174.89 TZS/kWh
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Yr
Energy
Sold
MWh
Unit
Price
€
Sales
Revenues
O & M
Working
Ratio
Cash Flow
€
PBT
Total Cost
including
Depreciation
O&M unit
cost per kWh
Cost of
Kwh
NPV
(Col. 7)
IRR
(Col. 7)
Year
Cumulative
Cash Flow
€ cent € cent Pay Back
6.3 yrs
-2 75 months 2014
-1 -7,300,000 -7,300,000 2015 -7,300,000
1 21,750 0.0795 1,729,026 183,320 0.11 1,545,706 1,180,706 548,320 842.85 2.52 -5,434,065 2016 -5,754,294
2 21,750 0.0827 1,798,187 186,986 0.10 1,611,201 1,246,201 551,986 859.71 2.54 -4,155,042 -41.25% 2017 -4,143,093
3 21,750 0.0860 1,870,115 190,726 0.10 1,679,389 1,314,389 555,726 876.90 2.56 -2,920,642 -17.86% 2018 -2,463,705
4 21,750 0.0894 1,944,919 194,541 0.10 1,750,379 1,385,379 559,541 894.44 2.57 -1,729,363 -3.91% 2019 -713,326
5 21,750 0.0930 2,022,716 198,431 0.10 1,824,285 1,459,285 563,431 912.33 2.59 -579,755 4.78% 2020 1,110,959
6 21,750 0.0967 2,103,625 202,400 0.10 1,901,225 1,536,225 567,400 930.58 2.61 529,592 10.45% 2021 3,012,183
7 21,750 0.1006 2,187,770 206,448 0.09 1,981,322 1,616,322 571,448 949.19 2.63 1,600,038 14.30% 2022 4,993,505
8 21,750 0.1046 2,275,280 210,577 0.09 2,064,703 1,699,703 575,577 968.17 2.65 2,632,904 17.01% 2023 7,058,208
9 21,750 0.1088 2,366,292 214,789 0.09 2,151,503 1,786,503 579,789 987.53 2.67 3,629,466 18.96% 2024 9,209,711
10 21,750 0.1131 2,460,943 219,084 0.09 2,241,859 1,876,859 584,084 1,007.28 2.69 4,590,961 20.39% 2025 11,451,570
11 21,750 0.1177 2,559,381 223,466 0.09 2,335,915 1,970,915 588,466 1,027.43 2.71 5,518,585 21.47% 2026 13,787,485
12 21,750 0.1224 2,661,756 227,935 0.09 2,433,821 2,068,821 592,935 1,047.98 2.73 6,413,496 22.29% 2027 16,221,306
13 21,750 0.1273 2,768,227 232,494 0.08 2,535,732 2,170,732 597,494 1,068.94 2.75 7,276,814 22.92% 2028 18,757,039
14 21,750 0.1324 2,878,956 237,144 0.08 2,641,812 2,276,812 602,144 1,090.32 2.77 8,109,623 23.41% 2029 21,398,850
15 21,750 0.1377 2,994,114 241,887 0.08 2,752,227 2,387,227 606,887 1,112.12 2.79 8,912,972 23.79% 2030 24,151,077
Ninga HPP - Unleveraged Profitability

19. 19
Conclusions
Expanding renewable energy access for rural communities in Africa is a challenging task.
In most of the cases, government investments and donor funds have proved to be insuffi-
cient to expand access to modern energy services in rural areas in a sustainable manner.
Nevertheless, Rural Electrification is now a priority for the Government of Tanzania and
for several International donors (WB, UE, UNIDO, etc.) and for this reason some instru-
ments to make this type of projects financially viable were put in place. By taking ad-
vantage of these opportunities, the new project of CEFA, the Ninga SHPP, will provide
reliable and affordable electricity to about 2,000 households and small enterprises in
7 villages in the Njombe Region. Also the project will sell the surplus to TANESCO, in-
creasing the national availability of power and at the same time assuring the financial
sustainability of the system. A partnership between non-profit and for-profit actors was
here proposed in order to rapidly mobilize financial resources, expand energy access, en-
hance empowerment of the local communities and meet national programmatic targets
for electrification and energy production.
To realize this ambitious project, CEFA has decided to adopt the above mentioned in-
novative approach, both financially and operationally, believing that a partnership with
a private actor is an opportunity for increasing the action’s impact on the beneficiaries
granting the future sustainability of the project. At CEFA we are also convinced that the
private partner can benefit from this relationship, taking advantage of our deep knowl-
edge of the country and the long experience of dealing with all stakeholders involved.