AES buys interest in Tanzania gas-to-electric project

An AES Corporation subsidiary, AES Sirocco, plans to purchase a 49% interest currently held by TransCanada PipeLines in the Songo Songo gas-to-electricity project in Tanzania, said Mark Fitzpatrick, executive vice president of AES.

Under the purchase agreement, AES plans to assume overall management responsibility for the US$325 million project. Songo Songo includes the refurbishment and operation of five natural gas wells in coastal Tanzania, the construction and operation of a 65 mmscf/day gas processing plant and related facilities, the construction of a 230 km marine and land pipeline from the gas plant to Dar es Salaam. It also involves converting and upgrading an existing 112 MW power station in Dar es Salaam to burn natural gas, with an optional additional unit to be constructed at the plant.

Fitzpatrick said AES Sirocco expects financial close on the project to occur by the end of this year or early next.

"We are delighted to be participating in this important project, which will bring great economic benefit to Tanzania through the development of its indigenous gas resources and the reduction of the country's dependence on imported oil and unreliable hydrology," he said. "The Songo Songo project is a key element of our commitment to expand activities throughout Africa, and we look forward to achieving financial close and to starting construction early next year."

AES, which has worked in nearby Uganda since 1994, received approval to purchase TransCanada's share of Songo Songo from the Government of Tanzania, the World Bank and the European Investment Bank—the lenders to the project. Approvals also came down from other equity participants—PanAfrican Energy (formerly Ocelot International), CDC and the Tanzania Development Finance Company. AES expects the interest transaction to close later this month.

HSBC acted as financial advisor and CMS Cameron McKenna acted as counsel to AES.

Edited by April C. Murelio
Managing Editor, Power Online