MZUMBE UNIVERSITY

DAR ES SALAAM CAMPUS COLLEGE

MASTER OF LEADERSHIP AND MANAGEMENT

COURSE NAME: PUBLIC PRIVATE PARTNERSHIP

COURSE CODE: PUB 633

COURSE INSTRUCTOR: DR. MUSHI

TYPE OF WORK: TERM PAPER.

NAME OF STUDENT: LIGHTNESS ASSEY

REGISTRATION NO: 31428014/T.23

DATE OF SUBMISSION: May 24, 2024

QUESTION:

CHOOSE ONE PPP PROJECT OF YOUR CHOICE THEN, EVALUATE AS PER

INSTRUCTOR INSTRUCTIONS.
SONGAS GAS POWER PROJECT

Songas is a leading Tanzanian gas-to-power company which generates 190 megawatts (MW) of
electricity. Using gas from the Songo Songo gas reserves, Songas also processes and transports
natural gas to other power generators and industrial customers. Since 2004, Songas has been a
strategic partner with the Government of Tanzania in meeting the growing demand for energy.
Songas sells all the electricity it produces to TANESCO (Oil Daily, 2005).

As a registered Tanzanian company, the Government of Tanzania owns more than 40% of the
shares in Songas through shareholdings held by TANESCO, TPDC and TDFL. Globeleq owns
54% of the shares in Songas and operates the plant. Globeleq is a leading independent power
producer which operates and develops power projects in Africa (Share, 2005). Globeleq is
owned by CDC (70%) of UK and Norfund (30%) of Norway. CDC and Norfund are
development finance institutions which support investment in developing countries
(shareholdings).

1. PROJECT RATIONALE AND BENEFITS

 The rational of that project.

Utilization of Domestic Resources: The project leverages Tanzania's own natural gas reserves,
reducing dependency on imported fuels. This utilization of domestic resources helps to keep
energy costs lower and provides a more sustainable and controlled energy supply (White, 2005).
Economic Benefits: By developing the natural gas sector, the Songas project contributes to the
national economy through job creation, infrastructure development, and increased industrial
activity (Peng et al., 2016). It also attracts foreign investment and expertise, stimulating further
economic growth.
Environmental Considerations: Natural gas is a cleaner-burning fossil fuel compared to coal
and oil. By shifting to natural gas, the Songas project helps to reduce greenhouse gas emissions
and other pollutants, contributing to better environmental outcomes and compliance with
international environmental standards (Gratwick, 2007).
Capacity Building: The project supports capacity building in Tanzania by transferring
technology and knowledge, training local professionals, and fostering the development of the
domestic energy sector.
Cost Efficiency: Natural gas-fired power plants are often more cost-efficient in operation and
maintenance compared to other types of power plants. This cost efficiency can lead to lower
electricity prices for consumers and businesses.

 Typology/gies of the project

Build-Own-Operate (BOO); The Songas gas power project exemplifies the Build-Own-Operate
(BOO) model, wherein private sector entities undertake the responsibility of financing,
constructing, owning, and operating the power generation and gas processing infrastructure. In
this model, private companies invest in the development of the gas processing facilities, pipeline
infrastructure, and the power plant, retaining ownership and operational control throughout the
project's lifespan (Share, 2005).

Joint Venture (JV); The Songas gas power project also fits the Joint Venture (JV) typology,
characterized by a collaborative partnership between the Tanzanian government and private
sector entities. This partnership involves shared investment, risk, and governance responsibilities
(World Bank, 2011). The Tanzanian government provides regulatory support, land access, and
other facilitative measures, while private companies contribute capital investment, technical
know-how, and operational management. The governance structure of the project ensures that
both public and private interests are aligned and represented, promoting mutual benefits.
 Benefits of utilizing a PPP structure in that project.

Risk Sharing; This includes financial risks, operational risks, and market risks. The private
sector can manage the technical and operational risks due to its expertise, while the public sector
can mitigate political and regulatory risks. This balanced risk distribution makes the project more
feasible and less burdensome for any single entity.
Enhanced Efficiency and Expertise; Private sector participation brings enhanced efficiency and
expertise to the project. Private companies often have advanced technical knowledge, innovative
management practices, and experience in similar projects. Their involvement ensures the
application of best practices in construction, operation, and maintenance, leading to higher
productivity and better project outcomes.
Improved Service Quality; With the private sector's focus on performance and customer
satisfaction, the quality of service delivery is often improved. In the Songas project, this means
more reliable and consistent electricity supply, better maintenance of facilities, and adherence to
high operational standards (Peng et al., 2016).
Economic Development and Job Creation; The development and operation of the Songas
project under a PPP structure contribute to economic growth and job creation. The construction
phase generates employment opportunities, and the operational phase provides long-term jobs in
management, technical, and maintenance roles.
Technological Transfer and Capacity Building; PPP arrangements facilitate the transfer of
technology and skills from the private sector to the public sector. In the Songas project, local
workers and professionals can gain valuable training and experience, enhancing their technical
capabilities and building local expertise. This capacity building is crucial for the sustainable
development of Tanzania's energy sector (Gratwick, 2007).
Accelerated Project Implementation; The involvement of private sector entities can lead to
faster project implementation. Private companies are often driven by efficiency and timelines
due to profit motives and contractual obligations. This results in timely completion of project
phases, ensuring that the benefits of the project, such as improved electricity supply, are realized
sooner.
Long-Term Maintenance and Sustainability; The PPP structure typically includes long-term
agreements that ensure the private sector is involved in the maintenance and sustainability of the
project. This long-term commitment helps in maintaining high operational standards and ensures
that the infrastructure remains in good condition, providing lasting benefits (Peng et al., 2016).

2. PPP FRAMEWORK
 Describe all PPP Policy and PPP Regulatory frameworks that govern the project
National PPP Policy; The National PPP Policy in Tanzania provides a strategic framework for
implementing public-private partnerships, aiming to harness private sector resources to meet
public infrastructure needs. The policy outlines principles for collaboration, emphasizing shared
risks, mutual benefits, and transparency between the public and private sectors.
PPP Act and Regulations; The PPP Act, along with its accompanying regulations, establishes
the legal foundation for public-private partnerships in Tanzania. It delineates the rights and
obligations of public and private partners, providing clear guidelines for project implementation.
The Act creates specific bodies, such as the PPP Centre and the PPP Regulatory Authority, to
oversee the approval process, monitor project performance, and ensure compliance with
contractual agreements.
Energy Sector Regulations; The Energy and Water Utilities Regulatory Authority (EWURA)
governs the energy sector in Tanzania, ensuring that projects like Songas comply with industry
standards and national policies. EWURA is responsible for licensing operators, setting tariffs,
and enforcing quality and safety standards (World Bank, 2011).
Environmental and Social Regulations; Tanzania’s Environmental Management Act mandates
Environmental Impact Assessments (EIAs) for major projects like Songas, aiming to mitigate
negative environmental impacts. Ongoing monitoring ensures compliance with environmental
standards.

Investment Promotion and Facilitation; TIC attracts foreign and domestic investors by offering
various incentives and support services. It provides a streamlined investment process, expedited
licensing, and administrative assistance to investors, enhancing the business environment (Peng
et al., 2016).
 PPP processes and institutional responsibilities

PPP Processes for the Songas Gas Power Project

Project Identification: The Tanzanian government, in collaboration with private sector entities,
identified the need for reliable power generation infrastructure to address energy shortages. The
Songas gas power project was identified as a viable solution to utilize domestic natural gas
resources for electricity generation.
Preparation and Planning: Feasibility studies were conducted to assess the technical, financial,
and environmental viability of the project. Business cases were developed to outline the project
scope, objectives, and potential risks, facilitating decision-making and investment planning.
Procurement: Transparent and competitive procurement processes were initiated to select
private sector partners for the development and operation of the power plant and gas processing
infrastructure. Criteria such as technical expertise, financial capability, and alignment with
project objectives were used to evaluate and select qualified bidders.
Negotiation and Contracting: Negotiations were conducted between the government and private
sector partners to finalize contractual agreements. These agreements defined the roles,
responsibilities, and obligations of each party, including risk allocation, financial arrangements,
performance indicators, and dispute resolution mechanisms.
Implementation and Construction: The project was executed according to the agreed-upon
terms, with private sector partners responsible for constructing the power plant and associated
infrastructure. Compliance with technical specifications, quality standards, and environmental
regulations was ensured throughout the construction phase.
Operation and Maintenance: Private sector partners assumed responsibility for operating and
maintaining the power plant and gas processing facilities throughout the concession period. They
ensured optimal performance, reliability, and safety to meet electricity demand and service
delivery requirements (Eberhard et al, 2016).
Monitoring and Evaluation: The project's performance was monitored against predefined
targets, with oversight from regulatory authorities and government agencies. Regular evaluations
were conducted to assess outcomes, address any deviations or issues, and ensure compliance
with contractual obligations.

Institutional Responsibilities for the Songas Gas Power Project

Tanzanian Government: Responsible for project oversight, policy development, and regulatory
approval processes. Coordinates with relevant ministries and agencies to facilitate project
implementation and ensure compliance with national policies and regulations (The Infrastructure
Consortium for Africa, 2011b).
PPP Unit or Centre: Provides technical assistance, capacity building, and coordination among
stakeholders involved in the project. Facilitates the development and execution of PPP
agreements, ensuring transparency and accountability throughout the process.
Energy and Water Utilities Regulatory Authority (EWURA): Ensures that the Songas project
adheres to regulatory requirements including licensing, tariff setting, and monitoring compliance
with safety and environmental standards and contributes to energy sector development.
Private Sector Partners (including Songas): Invest in project development, construction, and
operation of the power plant and gas processing facilities.
Investment Promotion Agencies: Promote the Songas project to attract domestic and foreign
investors. Provide facilitation services and create a conducive business environment to encourage
private sector participation in energy infrastructure development (The Infrastructure Consortium
for Africa, 2011b).
Civil Society and Oversight Bodies: Monitor project implementation, advocate for transparency
and accountability, and represent the interests of affected communities (Eberhard et al, 2016).

3. PPP CONTRACT MANAGEMENT

 Establishing contract management structure

Contract Management Framework; The contract management framework for the Songas gas
power project establishes a structured approach to managing the contractual relationship between
the public and private partners throughout the project’s lifecycle. This framework encompasses
contract administration, which includes processes for managing documentation, amendments,
and ensuring compliance with contractual terms (Oxford Analytica Daily Brief Service, 2013).
Performance management is a crucial component, involving the monitoring and evaluation of all
parties' adherence to their obligations, as well as setting and assessing key performance
indicators (KPIs).
Contract Management Team; A dedicated contract management team is essential for the
effective oversight of the Songas gas power project. This team includes a Contract Manager who
oversees contract performance, ensures compliance, and manages relationships between the
involved parties. A Legal Advisor provides support in interpreting contractual terms and
handling amendments, while a Financial Analyst monitors financial performance, budget
compliance, and payment schedules (Kitundu, 2015).
Governance and Oversight; Effective governance and oversight structures are vital for the
Songas gas power project’s success. A Steering Committee, comprising senior representatives
from the government, private partners, and regulatory authorities, provides strategic oversight
and decision-making capabilities. This committee ensures that the project aligns with broader
national and strategic objectives (Kapika & Eberhard, 2013).
Performance Monitoring and Reporting; Performance monitoring and reporting are critical
for tracking the progress and success of the Songas gas power project. Key Performance
Indicators (KPIs) are established to measure technical, financial, compliance, and customer
satisfaction aspects of the project. Regular reporting mechanisms are put in place, including
monthly performance reports that detail achievements and issues, incident reports documenting
any deviations from the contract, and annual performance reports providing a comprehensive
evaluation of the project’s performance over the year.
Risk Management; Risk management is a crucial component of the Songas gas power project,
aimed at identifying, assessing, and mitigating potential risks. A dynamic risk register is
maintained, listing all identified risks along with their impact assessments and mitigation
strategies. Regular risk assessments are conducted to update this register and evaluate the
effectiveness of existing mitigation measures. Contingency plans are developed for significant
risks to ensure preparedness for any adverse events (White, 2005).
Dispute Resolution Mechanisms; Effective dispute resolution mechanisms are essential to
handle conflicts that may arise during the Songas gas power project. Initial efforts to resolve
disputes focus on internal resolution through negotiation and mediation within the project
management structure. If internal resolution is not feasible, arbitration is used as stipulated in the
contractual agreements, providing a structured and impartial process to resolve conflicts. Legal
action through the courts is considered a last resort, used only when other mechanisms fail
(Kapika & Eberhard, 2013).
Documentation and Record Keeping; Comprehensive documentation and record-keeping are
vital for the Songas gas power project. All original contract documents, amendments,
performance records, and related correspondence are meticulously maintained. This includes
detailed records of performance evaluations, reports, audits, and risk management documentation
such as risk assessments and mitigation plans.

Communication and Stakeholder Engagement; Clear communication and proactive

stakeholder engagement are essential for the success of the Songas gas power project. A
comprehensive communication plan is established to facilitate internal communication within the
contract management team and external communication with stakeholders, including the public,
regulatory authorities, and other external entities. Regular updates on project progress,
performance, and any issues are provided to stakeholders to keep them informed and engaged
(Oxford Analytica Daily Brief Service, 2013)
 Design of the songas gas power project management
Key management phases include initiation with feasibility studies and stakeholder engagement;
detailed planning for budgeting, risk management, and resource allocation; execution focusing
on construction and installation; monitoring and control for tracking progress and quality
assurance; and closure for project finalization and lessons learned. This comprehensive
management framework ensures alignment with objectives, regulatory compliance, and
stakeholder satisfaction, ultimately contributing to Tanzania's energy security and economic
growth.
 Monitoring contractors’ performance through key performance indicators
(KPIs)
Monitoring contractors' performance through key performance indicators (KPIs) in the Songas
Gas Power Project is crucial for ensuring project success and maintaining high standards. KPIs
provide quantifiable metrics to assess various aspects of contractor performance, including
adherence to timelines, budget compliance, quality of work, safety standards, and environmental
impact. By regularly evaluating these indicators, project managers can identify potential issues
early, make informed decisions, and implement corrective actions promptly.
4. FINANCING THE PROJECT
 What options for financing the project that were in offer when the project was
being conceived.

When the Songas Gas Power Project was being conceived, various financing options were
considered to secure the necessary capital. These included equity financing from project
sponsors and private investors, providing capital in exchange for ownership stakes; debt
financing through loans and bonds from commercial banks and international financial
institutions like the World Bank; and public-private partnerships (PPPs) that leverage both public
regulatory support and private operational efficiency (BBC News, 2015). Additionally, export
credit agencies (ECAs) offered financial support via loans, guarantees, or insurance for
international projects, while grants and subsidies from governmental or international bodies
helped reduce financial burdens. Multilateral and bilateral aid from international organizations
like the International Finance Corporation (IFC) and foreign governments also played a crucial
role in supporting the project's infrastructure development, ensuring a comprehensive and
balanced financial model that managed risks and aligned with stakeholder goals (Kitundu, 2015).
 The Challenges of the project finance they are encountering/have encountered in
the project.
The Songas Gas Power Project has encountered several challenges in project finance, impacting
its development and execution. Key issues include securing sufficient funding, as large-scale
energy projects require substantial capital, and fluctuating financial markets can affect loan
availability and interest rates. Ensuring investor confidence and managing their expectations for
returns amidst economic and political instability in the region posed significant hurdles
(Eberhard et al, 2016). Additionally, coordinating among diverse funding sources, such as equity
investors, lenders, and aid agencies, often led to complexities in financial structuring and
compliance with varying requirements. Exchange rate volatility also posed a risk, potentially
increasing costs and affecting debt repayment.

5. RISK MANAGEMENT IN THE PROJECT

 risks that were identified the in Songas gas power project.
Financial Risks: Fluctuations in interest rates, exchange rates, and inflation could impact the
project’s budget and financial viability. Additionally, securing and maintaining adequate funding
posed a significant risk.
Regulatory and Legal Risks: Changes in government regulations, policies, or legal requirements
could affect project approvals, operational compliance, and overall project timelines.
Technical and Operational Risks: Potential challenges in the construction and operation phases,
such as equipment failures, technological issues, and delays in construction schedules, could
impact project efficiency and effectiveness.
Environmental Risks: The project needed to address potential environmental impacts, such as
pollution, habitat disruption, and compliance with environmental regulations to avoid fines and
ensure sustainable operations.
 Risk evaluation methodologies that were applied in the risk management.
The Songas Gas Power Project employed a range of risk evaluation methodologies to manage
potential risks effectively. Qualitative risk analysis prioritized risks based on probability and
impact, while quantitative risk analysis used numerical techniques like Monte Carlo simulations
to quantify their effects. A risk matrix categorized risks by likelihood and severity, and SWOT
analysis assessed internal and external factors. Fault Tree Analysis (FTA) identified root causes
of failures, and Failure Modes and Effects Analysis (FMEA) evaluated potential failure modes
(BBC News, 2015).

6. PPP PROCUREMENT
 Describe various forms of procurements that was applied
Competitive Bidding: This method involved inviting multiple suppliers and contractors to submit
bids for providing goods, services, or construction work.
Direct Procurement: For critical items or services with limited suppliers or urgent timelines.
Turnkey Contracts: For significant project components, ensuring comprehensive responsibility
from design to commissioning.
Subcontracting: Utilizing specialized firms for specific tasks to leverage expertise and manage
workload.

 To what extent the procurement process was in line/harmonized policy and

policy frameworks like Public Procurement Acts, Public Finance Act etc.
The Songas Gas Power Project's procurement process was closely aligned with policy
frameworks like the Public Procurement Act and the Public Finance Act, ensuring transparency,
accountability, and regulatory compliance(BBC News, 2015). This adherence promoted fair and
ethical procurement practices, minimized risks, and ensured efficient use of public funds.
Harmonizing with these policies facilitated proper oversight and secured necessary governmental
and financial stakeholder support.
 Methods of structuring bid evaluation criteria.
Technical and Financial Criteria: Separating technical and financial evaluations to assess the
technical capabilities and cost-effectiveness of bids independently.
Weighted Scoring System: Assigning weights to different criteria based on their importance, and
scoring each bid against these criteria to obtain a total score.
Pass/Fail Criteria: Establishing minimum requirements for certain criteria, where bids must
meet these thresholds to be considered further.
Compliance Checklists: Using checklists to verify that bids comply with mandatory
requirements and specifications outlined in the tender documents.
Benchmarking: Comparing bids against industry standards or past projects to gauge their
competitiveness and feasibility (BBC News, 2015).
Expert Panels: Involving panels of experts to review and score bids, ensuring diverse
perspectives and specialized knowledge in the evaluation process.
REFERENCES
Share, J. (2005, May). Historic East African project well worth its challenges. Pipeline & Gas
Journal.

Oil Daily. (2005, June 8). Tanzania plant expanded.

White, D. (2005, August 3). Controversy is the rule rather than the exception in contracts.
Financial Times.

African Business. (2006, February). Songo Songo an overwhelming success.

Gratwick, K., Ghanadan, R., & Eberhard, A. (2007). Generating power and controversy:
Understanding Tanzania’s independent power projects. University of Cape Town Graduate
School of Business: Working Paper v.2.

World Bank. (2011, September 30). Tanzania—Songo Songo Gas Development and Power
Generation Project (Implementation Completion and Results Report). Washington, DC.

The Infrastructure Consortium for Africa. (2011a). Attracting investors to African public-private
partnerships: A project preparation guide. Washington, DC: World Bank.

The Infrastructure Consortium for Africa. (2011b). When the power comes: An analysis of IPPs
in Africa. Tunis: ICA.

Kapika, J., & Eberhard, A. (2013). Power-sector reform and regulation in Africa: Lessons from
Kenya, Tanzania, Uganda, Zambia, Namibia, and Ghana. Cape Town: Human Sciences Research
Council.
Oxford Analytica Daily Brief Service. (2013, April 18). Tanzania: Power deficit endangers gas
export hopes.

BBC News. (2015, October 9). Tanzania closing hydropower plants.

Kitundu, T. (2015, December 6). Unpaid bills threaten Tanzania power supplies. East African
Business Week.

Eberhard, A., Gratwick, K., Morella, E., & Antmann, P. (2016). Independent power projects in
Sub-Saharan Africa: Lessons from five key countries. Washington, DC: World Bank.

Power hungry: Electrification plans are stalling because distributors won’t pay. (2016, January
9). The Economist.

Kapama, F. (2016, February 29). Oil use at IPTL plant engines monthly costs 22bn/-. Daily
News.

Kamndaya, S. (2016, May 12). Songas won’t shut plants for now. The Citizen.

Peng, D., & Poudineh, R. (2016, August). Sustainable electricity pricing for Tanzania
(International Growth Centre Working Paper E-40305-TZA-1). London: London School of
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