Practice Areas > Project Finance
LawCastles has one of most experienced project finance and development experts of any Tanzanian law firms and has an exceptionally track record in domestic and international transactions. We advise sponsors, governments, financiers, purchasers, suppliers and contractors.
LawCastles is very experienced in project finance and offers expert project finance services to clients in a range of industry sectors, including transport, power, gas, water, resources and telecommunications. We advise sponsors, governments, financiers, purchasers, suppliers and distributors. Our demonstrated experience and expertise in all aspects of project finance allows us to deliver effective and valuable legal and project management advice. Our lawyers offer comprehensive support and guidance on all aspects of project formation, structuring, implementation, financing and operation. Our clear and practical approach will help you enhance your competitive advantage and achieve commercial success.
The firm provided advisory services (in association with a Canadian firm) to the Government of Tanzania on structuring of a proposed combined cycle coal fired electricity project at Mchuchuma, Southern Tanzania. In 2006, Lawcastles advised sponsors in Kiwira Coal Fired Electricity Project (200MW). Other projects include providing advisory services to Government of Tanzania on performance based road maintenance concession study for Mtwara-Mbamba Bay Road in Southern Tanzania.
Generally, the key government departments in most sectors are parent ministries. The parent ministries are responsible for approving major projects. The term ‘major project’ is subjective and it is recommended that project sponsors should seek guidance from the relevant ministry before entering into an agreement with any authority or agency under the ministry. If proper procedures are not followed, the project may end up in political quagmire and may not take off.
Power, Minerals, Oil and Gas
Ministry of Energy and Minerals (‘MEM’) is the overall supervisor of energy and minerals sectors in accordance with specific legislation. MEM approves major projects relating to power generation, transmission and transmission, oil, gas and minerals extraction.
As far as the mineral sector is concerned, the specific legislation is the Mining Act, Cap. 123 (‘Act’). This legislation establishes the office of the Commissioner for Minerals (‘Commissioner’) within the MEM. The Commissioner is appointed by the President of the United Republic of Tanzania. The Commissioner has a responsibility to supervise and regulate minerals exploration and extraction activities. The Act also establishes a Mining Advisory Committee which has the responsibility of advising the minister responsible for minerals on matters concerning minerals sector generally. The Act empowers the minister to grant, renew, suspend or cancel licences for minerals exploration, production or trading. Section 10 of the Act allows the minister to conclude minerals development agreement with a holder of a mineral right (normally special mining licences). The objectives of the minerals development agreements is to guarantee the fiscal stability of a long-term mining project, define the circumstances or manner in which the minister may exercise his discretion conferred on him by the legislation, lay down environmental requirements and to define the dispute settlement mechanism arising out or relating to the agreement.
With regard to oil and gas, the specific legislation is the Petroleum (Exploration and Production) Act, Cap. 328 (‘Act’). Section 8 of this Act establishes the office of the Commissioner for Petroleum Affairs (‘Commissioner’). The Commissioner is appointed by the President of the United Republic of Tanzania and has powers to carry out general administration of oil and gas exploration and development activities. The Act empowers the Minister to grant, renew, suspend or cancel licences for oil and gas exploration or development. In addition, section 14 of the Act allows the Minister to enter into an agreement with any person for grant of exploration or development licence and stating the conditions and benefits given to the licence holder.
The Electricity Act, 2008 (‘Act’) have liberalized the electricity generation, transmission and distribution sector. The effect of liberalization is to remove the monopoly of state owned electricity company to generate, transmit and distribute electricity. The MEM and Minerals and the Energy and Water Utilities Regulatory Authority (‘EWURA’) are key institutions in project finance transactions. New projects are supposed to be directed to EWURA which in turn will liaise with other institutions. Section 5 of the Act, gives EWURA powers to approve initiation of the procurement of new electricity supply installations, award licences, approve and enforce tariffs and fees and approve terms and conditions of electricity supply. In exercise of its functions, EWURA is generally required to consult the minister responsible for energy though the minister is more powerful when it comes to approving the projects. Section 4 of the Act gives the minister responsible for energy overall supervisory and oversight in the electricity supply industry. The projects that require to be licenced by EWURA include generation, transmission, distribution, supply, system operation, cross-border trade in electricity, physical and finance trade in electricity and electricity installations. EWURA has powers to approve key power purchase agreements under section 25 of the Act.
With regard to projects involving supply of electricity in rural areas, the relevant legislation is the Rural Energy Act, 2005. This legislation establishes Rural Energy Board which has powers, through a special implementing agency, to approve projects and allocate grants necessary to subsidize the capital costs of projects.
Telecommunications, Roads, Airports, Ports and Railways
The Ministry of Infrastructure Development approves major projects relating to telecommunications, ports, airports, railways and toll roads and bridges. There are regulatory authorities which are under these ministries which grant licences to projects which have been approved by the Ministry. In addition to regulatory agencies, there are implementing agencies for airports, roads and ports sectors.
Telecommunications projects can generally be directed to Tanzania Communications Regulatory Authority (‘TCRA’). TCRA is a regulatory agency established under the Tanzania Communications Regulatory Act, 2003. TCRA has powers to grant all types of licences to projects relating to telecommunications and broadcasting. Before granting a major licence, TCRA normally obtains clearance from the minister responsible for infrastructure. The private sector can be easily involved in telecommunications projects subject to compliance with shareholding restrictions that at least thirty five percent of the equity in the project company must be owned by Tanzanians.
Section 4 of the Roads Act, 2007 empowers the Ministry of Infrastructure Development to, among other things, promote involvement of the private sector in development, maintenance and management of roads. The Minister responsible for infrastructure has powers to appoint a road authority which has jurisdiction to construct and maintain roads in a specified area. The appointed authority for a specified area has powers to, among other things, negotiate concession agreements with private sector entities to facilitate financing and development of selected roads in accordance with the guidelines prescribed by the minister responsible for infrastructure. Currently, road toll is imposed on diesel and petrol, transit fees, heavy vehicle licences and vehicle overloading fees and is collected by toll collectors designated under the Road and Fuel Tolls Act, Cap. 220.
As far as railway projects are concerned, the entity empowered to develop rail infrastructure is Reli Assets Holding Company Limited (‘RAHCO’) established under the Railways Act, 2002 and incorporated under the Companies Act, 2002. RAHCO has mandate to develop rail infrastructure and entering into contractual obligations with other entities in a form of concessions, joint ventures, public private partnerships or other means. Accordingly, projects relating to development of ports infrastructure are required to be directed to RAHCO which in turn must obtain approval of the minister responsible for infrastructure.
Once the project takes off, the operator have to be licensed by Surface and Marine Transport Regulatory Authority (‘SUMATRA’) which is a regulatory agency for all modes marine and surface of transport. SUMATRA was established under the Surface and Marine Transport Regulatory Authority Act, 2001 and has powers to grant, modify, cancel and renew licences, monitoring operators’ behaviour and ensuring they do not abuse any local monopolies. In addition, the Surface and Marine Transport Regulatory Authority Act, 2001 establishes standards for the terms and conditions of supply of regulated services and framework for resolution of complaints and disputes. Tanzania Civil Aviation Authority (‘TCAA’) (established under Tanzania Civil Aviation Authority Act, 2003) grants licences air services operators. In addition to TCAA, there is Tanzania Airports Authority (‘TAA’) which is a semi autonomous implementing agencies which assist in, among other things, project preparation and supervising the implementation.
Currently, major projects relating to developing port infrastructure are required to be performed by Tanzania Ports Authority (‘TPA’). TPA is established under the Ports Act, 2004 and has a mandate to develop port infrastructure and superstructure and entering into contractual obligations with other entities in a form of concessions, joint ventures, public private partnerships or other means. Accordingly, projects relating to development of ports infrastructure are required to be directed to TPA which in turn must obtain approval of the minister responsible for infrastructure. The project proposals can also be submitted directly to the minister responsible for infrastructure for approval.
Tourism
The Ministry of Natural Resources and Tourism (‘MNRT’) approves major projects relating to tourism such construction of major lodges in national parks. The Tourism Act, 2008 provides a legal framework for tourism promotion. In relation to projects, section 6 (1) of the Tourism Act, 2008 provides among other things that the tourism division within the MNRT have powers to appraise investment proposals concerning tourism industry. The Tanzania Tourism Licensing Board grants relevant licences to tourism facilities and activities (section 19 of the Tourism Act, 2008).
Water and Sewerage
Major projects relating to provision of water supply and sewerage services must be approved by the Ministry of Water and Irrigation. Currently the provision of water supply and sewerage services is mainly done by public authorities. Section 3(1) of the Waterworks Act, Cap. 272, allows the minister to designate areas where public water authorities are allowed to provide water supply and sewerage services. Most cities and towns in Tanzania have been designated as areas where public water authorities are allowed to provide water supply and sewerage services (Regulation 2 of the Waterworks Regulations, 1997). However, section 3(3) of the Waterworks Act, Cap. 272 allow the minister responsible for water to permit any other entity to provide water supply and sewerage services in the designated areas. Basing on this provision, water supply and sewerage services projects must be approved by the minister responsible for water under section 3(3) of the Waterworks Act, Cap. 272. There is a special legislation for Dar es Salaam city, namely, Dar es Salaam Water and Sewerage Authority Act, Cap. 273. This legislation creates Dar es Salaam Water and Sewerage Authority (‘DAWASA’) and defines DAWASA designated area. DAWASA is allowed, subject to approval of the minister responsible for water, to make concession to other operators through lease and temporary transfer of its assets to the operator for the purpose of providing water supply and sewerage services (section 8(1) of the Dar es Salaam Water and Sewerage Authority Act, Cap. 273). The authority responsible for regulating operators in water supply and sewerage services sector is the Energy and Water Utilities Regulatory Authority.
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