OFFICE OF THE CONTROLLER AND AUDITOR GENERAL ZANZIBAR AUDIT REPORT OF THE CONTROLLER AND AUDITOR GENERAL THE FINANCIAL STATEMENT OF ZANZIBAR ENERGY SECTOR TRANSFORMATION AND ACCESS PROJECT FOR THE PERIOD ENDED 30TH JUNE 2022 Office of Controller and Auditor General, Maisara, Street, P.O. Box 258, Tel: +255 24 2234009 Fax: +255 24 2234009 E-mail: info oca go t Website: ZANZIBAR FI-ECTRICITY CORPORATION (ZECO) ZAN/IBAR FNIRGY SECTOR TRANSFORMATION AND ACCESS IN ZANZIBAR ELECTRICITY CORPORAT ON PROJECT FUNDED YV WORLD BANK RLPORT OF MANAGEMFNT l INCORPORAION, PRINCIPAL ACTIVITIES AND BACKGROLND /anzibar E-ilectricity Corporation (ZECO) was incorporated in Zaniibar under Act No 3 of 2006. ZECO is wholyK ow ned by the Revol Litionary iovernment of /anzibar and is under the Ministry of Water. Vnergy and Minerals. ZECO generates, purchases. transmit, distribute, supplies and seils electricity to both Ujngja and Pemba Islands. ZECO imports power from national grid of mainland T anzania though submarine cables. Unguja has two sub marine cables. w hici starts from Ras Kiromoni (1 anzania mainland) and Ras Fumba (Zanzibar) with total capacity of 45Megawatts (MW) and 100MW that was installed 1980 and 2013 respectivel. Pemba has one sUbmarine cable wvith capacity of 2OMW which starts from Iinyanjan i in Tanga (Tanzania mainland) to Ras Mkumbtuu in Pemba ZLECOl has standby generators with capacity ol 25M W in Unguja. 2. ZECO MISSION To supply eleciricity so as to mee the national denand in an effective- safe. reliable and sustainable manner. 3. ZECO VISION lo be efficient and commiercially sound electric utility supporting the development of the ceonomy in Zanzibar. 4. /ANZIBAR FNER-GY SLCTOR IRANSFORMATION AND ACCESS PROJVCT IN ZANZIBAR LECTRICITY CORPORATION. The World Bank project is the first support in the energy sector in the Revolutionary Government of /anzibar (RGo/>. the project adopts a comprehensive valie chain approach to support the RGo/ in achieving its stated goals of developing renenable energN resources to improve reliabilitv and security of electricity supply and to seale up access to aflördable and reliable eletricity service. The project is intended to support the transformation of the /anzibar poner sector by accelerating the efforts towards universat electrieitv access- and the transition of ZEtO from a distribution utility to one managing a modern sy stem with iniegrated variable rerienable energy and 1 ~ Battery -nerg\ Storage S ystem (BE SS). and a grid wide Supervisory Control and Data Aequisition (S \DA) sxstem. i Projeet Objective the objectives olthe ProLeet are to expand access to reliable and efficient electricity services and to seale up renew able energy generation in Zanilhar, Project Components The project is structured in threc components: (1) Rene able Ener,,v and Energ\ Storage infrastructure development. (ii) Gid Modernization and access scale up. and (iii) Sector institutional strengtlhening and projeet implementation support. Detailed description of the components are provided below:- a) Component 1 . Renewable Energy and Storage Infrastructure Development This component will support the RGoZ to develop the island's first large grid-scale renewable energy power generation plant and hatterN energ storage inifrastructure. The publielv owned solar PV plant will help meet the grow ing electriLit demiand in the near term. while paving the wav for future scale-up of renexxable energy power generation, this component will be implemented by ZECO and comprises of the fol lowing suh-components: - 1) Sub-component 1 .1. Battery Energy Storage Sy stem (LBEY,) ibr Gid. This sub-component will support the design. supply , installation. and initial operation of a centralized publiels onned BLSS. ii) Sub-component 1,2. Solar Photovolhaie (PV) Plant. I his sub-component will finance the design. construction, and initial operation of a solar PV pow er generation plant. iii) Sub-component 1.3. Technical Assistance for Renewable Energv. lhis sub-component will support (a) the necessary technical and supervision consultancies for the BLSS and solar PV plant. and (b) tecehnical assistance for the development of future renewvable energy proJeets in Zanzibar. including through pria ate sector participation. b) Cornponent 2. Grid modernization and access scale-up his component is aimed at addressin ke\ constraints in the electricity grid in 1 nguja and ill finance inestmnts that are in line Xnith the latest /Lc 1 leetrification Master Plan (LNIP). Below are sub-components of components 2: i) Sub-component 2 1. 132kV Backbone Y ransmission Intrastructure. This sub-component will finance the construction of the first 132kV High Voltage (HV) transmission backhone infrastructure. including 1010km oftransiission line w hie start double circuit from Unguia town (\ elezo) to central of Unguja (Ubago) and then one line going to North of t nguja (Mlatemne) and another line to south (Makunduehi), at the end of each line (Matemne and lakunduchi will construct substations. The main function of the line is to evacuate power from the proposed solar PV power plant financed under component 1. and to enable ftiure integration of VRE power generation to meet the grow ing poxver demand in the island. 2 2 ii) Sub-component 2.2. Distribuition Nclork Strengthening and Access Scale-up. This sub- component wkill linance the extension and strengthening of the electricity distribution netxork. including metering s stems. and expand household electricit access. iii) Sub-component 23. Installation of a SCADA System. This sub-component will finance the design. supply. and installation of the SCAD\ and Lnerg\ Management System (ENIS). and a control center to enhance /( s osersight and control of netwvork operations, c) Component 3. Sector Institutlonal Strengtiening and Project 1mplernentation Support 1 his component xvli support pro,ect implemetation. necesarN capacity strengthening of sector institutions. includinu /VVO. M\\\EM. and /l RA. and design and implementation of key planning. strategy and regulatory frameworks, including those on energy efficiency and gender. i) Sub-component 3.1. Technical Assistance and Project Implementation Support to /ECO 1 his sub-component W ill suppor1 iechnical assistance to ZECO to strengthen institutional. operational and project management capact. ii) Sub-component 3.2. ¯1 echnical \ssistance and Project Implementation Support 'Fhis sub- componem n ill support sector institutional capacity strengthening and the development of necessary planning and strategic fraieworks for the Lanzibar powxer. iii) Sub-component 3.3. Inergy Ic iciency Improvemcnts. 1 his sub-component will support the design of prioritŽ interventions and strategics for the efficient use of electricity in Zanzibar and ws i also inlform iheir subsequei implementation. iv) Sub-component 3.4. C'losing the Gender Gap in the Lneriv Seetor. This sub-component ,xill support the design and implernentation of inters entions to close the gender gap in employ ment opportunities and carcer advancement in the energy sector. 6. BOARD OF DIRECTORS The Directors. all Tanzanians. who served /ECO during the year are as follows. FSIN Name of Board Menber Title Date of Appointernent 1 Retired M.IGLN S.S.Othaman Chairperson 0 1/112/2021 2 Mr.Azizi Said Ali Member 15/02/2022 3 Mr.Abdulla Abdi Mohammed Member 15/02/2022 4 Mr. l lafidh Sulciman Makame Menber 15/02/2022 i Mr. Mshenga Ilaidar Mshenga Member 15/02/2022 L_ 3 7. ZLCO \.ANAG INl I1 LA\ Responsible for all aspects of p rojcct management for component 1 (Renew able VLnergy and Energy Soage Inirastruture). component 2 (Grid \odernization Access scale- up) and subcoiponeni 3.1 (Sector Strengthening and Project Implementation Support). includimg cngieerin aspeets. proleet proeirerent. financial management and Accounting, monitoring and evaluation. En\ ironmental Safeguard. Social Safeguards Occupational Ilealth and Safety to ensure achie\ enent of the projecl development obectiv es. Conduct Management team that managed the proicet tor the perioed ended 30 June 2022 is as follows: SN POSIlFiON Mshenga HaIdar Mshenga General \ianacer 2 ThabiT Salum Khamis Commereial manager Maulid Shiraz I lassan Planing and Research Manager 4 Mwanakaa Ahmada Miohd Fi nanc \anager Ali Haji Makame [lead of Pw_urment 6 Moh'd Juma Othman Pemba Branch Manager 7 Kassinim Abdulla Ali Internal Auditor 8 [iarid \1ahrouk Juma Human Re Mmarce \lanager S Yakoub \hmed Mohamed Operation \Langer 0 Hajii Juma Ch apa Ag. Public Relatiot 2 Khami la Kai IT Manager 13 Mohamed Idriss Hussein 1 egal Officer 14 Aishe Said Yalwa Proleet Acun tt 5 Moh'd 1 Iaji 1 ji Project A,ccntant To make its efficiene and effective of the project implementation. the project employee 5 individual consultants to sUpport implementation as tollow: " Assistance Project Manager • Proeurement specialist • Social and Safegaard Specialist * Occupational 1 tealth and Safety Specialist • Gender Specialist 4 ZANZIBAR ELECTRICITY CORPORATION (ZECO) ZANZIBAR ENERGY SECTOR TRANSFORMA l [ON AND ACCESS IN ZANZ1BAR LCTRRICI Y CORPORATION PROJECT FUNDED BY WORLD BANK 8. STATEMFNT OF1 MANAGEMENTS RESPONSLBIIT [ILS The management of Zanzibar Electricity Corporation is responsible lor the preparation of the financial statements of the project titled -Zanzibar Energy Sector iransformation and Access in Zanzibar Electricity Corporationf. w\hich comprises the statement of Affairs Balance sheet as at 30 June 2022. and the Statement of sources and uses of fund Cash Receipts and payment for the period ended 30 Julie 2022 and notes to the financial statemenIs w hich inClude a suinmary of significant accounting policies and other expinatory notes. in accordance with te accounting policies set out in note 8 to the financial statements. 1 he management is also responsible for such internal control as te management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraid or error, and för maintaining adequate accounting records and an efiective sy'stcm of risk managementF Procurement of goods. works and consultancy and non-consultancy service to the extent that they are reflected in these financial statements have been done in accordance with te Public Procurement Act of 2016 and its Regulations. In our opinion, these financial statements present fairly all-material respect of the operations of the Project lor the Period ended 30th June. 2022. Lng. Mshcnga Haidar Mshenga General Manager /anzibar Electricitv Corporation 5t /A NZIBAR ELECTR ICITY CORPORATION (jECO) /AN/IBAR ENERGY SECIOR 1RANSFORMAI1ON AND ACCESS IN ZANZIBAR ELLCTRICITY CORPORATION PROJECT FUNDED 1BY WORLD BANK 9. ST ATEMEN OF REFPT AND PAYMFNT FOR TIE PERIOD ENDED JUNE 2022 Deseriptions NOTES 30-June-22 USD Opening baliance 0 Received frem W 6 1,337,100 Ttl_Receipts 1,337,100 Expenditures Operating Expenses 7 18.596 Finance Lxpenses 8 839 Hired C'oiisultancv 9 72.000 Lxchange rate los l I 2.766 Total Expenditure 94,201 Surplus or Deficit during the Year 1 ,242,899 Notes I to 13 Form part of tiese Financial Statements The financial stanemeuLs on pages 6 to 9 were approved and autioriized for issue b Management on -- Maulid Shiraz lassan Aishe Said Yahya Project Manager ProJect Accountant /anzibar Elctricity C/rpration Zanzibar Liectricity Corporation ZESTA Projec ZlSTA Project 6 ZAN/IBAR ELCTRICLTY CORPORATION (ZECO) ZANZIBAR ENERGY SECTOR TRANSFORMATION AND ACCLSS IN ZA\LIBAR ELLCTFRICFFY CORPORATION PROJECT 1UNDED BY WORL) HANK 10. ST AIMI N OF AFFAIR FOR THE PERIOD ENDED JUNE 2022 DESCRIPIONS IN) I L 0-JUNE-22 USD A SS ET Cash and Bank Balances 0 1 263,867 Total Asset I1,263,867 ACCL\M[LATED FLNI)S AND LIABILITIES Accumilated Fund 1.242.899 Total Accumulated Fund 242,899 Currem 1iablit\ -rPa> able i 2 0,968 Total Accumulated Fund and Liabilities 1,263,867 Notes I to 13 Form part of these Financial Staiements. The financial satements on pages 6 to 9 were approved and authorized for issue by Management on-- 2022 and igned by: Notes and related staements forming part of this report appear on pages 10 to 12 MaLil id Shiraz Hassan A ishe Said Yahya Project Manager Pro ject Accountant Zanzibar Eleetricity Corporation Zanzibar Electricity Corporation ZESTA Project ZESTA Pro ject fil... 7I ZANZIBAR LIECTRICITY CORPORA TION (ZECO) ZANZIBAR ENERGY SECTOR TRANSFORMATION AND ACCESS IN ZANZIBAR LLECTRICITY CORPORATION PROJE1 CT FU1N[)D BY WORLD BANK STATEMENTJ-l OF FUND (CASH) BALANC FOR TI IE PERIOD END)) JNE 2022 Descriptions Notes 30-Iune-202 USD Opening Balance Reccived Fund 6 1,337.100 Expenditure for the Peiod (9-201 Closing Fund Balance 1,242.899 Notes I to 13 Form part ofthese Financial Staternenits The linancn saemeni en pages 6 to 9 were approved and authorized for issue by Mianaemen en - - 2022 and siened b\ Maulid Shiraz Hassan Aishe Said YahNa Projeci Manager Projeci Accountant Zanzibar Ecctricity Corporation Zanzihar Llectricity Corporation ZESTA Project ZESTA Project 8 STAiEMNT OF liGE VS ACT [UAL FOR THE PFRIOD ENDED JUNE 2022 BUDGETED FACTUAL VARIENCES % of actual/budget 3.0 Sector strengthening 3.1 Consultancics, project 1,353,101) 19,435.36 1,333,664.64 1.44% implementation support, training & operating cost - ~~~ - ----- 3.2 Hiring of individual 144,000 72,000 72,000 5V'. eonsultants TOTAL 1,497,100.00 91,435.36 1,405,664.64 6.11% VARIANCE EXPLANATION The Zaniibar Energy Seetor Transformation and Access Project spent $ 91 43536 equal to 6.84% ofthe budgeted amrount of $ 1.337.100 due to the fling :- Lt disbursement of fund from World Bank to our Desig\aed Account at Peoples' Bank of Zanzibar, whereas the World Bank disbursed the I` disbursement on 16"l April., 2022 for implementation. Delay in completion of procureiment process for purchasing of Olflce Motor Vehicles. Office Furniture and Offie Equipnient Delay iin completion ot etiiploymnent process of Gender Speciali. Notes and related statetenits forming part of this report appear on pages I I to 14 Maulid Shiraz Hassan Aishe Said Yahya Project Manager Projeet Accountat Zanzibar Electricity Corporation /ivibar Electricity Corporation ZESTA Project ES1A Projec 9 ZANZIBAR ELECTRICITY CORPORATION (ZECO) ZANZIBAR ENERGY SECTOR TRANSFORMATION AND ACCESS IN 7ANZIBAR ELEC IRICI 1Y CORPORA ION PROJECT FU,)NDID BY WORLD BANK NOTES TO TfI FINANCIAL STATEMENT FOR A PERIOD EN DING 30 '" JUNE 2022 1. REPORTING ENT ITY Zanzibar Electricity Corporation (ZLCO) (the "Conpany-) is a Company domiciled in Zanzibar incorporated under Company's Act No 3 of 2006. The -Energy Sector Transformation Access in Zanzibar Electricity Corporation is a Project funded by the World Bank (WB) through IDA CREDIT FUNDS and TRI ST Fund. 2. BASIS OF PREPARATION a% The financial statements have been prepared in accordance with the requirement of Word Bank. emphasizing IPSAS accrual bases of accounting and applying the accounting policies explained under note 3 below. 3. SIGNIFICANT ACCOUNTING POLICIES (a) Grant income Grait incole comprises ofash redlceipts fron the Word Batik (WR) and deposited into the PrJect's UISD bank alecotiit and is accounted [or in the period in which it is received. (h) Expenditures An expenditure in respect of goods and service is recognised in the statement of receipts and expenditures at the time when they incurred. (c) Fixed assets and inventory Ath Expenditure of capital nature sICh as acquisition of fixed assets solely used in the running/operation of the project are capitalized and accounted for in accordance with IPSAS 17. while that capital expenditure used in constructions of the project activities are expensed in the period of acquisition. (d) Foreign currency translations The financial statements have been prepared in United States Dollar (USD). Grants are received in the United States Dollar (USD) account and expenditure transactions incurred in USD and the Tanzanian Shilling (TZS). TZS transactions translated into the USD at prevailing exchange rate. Exchange differences arising on translation are recognized in the Statement of Receipts and Expenditures. 10 i (e) Cash and cash equivalents (ash and cash equivalents comprise cash in hand and deposits held at banks with maturities of less than three montis. 4. FUNCTIONAL AND PRESEN I ATI(ON CURRENCY The finaneial stateienits are presenIed i lunited States Dollars (1SD). wliich is the Proleet's tunetional curreney. i. GRANT INCOME During the period ended 30 June 2022, the Project receive grants Irom the World Bank amouning to I SD 1.337.100 NOTE NO.6 Grant Income GRANT RECEIVED L'SD T/S 202 12022 Reecived I6' ApriL 2022 1337.100 3,095.386.500 Previous phase balance - ik1AL Recei\ ed from WB 1,337 100 3.095.386.500 NOTE NO. 7 Operating Expenses NO DLAILS AMOUN[ LSD I iraining fees for two stall at Kenya 4.060.00 2 Allow ance dunrig training for 2 stat i 1,420.00 3 Vnue oi tramm 938.88 4 Travel alIowanie uor traning 2 staff[ 5, Tra im i0i 967.60 6 Retrehment 864.00 TOT 18,596.00 NOTE 8 Financial Expenses U S D- Bank (harges 839 Total inaneal (ost 839 1 11N\ ,.. NOTE NO 9 Salaries for Hired Consultancies E I NALS N UAMOllNIN LSD IA ssistance project mianager 24.00 2 Safet\& healIh offi ec 1s8000.00 3 Procurement specialist 18000 __ 4 Social e specialist 12.00000 TOTA L 72-000-0- 30"1 June 2022 NOTE 10 Bank and Cash halances USD DETAWS 15 AMO N I l USD Designated Account 887 8 2 Operatmn \couInt 878.476.42545 376.705-36 losmng rate: I usd ='1 /' 3V 00 'IOTA1 1.263,866,64 NOTE 11 Exchange Rate Gain / Løss Closing balance at spot rate = 878.476,425.45 2.3 15 = US[D 379.471.46 Closing balance at the closing rate = 878.476.425,45 / 2.332 - USD 376.705.36 Foreign exchange Ioss = USD 379,471.46 - LISD 376,705.36 = USD 2.766.10 N B : 1he Special dran ing right (SDR>I amoun at the time of signing the contraet was 82.600.000 cquivalent to US5D 117 million lUr the exchange rate of 0.705982 and 30"' June 2022 was 0.753 13700 NOTE 12 Payable 1 Pa,\ ce for åldiX dLILaL consukancics April 7 A 5.79t) il 2 Pit cc for niN !dua] consnultanIiiei \Ies My l RA 7-502.81 3 Payiei a i mdMual consultiancies une T RA 7.502.8l 4 /anihar Rcienu , 163,28 10 \IÄ21 900 NOTE: 13 Comparative Figures Previous year's figures have not been entered in order to make them comparable wkith ihose of the current y ear. considering the proecct current year is the first year to be reported. 13E