Egyptian firms to build $3 billion power plant on Tanzanian world heritage site

DAR ES SALAAM (Reuters) - Tanzania has signed a deal with Egypt's El Sewedy Electric Co and Arab Contractors to build a $3 billion hydroelectric plant on a World Heritage site in the country, that will more than double Tanzania's power generation capacity.

The project has faced opposition from conservationists, who say the construction of a dam on a river that runs through the Tanzania's Selous Game Reserve, known for its elephants, black rhinos and giraffes, as well as many other species, could affect the wildlife and their habitats.

Energy Minister Medard Kalemani, said in comments broadcast on state television on Wednesday that the plant would have an installed capacity of 2,115 megawatts, calling it "a very huge dam project."

Representatives of state-run Tanzania Electric Supply Co, El Sewedy and Arab Contractors signed the agreement in the presence of President John Magufuli and Egyptian Prime Minister Mostafa Madbouly, TV broadcasts showed.

Magufuli said the project will be wholly funded from taxes. Monthly tax revenue collection has increased from 850 billion shillings ($370.37 million) per month before he came to power in late 2015, to an average of 1.3 trillion shillings ($566.45 million)under his administration, he said.

"When we asked for financing for this project, the lenders refused to give us money but thanks to improved tax collection, we are able to finance this project using our own resources," he said.

Arab Contractors will have a 55 percent stake in the project and El Sewedy 45 percent, El Sewedy said on Tuesday.

El Sewedy said the Egyptian stock market had halted trading of its shares pending details on the deal it had signed.

Covering 50,000 square km, the Selous Game Reserve is one of the largest protected areas in Africa, according to UNESCO.

The World Wildlife Fund conservation group said in a report in July last year the proposed hydropower dam "puts protected areas of global importance, as well as the livelihoods of over 200,000 people who depend upon the environment, at risk".

Officials at the WWF Tanzania office were not immediately available to comment on Wednesday's deal.

Magufuli dispelled the environmental concerns, saying Tanzania had allocated 32.5 percent of its total land mass to conservation.

"The dam will become a major source of water and the cheap electricity to be produced from the dam will reduce the number of people who cut trees for firewood," he said.

Magufuli, nicknamed "the bulldozer", for his forceful leadership style, has in the past pushed for the project to start as quickly as possible to speed up development.

He has introduced anti-corruption measures and tough economic reforms and pushed for swift completion of big infrastructure projects including roads, railways and airports.

($1 = 2,295.0000 Tanzanian shillings)

(Additional reporting by Sami Aboudi in Cairo; Writing by George Obulutsa; Editing by Alexandra Hudson)