9 March 2014

Tanzania: Former IPTL Boss Clears Air On Company's Operations

THE new operator of Independent Power Tanzania Limited (IPTL), Pan Africa Power Solutions Tanzania Limited, is reported to have started withdrawing money from an escrow account at the Bank of Tanzania.

The move has attracted a heated debate with some sections questioning its legality. Our Staff Writer FAUSTINE KAPAMA interviewed a former Director with IPTL, Mr James Rugemalira, acting under power of attorney, to clarify the controversy and other issues relating to the matter.

Question: Controversy surrounds withdrawal of money from the escrow account at the Bank of Tanzania (BOT) that had been kept pending resolution of the dispute involving Independent Power Tanzania Limited (IPTL). What is going on as far as you are aware of the matter?

Answer: After the International Centre for the Settlement of Investment Disputes (ICSID) Tribunal determined the tariffs that should be paid by Tanesco to IPTL and the corporation of IPTL commencing from January 15, 2002, Tanesco was advised that there was some impropriety or some mistake regarding the equity.

So it stopped paying the capacity charges in 2006. According to the contract, therefore, the government of Tanzania which was the guarantor of the tariff opened with IPTL an escrow account where several amount of money from disputed invoices were deposited.

Before the end of 2013, Tanesco and IPTL agreed or resolved the dispute. When they resolved the dispute, the escrow account was actually used to pay whatever that were being claimed by IPTL. As far as I am concerned the escrow account has already been closed and there is no dispute at the moment regarding the tariffs or any dispute between Tanesco, IPTL or the government of Tanzania.

Question: I understand Pan Africa Power Solutions Tanzania Limited (PAP) is the new owner of IPTL. According to reports, the company is drawing the money from the escrow account and that is why there were some suspicions on the transaction. What is your responses to this? Is PAP legally entitled to draw the money from this account?

Answer: Pan Africa Power Solutions Tanzania Limited has bought VIP Engineering and Marketing Limited's 30 per cent shares in IPTL. Pan Africa Power Solutions Tanzania Limited has also ratified purchase of Mechmar Corporation (Malaysia) Berhad's 70 per cent shares in IPTL.

Therefore, under the circumstances, it has full mandate to actually instruct how the IPTL moneys which were withdrawn from the escrow account may be spent.

Question: It is also claimed that IPTL was liquidated. How is it possible then to sell shares under such circumstances?

Answer: IPTL was under provisional liquidation until September 15, 2013 when upon VIP Engineering and Marketing Limited withdrawing the winding up petition and the High Court of Tanzania before Judge John Utamwa acceding to VIP's withdrawal for the winding up of IPTL.

The IPTL Company is, therefore, back into business and it was not wounded up as purportedly reported. IPTL is now allowed to operate as a corporate citizen of Tanzania. So it is not true that IPTL has been liquidated.

Question: There is a case opened by VIP Engineering and Marketing Limited against Standard Chartered Bank, which is still pending before the High Court. Standard Chartered Bank claims to be a creditor of IPTL for what is alleged that it had bought the debt from banks that had financed IPTL projects and was claiming that escrow account was its only security pending resolution of its dispute. Can it be said that PAP has wrongly assumed access to the escrow account, while such dispute was still pending?

Answer: That is a complete different case. It is a suit for damages. In that case against Standard Chartered and others, VIP Engineering and Marketing Limited are actually claiming past damages, which suffered in IPTL. That case dates back from June 13, 2013.

It was initially opened in New York in the United States of America and upon the request by Standard Chartered the case was transferred to Tanzanian courts because Standard Chartered maintained that it is local courts which have jurisdiction and that is the forum where everybody who may have claims in IPTL may also be heard.

So anybody who has related claims was given notice to join in but otherwise the suit is by VIP Engineering and Marketing Limited against Standard Chartered and others and not against IPTL.

Question: What are your general views on what is now being reported about this issue?

Answer: There has been some serious misrepresentation of facts. I know this issue involving IPTL very well. I have been among the directors with full mandate since IPTL was established until January 24, this year, when we gave consent to all other legal procedure involving transfer of VIP shares in IPTL to PAP.

I should repeat here that there is no dispute as far as the issue of withdrawal of money from the escrow account is concerned involving key parties of whom I know, who are IPTL and the government. The Bank of Tanzania was just a custodian or agent. None of among these key parties is complaining.

IPTL itself is also not complaining. Now who is complaining to the resolutions reached by the parties to resolve the conflict, because that was done for the interest of public? We as VIP we have sacrificed a lot. We were to demand over 200 million US dollars for the sale of the shares, but we just got 75 million US dollars.

To show you that we stood for the interest of the public, when we sold our shares, we gave the condition that the new owner of IPTL must expand its capacity from the current 100 MW to 500 MW and sell power to Tanesco at a tariff of between six to eight US cents per unit.

Question: It has been reported that the contract for operation of IPTL ends in 2015 and thereafter IPTL will be owned by Tanesco. Is this assertion true or not?

Answer: This is another misconception and misrepresentation of facts. Maybe let me reproduce the following backgrounds. IPTL was formed on November 1, 1994 under the Tanzania Companies Ordinance for the purpose of constructing, owning and operating a power plant in Tegeta.

In the year 1995, IPTL entered into a Power Purchase Agreement (PPA) with Tanesco. The PPA with Tanesco is IPTL's sole source of revenue.

Under the PPA, IPTL was to design, construct and operate the power plant to supplement Tanzania's power supply. The duration of the PPA is 20 years from the date of commencement of commercial operations, subject to extension by the parties. Since IPTL commenced commercial operation of the power plant on January 15, 2002, then the PPA will end on 2022 and not 2015 as misreported.

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