30 June 2014

Tanzania: VIP Opposes Security for Costs Payment in IPTL Case

VIP Engineering and Marketing Limited has opposed the request by Standard Chartered Banks, demanding unspecified amount of security for costs before hearing of a suit for 787bn/- fraud, among other claims, in the Independent Power Tanzania Limited (IPTL) case.

In its counter affidavit, VIP alleges that the application by Standard Chartered Bank PLC, Standard Chartered Bank (Hong Kong) Limited and Standard Chartered Bank (Tanzania) Limited and Joint liquidators of Mechmar Corporation (Malaysia) Berhad, was legally misconceived and not maintainable.

"The reliefs sought by the applicants are not backed by any law and that all the orders sought are very prejudicial to the court and the respondent (VIP), in particular for uncertainty and prejudging the outcome of the case," reads part of the affidavit filed by advocate Michael Ngalo, for VIP.

The affidavit further alleges that the applicants have filed the application in question untimely and with abuse of process, with no other purpose than to delay further the adjudication of the respondent's legitimate claims.

In the application, the applicants are requesting the court to order VIP to give security for costs to their satisfaction in the event they were successful in the defence to the suit and that all the proceedings should be stayed until such security is given and if not the suit should be dismissed.

VIP Company has sued all the applicants together with two others, Wartsila Nederland BV and Wartsila Tanzania Limited, demanding 490.9m US dollars, allegedly for fraud, conversion of rights and corporate waste in dealing with its interests in IPTL.

In the suit, apart from the monetary compensation, VIP represented by advocates Respicius Didas, Michael Ngalo, Cuthbert Tenga and Dosca Mutabuzi is also seeking for a declaration that the company and IPTL have suffered substantial loss and damages as a result of the defendants' actions and conduct.

The plaintiff is also requesting the court to declare that neither the Banks nor their agents have ever legally been creditors of IPTL and defendants committed fraud, money laundering, corporate waste and oppression, diversion of funds and conversion of IPTL and VIP property, as a result of their conducts.

Furthermore, the company is requesting the Court to order Wartsila to carry out dual gas and heavy fuel oil conversion of the IPTL power plant at a cost of not more than 11.5m US dollars. VIP had owned 30 per cent shares in IPTL, while Mechmar owned the other 70 per cent shares.

IPTL was formed on November 1, 1994 for the purpose of constructing, owning and operating a power plant at Tegeta in Dar es Salaam. In 1995, the company entered into a Power Purchase Agreement (PPA) with Tanzania Electric Supply Company (Tanesco).

Under PPA, IPTL was to design, construct and operate the power plant to supplement Tanzania's power supply and the duration of the Agreement was 20 years. The power plant was under the engineering procurement and construction contract between IPTL and Wartsila (EPC Contract).

The PPA provided for conversion of the IPTL power plant to operate on natural gas as quickly as practicable, which would reduce overall costs and improve the profitability and efficiency of the company.

"As of today, the plant has not been converted to operate on natural gas and its capacity has not been expanded because of fraudulent and deceptive practices of the defendants.

This has resulted not only in the exacerbation of Tanzania's power shortage, but also tremendously diminished IPTL and VIP's profits," reads part of plaint.

Pursuant to the PPA, IPTL was entitled to receive certain payments after the commencement of commercial operation of the power plant, certain payments for maintaining the power plant in a state of readiness and payments for electricity actually provided pursuant to a tariff calculated to permit investors a reasonable rate of return. "VIP was entitled to receive dividends from IPTL's PPA revenues.

To date, VIP has never been paid anything nor has IPTL been able to reinvest any part of its substantial missed revenues in the expansion of the power plant in order to increase its revenue and profitability and consequently IPTL's shares value," the plaint states.

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