28 July 2014

Tanzania: Low Power Tariffs - Will IPTL Manage It As It Settles Other Pending Matters?

THE ruling given on September 5, 2013 by High Court Judge John Utamwa set in motion the implementation of the long standing plan for Independent Power Tanzania Limited (IPTL) to offer the lowest power tariffs to Tanzanians. Our Staff Writer FAUSTINE KAPAMA revisits the ruling and any other proceedings to review what followed thereafter.

PRIOR to the issuance of the ruling given by the High Court on September 5, 2013, marking the withdrawal of the petition for winding up of Independent Power Tanzania Limited (IPTL), the company's minority shareholder, VIP Engineering and Marketing Limited, had provided three conditions based on public interests to whoever would be interested to purchase his 30 per cent shares in IPTL.

The conditions included expansion of the power plant situated at Tegeta area on the outskirts of the Dar es Salaam City from the current 100MW to 500MW, reduce power tariff to between six to eight US cents per unit and convert the plant into gas firing, instead of using heavy fuel.

Conversion of the power plant to gas firing and expansion of its power generation should have been done in 2003 when the Songo Songo Natural Gas became available and would have been accomplished by 2005.

But the process has not been effective due to some interference. Several companies came up to negotiate with VIP Engineering to seal the deal, but they all failed to abide by the conditions, except Pan Africa Power Solutions Tanzania Limited (PAP), which expressed commitments to fulfil after taking over the operation of IPTL.

The VIP Engineering advertised in the newspapers its intention to withdraw the petition for winding up IPTL on public interest. But only Law Associates Advocates showed up to object to the withdrawal of the winding up proceedings of IPTL and the consequential orders sought.

Law Associates Advocates contended that before the withdrawal of the petition and discharge of the provisional liquidator should not be allowed until they are paid debts together with statutory interests as well as legal fees for representing VIP Engineering in IPTL cases.

The law firms, in a similar spirit, opposed any release of money from the escrow account operated at the Bank of Tanzania to PAP or whatsoever, till they are paid the legal fees fully from the account. It also sought for restraint orders against the provisional liquidator from handing over affairs of IPTL to PAP or any other person whatsoever till the debt is satisfied in full from the money in the escrow account.

However, upon hearing some grounds of objections raised by VIP, PAP and VIP Engineering, the judge dismissed the application by the law firm and granted all the prayers by the VIP, including marking the petition for winding IPTL as duly withdrawn.

The court also terminated the appointment of Provisional Liquidator, who was Administrator General overseeing IPTL affairs at the time and directed him to hand over all affairs of the company (IPTL), including the power plant and money from escrow account to PAP. It further noted the agreement on the sale of shares signed between VIP Engineering and PAP, which has committed itself to paying off all legitimate creditors of IPTL, expand the plant to about 500 MW and sale power to Tanesco at a tariff of between US cent six and eight per unit.

Immediately after taking over the IPTL affairs, PAP management started implementing the ruling of the court, notably the expansion of capacity of the power plant and reduction of tariffs to the lowest point the soonest possible in public interest.

PAP's Company Secretary Joseph Makandege says since they took over the IPTL Company following the removal of the provisional liquidator, they embarked on a variety of arrangements that would see the conversion and expansion begins by early January, this year.

"We approached different partners including contractors and financier, all of whom showed great preparedness to support in carrying out the conversion and expansion," he says, noting that expansion of a power plant from 100MW to 500MW required intensive capital investment.

According to Mr Makandege, after PAP had taken over ownership, control and management of the affairs of IPTL it was their intention and in fact was still their intention to see it that they convert the power plant from Heavy Fuel Firing plant to Dual Firing Plant.

He says that they wanted to make the plant be capable of using a heavy fuel oil which is currently using as well as gas with the aim of providing for a contingency in case of shortage of supply of fuel and then fallback position where there are insufficient of gas.

"It is our conviction that conversion of the plant would make it more competitive and productive. The conversion will not only make more profitable but enable it generate and provide more energy efficiently for the public interest of the people of Tanzania," he says.

Mr Makandege further points out that PAP wanted to make the plant more affordable by reducing the tariffs in the shortest time possible and were committed to expanding the power generation in order to increase the electricity supply to mitigate the shortage in the country.

"We have been until recently at an advanced stage of negotiations with various contractors and financiers for the purpose. Unfortunately indeed, of the recent past, we faced a great setback following the ongoing misleading publications surrounding IPTL," he claims.

According to Mr Makangege, had it not been frustrations and other challenges, notably some ongoing misleading publications regarding business surrounding IPTL, the process would have reached an advanced stage. However, he says, the PAP management was still going on with its efforts in reaching out to some financiers and contractors to undertake the project.

"We are trying our best to see to it that we deliver to our promises," he says. Mr Makandege says that PAP was interested in seeing to it that the conversion and expansion of the power plant was undertaken and accomplished within the shortest time possible, preferably by early next year.

He claims that in fulfilment of other conditions, including the commitments to pay off all legitimate creditors, PAP invited all those with genuine claims to come forward for verification and consideration. A number of companies have showed up, including Law Associates firm.

To the surprise of PAP, the Chief Counsel says, Standard Chartered Bank, who claims to be creditors of IPTL, instead of submitting their claims, embarked on different approach and filed two cases at the High Court's Commercial Division, attempting to oppose the ruling in question.

The two commercial cases were filed by Advocate Martha Kaveni Renju, who had been claiming to be an Administrator Receiver of IPTL.

She sought to restrain the PAP and VIP from taking possession of, exercising beneficial or legal rights or transferring any proceeds of Escrow Account at BoT or other IPTL assets, together with running the power plant, until final determination of the matter.

However, the filing of the cases could not go unopposed as the defendants filed several grounds of objection, with a view of requesting the court to dismiss them. The cases were filed under two different numbers before being consolidated on agreement from the parties.

Among the grounds of objection lodged by defendants (VIP and PAP), indicated that Ms Renju had no locus standi (best placed) to commence the proceedings and that the orders she had sought were not legally maintainable under the law.

Other grounds showed that the court has no jurisdiction to grant the prayers sought by the plaintiff and that the action commenced was an incredible, time barred and was a deliberate continuation of abuse of court process.

The defendants further alleged that the matter had already been decided by Judge John Utamwa at the High Court District Registry in Dar es Salaam.

Having faced with such challenges, Ms Renju surrendered from prosecuting the cases and decided to withdraw them. Judge Robert Makaramba, who was hearing the cases after being consolidated on consent from the parties, granted the request for the withdrawal.

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