The 100-megawatt electricity generating plant built by Independent Power Tanzania Limited in Tegeta, Dar es Salaam, in the 1990s. PHOTO | FILE
By The Citizen Reporter
IN SUMMARY
IN SUMMARY
- The Citizen traces the IPTL saga since the firm was contracted as an independent power producer two decades ago in the wake of an electricity shortage caused by a prolonged drought
- 1994: The year Tanzania Electric Supply Company signed an agreement with Independent Power Tanzania Limited
Dar es Salaam. As the nation awaits what will transpire this week in Parliament with the tabling of the probe report on the escrow account, The Citizen brings you a chronology of key events since Independent Power Tanzania Limited (IPTL) signed a memorandum of understanding with Tanzania Electric Supply Company (Tanesco) 20 years ago:
1994 – Drought leads to power shortages as hydro catchment areas run dry. Tanesco invites emergency solutions, eventually settling for two turbines financed by foreign aid. A joint venture known as Independent Power Tanzania Ltd is set up between Mechmar Corporation of Malaysia (70 per cent) and VIPEM of Tanzania (30 per cent).
August 1994 – IPTL signs an MoU to provide electricity under an independent power project arrangement as a “fast track” measure, but a “medium to long-term solution” is proposed in November.
November 1994-June 1995 – IPTL starts negotiations with Tanesco through KTA Tenaga Sdn Bhd (Malaysia-engineering), Fieldstone Private Capital Group (USA-finance), Long and Co. and Clyde and Co. (UK-legal affairs).
May-June 1995 – IPTL and Tanesco sign a 20-year power purchasing agreement to build and run a 100 megawatt slow-speed diesel (SSD) power plant in Tegeta, Dar es Salaam, at the cost of $163.5 million, including an engineering procurement and construction contract (EPC) worth $126.39 million, and with a “reference tariff” of $4.2 million per month plus 3.25 US cents per kWh of electricity actually produced. The final tariff will depend on actual costs incurred.
February 1995-January 1996 – Without informing Tanesco, IPTL negotiates with Wärtsila to build a cheaper medium-speed diesel (MSD) plant.
Wärtsilä’s EPC bid increases by 33 per cent, from $85.7 million to $114.2 million, even though the scope of the project falls considerably.
February 1997 – EPC contract signed.
May 1997 – Mechmar/IPTL obtain a $105 million loan from Sime Bank and Bank Bumiputra. In September 1997, Tanesco requests full documentation on actual costs incurred in order to negotiate final power purchase tariffs.
IPTL produces the EPC at the end of February 1998.
April 1998 – Tanesco issues notice of default to IPTL for unilateral substitution of MSD facility.
April-October 1998 – Tanesco attempts unsuccessfully to negotiate a lower tariff reflecting the “actual, verifiable and prudently incurred cost” to IPTL of building an MSD plant — as opposed to the contracted SSD plant.
2010 – Mr Sethi comes to Tanzania, and claims that he had bought 70 per cent of IPTL from the Malaysian company. He attempts to take over the management of the company, but fails because of the winding up petition filed by Mr Rugemalira, the minority shareholder, who owns 30 per cent of IPTL.
September 2013 – Mr Rugemalira finally agrees to sell his 30 per cent stake to Mr Sethi’s company called PAP for $75 million. He is paid an advance of $7 million on the condition that he withdraws his winding up petition filed at the High Court of Tanzania. Mr Rugemalira withdraw the petition, which paves the way for the consent judgment issued by Mr Justice John Utamwa in September.
October 2013 – PAP’s lays claim to the escrow monies start, but faces legal hurdles. BoT raises concerns, including the allegation that PAP had not registered the purported sale of the 70 per cent stake with the Business Regulatory and Licencing Authority (Brela). BoT also demands proof that PAP lawfully acquired 70 per cent of IPTL as it claims.
October 2013 – PAP presents documents to Tanzania Revenue Authority (TRA) that show that Mechmar sold its 70 per cent stake to Piper Link for Sh6 million ($3,663). The documents further show that two weeks after the purported transfer of shares, the British Virgin Island company sold those share to PAP at the price for $300,000 (Sh500 million).
November/December 2013 – BoT transfers escrow funds to PAP’s accounts at Stanbic Bank after clearance from the Attorney General’s office as well as the Ministry of Energy and Minerals.
February, 2014 – ICSID rules that Tanesco was indeed overcharged by IPTL. The arbitrator orders the two parties to re-calculate the tariff and report back to the court in May 2014 so that a decision is made. At that time, the escrow account had already been emptied and officially closed.
March 2104 – Parliament’s Public Accounts Committee, directs the Controller and Auditor General to launch an investigation into the process leading to the irregular withdrawal of money from the escrow account.
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