Now Independent power producer (IPTL) disputes award of Sh427bn

Tuesday October 22 2019

 

By Alawi Masare @AMasare malawi@tz.nationmedia.com

Dar es Salaam. Independent power producer IPTL is disputing the $185.4 million (Sh426.5 billion) awarded to its creditors last week at an arbitration hearing over breach of contract.

The company’s secretary and acting managing director, Mr Joseph Makandege, indicated yesterday they would oppose the award entered against the Government of Tanzania as a guarantor in its contract with Tanzania Electric Supply Company (Tanesco).

In a statement to the media, Mr Makandege said they would bank on at least five pending court cases in Tanzania against the Hong Kong subsidiary of Standard Chartered (SCBHK).

The bank won the huge award after successfully suing the government in 2015 for breach of contract following IPTL’s contract fallout with Tanesco over the Sh306 billion Tegeta Escrow scandal.

The government has since acknowledged the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) liability but declared that IPTL, and not Tanzanian taxpayers, would pay the amount in question.

Government spokesperson Hassan Abbasi said Tanzania could not shoulder the burden of paying the money because it was IPTL and not the government that borrowed from SCBHK.

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“We completely agree with the government that it doesn’t owe SCBHK and that IPTL is responsible for its debts. However, for now, we don’t recognise this bank as one of our creditors,” said Mr Makandege.

Mr Makandege was in May 2018 controversially elevated as acting managing director after a reported boardroom ouster of Mr Harbinder Singh Sethi, the supposed principal owner of IPTL. However Mr Sethi who is in remand prison objected to the ouster and termed it illegal. He had been in custody over the Tegeta Escrow scandal when his ejection was reported.

Mr Makandege has worked as IPTL’s company secretary for many years. He now says the Hong Kong bank has to prove in Tanzanian courts that it’s really one of the company’s creditors.

“The claims and award are in the list of matters we disputed in the ongoing cases at the High Court of Tanzania and such decisions will resolve the tussle. If they win, we will pay them and all other debts. Our plant and other assets can definitely cover the cost,” he said.

The company has at least five cases it filed in 2014, 2016 and 2017 in which it challenges previous awards and request the court to declare SCBHK out of its creditors.

“If we win, we can even tell them to deduct the money from the $3.2 billion (Sh7.4 trillion) which we are demanding from the bank,” said Mr Makandege.

Asked how the local court cases could impact the ICSID award, Tanganyika Law Society (TLS) president Rugemeleza Nshala said it is only if the cases in the local courts were decided, that they could provide more light on the issue. “It’s better if the local cases were decided so that we compare the decisions of the High Court and that of the international tribunal. The challenge with the international courts is that the claimant may choose to impound Tanzanian assets or properties outside the country,” said Dr Nshala.

Mr Makandege also said the company is owed by Tanesco an amount he did not mention and asked the government to return its operating licence so that it resumes power production. The government withdrew the licence in 2018 amid concerns about its suspect contracts and operations.

In 1995, IPTL, which was owned by Malaysia’s Mechmar and Tanzanian VIP Engineering and Marketing, signed an agreement with Tanesco to generate 100 megawatts through a plant located in Tegeta, Dar es Salaam.

IPTL raised money from a consortium of creditors including Malaysian banks for the project and the company had to repay the loan using money it generates from sales of electricity. This debt was later acquired by Standard Chartered Bank Hong Kong.

IPTL and Tanesco opened an escrow account at the Bank of Tanzania but the money were controversially transferred to Pan Africa Power Solution Ltd (PAP) which claimed to control IPTL – a move that left the loans insecured. The money was shared among businessmen, politicians and government officials among others people in a scandal that saw several people charged with corruption while then AG Frederick Werema and energy and minerals minister Prof Sospeter Muhongo resigned from the government. Lands minister Prof Anna Tibaijuka was also sacked over the scandal.