Team’s queries on IPTL deal

Dar es Salaam. Was it proper for the Attorney General to order exemption of value added Tax (VAT) amounting to Sh26 billion in the sale of the Independent Power Tanzania Limited (IPTL)?

This is one among 10 areas earmarked for investigation by the Parliamentary Accounts Committee (PAC) in the IPTL takeover deal following a meeting between the Bank of Tanzania (BoT) governor, Prof Benno Ndulu, and committee members at the weekend.

PAC chairperson Zitto Kabwe said yesterday that the probe team seeks to find out whether legal procedures were followed in the takeover of the IPTL by the Pan African Power Solutions Limited (PAP).

Meanwhile, Prof Ndulu yesterday addressed a press conference during which he reiterated that the central bank ensured it adhered to legal requirements when it released to IPTL the Sh201 billion held in the escrow account.

Prof Ndulu said the BoT should not be associated with questions over how the money was spent or in any other IPTL disputes.

“As an escrow agent, the BoT executed its role in adherence to escrow agreements and requirements, which highlighted the rights and responsibility of each party. For BoT, the responsibility was to take care of the account to ensure the money is released as stipulated,” said Prof Ndulu, showing documents to underscore his explanations.

He added: “BoT was not involved in the controversy of the owners of IPTL and legality of their share ownership in the new company because according to the agreement, that wasn’t one of the roles of the bank.”

According to Prof Ndulu, on November 28, 2013, IPTL issued a letter instructing the BoT to pay the client mentioned in its letter.

“Before releasing the funds, we asked for indemnity letter from them to put ourselves on the safe side just in case something went wrong… we paid according to their instructions,” said the BoT boss.

The power generation agreement between IPTL and Tanesco will come under scrutiny in the PAC-ordered investigation, with Mr Kabwe stating that the PAC team intends first to establish if the recent takeover of the firm by PAP wouldn’t lead to loss of billions of taxpayers’ money.

“We will investigate how the takeover took place and check out whether the Malaysian company was still the majority shareholder in IPTL during the takeover by PAP,” he said in a statement.

The MP noted that the reported sale of the Tegeta-based company, which was jointly owned by Mechmar Corporation of Malaysia and Tanzania’s VIP Engineering and Marketing Ltd, has raised more questions than answers.

The probe would also extend to the amount of money in the escrow account by the time the sale was sealed, the amount paid to IPTL and additional amount of money which should be paid to the national power utility, Tanesco.

But, the PAP executive chairman, Mr Harbinder Singh Sethi, of PAP last week defended the way it acquired the IPTL.

The executive chairman termed the deal a clean transaction, denying any wrongdoing. “I followed all the procedures....I did not come to Tanzania to make money....I want to help Tanzania to get enough electricity that is vital for economic development,” he told a section of journalists in Dar es Salaam.

Yesterday, Mr Kabwe said PAC members were concerned by the reported VAT exemption supposedly ordered by the Attorney General and confirmed that it was one of the issues to be probed by his team.

“We have to investigate the legality of the exemption and advise the Tanzania Revenue Authority (TRA) appropriate measures to be taken to recover the money,” Mr Kabwe said, noting that the money was for levy on capacity charges.

The saga has seen the Standard Chartered Bank lodging complaints against Tanesco and the power production agreement the power firm reached with IPTL. “In such cases, we will investigate if the national interests were safeguarded”, he said.

The investigation would also focus on whether the ministry of Energy and Minerals conducted a due diligence on PAP before it endorsed the transaction.

Other areas to be investigated include establishing the basis for the tariff dispute between Tanesco and IPTL, the actual amount that was supposed to be in the escrow account by the end of last year and claims by the Standard Chartered Bank, Hong Kong that it legally acquired the control of IPTL plant in Tanzania after it bought the Mechmar debts.

On Sunday, PAC ordered investigation and auditing of the accounts and the sale of the Tegeta-based local power firm whose buyout is feared could force Tanesco to pay to PAP large sums of money.

The committee, according to the Kigoma North MP (Chadema), was much worried Tanesco might have to pay Sh201 billion to PAP that reportedly bought at $65 million.

He revealed this immediately after the weekend meeting of the committee with senior BoT officials to discuss the Sh201bn Tegeta escrow account linked to the deal.

“We have resolved that the CAG should carry out a thorough audit of the entire IPTL deal and justification for using the Tegeta escrow account to settle the purchase of the power company,” the legislator said.

PAC also asked the Prevention and Combating of Corruption Bureau (PCCB) to commence in-depth investigations into the saga. That would entail checking out the ownership of IPTL and the legality of transfer of its ownership to PAP.

Although the central bank says it transferred the escrow funds to IPTL, the affidavit sworn by James Rugemalira, the managing director of VIP Engineering and Marketing Ltd, served at the High Court on January 8th this year, states that the money was paid to PAP.

VIP Engineering and Marketing Ltd, was a Tanzanian company that owned 30 per cent shares in IPTL until it allegedly sold its stakes to PAP at the cost of $ 65 million.

Before being acquired by PAP, IPTL was jointly-owned by a Malaysian firm, Mechmar Corporation and Tanzania’s VIP Engineering and Marketing Company Ltd, with the former controlling a 70 per cent stake.

Last week, PAC summoned the BoT governor so that he could shed light on the controversy; it later met in Dodoma with the CAG Ludovick Utouh on the same.

According to Mr Kabwe, the committee had ordered the escrow account frozen pending several court cases involving IPTL, Tanesco and other parties.