Why Tanesco wants to pull out of 15-year Symbion deal

Monday May 30 2016
pic symbion

Dar es Salaam. Tanzania Electric Supply Company (Tanesco) is reportedly citing court cases facing Symbion Power Company Limited as the reason why it wants out of a 15-year contract with the US firm, The Citizen can report.

One of the cases involve a judgement issued by the Commercial Division of the High Court granting the confiscation of the Symbion power plant located in Ubungo over a Sh6.372 billion debt.

The judgment issued by Judge Amir Mruma, on March 23 this year, followed a case filed in 2014 by East Africa Cables against Symbion Power Tanzania Limited and its parent company Symbion Power LLC of US for a debt on power cables and related services.

Tanesco is a minority shareholder in East Africa Cables along with Kenya’s Trans Century. The orders to attach the Ubungo plant which is Symbion’s flagship in the country is yet to be executed.

The other case, according to a source privy to the matter, include the suing of Symbion for a $28m (Sh60.4 billion) by Dubai based company—Rental Services and Solutions (RSS)—for non-payment of power rental fees. The case filed in April has not taken off yet, with Symbion arguing that the money was withholding tax that it deducted from the complainant and paid TRA. It has also indicated it would pursue this case through arbitration in the London Court of International Arbitration (LCIA).

Additionally, Tanesco is also mentioning the fact that the US firm owes Oilcom some Sh6 billion in arrears for fuel supply over the last three years. The Citizen could not, however, independently establish this particular claim.

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“The argument Tanesco is putting forward is whether it could rely on Symbion to service the contract and ensure power supply was not disrupted in the wake of mounting court cases and debts,” said the source who asked not to be named due to the sensitivity of the matter.

According to the source, this could explain why Tanesco referred to as “putting on hold” talks for a long term relation with Symbion while it very well knew that it had in December 2015 entered a contract with the same company for supply of 112MW until 2030.

The source said it would be difficult for the Tanesco management to justify that they were not taking the decision to end the contract following directives from the government that were not based on their own sound judgement.

This revelation came even as Tanesco managing director Felchesmi Mramba refused to discuss the contract with Symbion, telling The Citizen that it would be improper for him to respond on any matters around the contract through the media.

“Tanesco would pursue acceptable means to solve any arising dispute with Symbion because as MD I am not allowed to speak openly on the nature of our business,” he told The Citizen on Saturday in a telephone interview.

“Symbion should table concrete reasons to support continuation of the contract and we will also defend our withdrawal decisions,” said Mr Mramba.

Separately, Symbion Power LLC Senior Vice President for Public Affairs and Communications Adi Raval told The Citizen the firm would wait for the natural progression of their contract with Tanesco.

“Symbion is not going to discuss something that is so obviously ridiculous it is beyond belief,” said Mr Raval when asked to comment on the court cases facing the company and how it could affect its contract with Tanesco.

Last week when the dispute was first and exclusively reported by The Citizen, Mr Raval said Symbion believed it had a valid Power Purchasing Agreement (PPA) that could not be unilaterally terminated by Tanesco. He declined comment on the revelation by The Citizen that the firm was already considering to sue Tanesco at the International Chamber of Commerce (ICC) in France for indicating that it would not honour their contract.

As the contract saga rages on, an MP and economic experts have called for a sober approach to the dispute lest the country finds itself on another costly crisis akin to the Dowans scandal in which an Independent Power Producer was paid $77.5 million (Sh126 billion) by tax payers after Tanesco was adjudged to have wrongly terminated its emergency power supply contract.

Kigoma Urban MP and former chairman of the Public Accounts Committee (PAC) Zitto Kabwe said there was more than meets the eye in the dispute and challenged Tanesco to come out clean on the matter.

“Tanesco shall explain further the basis of their decision but I will not hesitate to say that all this hullaballoo revolves around IPTL wanting to enjoy power supply monopoly with Tanesco,” said Mr Kabwe.

The MP said the public expected Tanesco to end its relation with IPTL, especially after the damning Parliamentary probe report that linked it with the Sh320 billion Tegeta escrow account scandal.

“What we are seeing is mere distraction for shenanigans to hand over more business to IPTL. I have information that a tender for oil to run IPTL has been called. This leaves one conclusion, that Tanesco and IPTL are colluding against other cheaper players in the market,” he said.

Prof Haji Semboja of the University of Dar es Salaam said it would be critical for the two sides to amicably iron out the matter.

He said it would portray a bad image if resolution stalled to an extent of taking the issue to an international arbitration.

“No one is ready to destroy their reputation. Tanesco shouldn’t allow the international community think Tanzania is unpredictable to investors,” he said.

He added that reforming Tanesco was long overdue for it to match the current economic realities as the country’s need for power to drive industrialisation grows.

Another economist, Prof Samuel Wangwe, said Tanesco’s decisions should go in line with the exit clauses provided in the contract so that the taxpayer and the economy are not jeopardised.

For his part, former Kigoma South MP, Mr David Kafulila, said Tanesco shouldn’t be intimidated by the threat to be sued.

He said independent power generating companies were eating up the country’s economy, advising Tanesco to purchase and install its own facilities instead of relying on independent power producers.